**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-Q**

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**x        QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For the quarterly period ended September 30, 2007**

 

**o        TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition periodfrom                to                **

** **

**CommissionFile No. 1-12248**

** **

**KAISERGROUP HOLDINGS, INC.**

(successorissuer to Kaiser Group International, Inc.)

(Exactname of registrant as specified in its charter)

 

| **Delaware**                              | ** ** | **54-2014870**       |
|-------------------------------------------|------------|----------------------|
| (State  or other jurisdiction of          |       | (I.R.S.  Employer    |
| incorporation  or organization)           |       | Identification  No.) |
|                                      |       |                 |
| **9300 Lee Highway, Fairfax, Virginia**   | ** ** | **22031-1207**       |
| (Address  of principal executive offices) |       | (Zip  Code)          |

 

Registrant’stelephone number including area code: **(703) 934-3413**

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 (the “Exchange Act”) during the preceding 12 months (or for such shorterperiod that the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. 

Yes x   No o

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer.

Large accelerated Filer o             AcceleratedFiler o             Non-acceleratedFiler x

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).

Yes  o  No  x

**Applicable only to issuers involved in bankruptcy proceedings duringthe preceding five years:**

Indicate by check mark whether the registrant has filed all documents andreports required to be filed by Section 12, 13 or 15(d) of the Exchange Actsubsequent to the distribution of securities under a plan confirmed by acourt.  Yes x    No  o

The Plan of Reorganization of Kaiser Group International, Inc. underChapter 11 of the Bankruptcy Code became effective on December 18, 2000.  The Plan provided, among other things, thatholders of shares of common stock of Kaiser Group International, Inc. receiveshares of common stock of Kaiser Group Holdings, Inc. and that holders of specifiedoutstanding debt obligations and other specified claimants receive cash andshares of preferred stock and common stock of Kaiser Group Holdings, Inc., allin accordance with the terms set forth in the Plan. The initial distribution ofsecurities occurred as of April 17, 2001.

As of November 12, 2007, there were 1,790,890 shares of Kaiser GroupHoldings, Inc. Common Stock, par value $0.01 per share, outstanding.

 

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**KAISER GROUP HOLDINGS, INC.**

**INDEX TO FORM 10-Q**
|                                                                                                                      | **Page**   |
|---------------------------------------------------------------------------------------------------------------------------|------------|
| **Part I —  Financial Information**                                                                             | ** ** |
|                                                                                                                      |       |
| Item 1.  Financial Statements:                                                                                            |       |
|                                                                                                                      |       |
| Consolidated  Balance Sheets at September 30, 2007 (unaudited) and December 31, 2006                                 | 3          |
|                                                                                                                      |       |
| Consolidated Statements of Operations (unaudited) for  the Three Months and Nine Months Ended September 30, 2007 and 2006 | 4          |
|                                                                                                                      |       |
| Consolidated Statements of Cash Flows (unaudited) for  the Nine Months Ended September 30, 2007 and 2006                  | 5          |
|                                                                                                                      |       |
| Notes  to Consolidated Financial Statements (unaudited)                                                                   | 6          |
|                                                                                                                      |       |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations                       | 12         |
|                                                                                                                      |       |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                                       | 17         |
|                                                                                                                      |       |
| Item 4. Controls and Procedures                                                                                           | 18         |
|                                                                                                                      |       |
| **Part II  — Other Information**                                                                                | ** ** |
|                                                                                                                      |       |
| Item  1. Legal Proceedings                                                                                                | 18         |
|                                                                                                                      |       |
| Item  1A. Risk Factors                                                                                                    | 18         |
|                                                                                                                      |       |
| Item 6.  Exhibits                                                                                                         | 20         |
|                                                                                                                      |       |
| **Signatures**                                                                                                            | 25         |

 

2

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**PART I — FINANCIALINFORMATION**

**ITEM 1. FINANCIAL STATEMENTS**

**KAISER GROUP HOLDINGS, INC. ANDSUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(Inthousands, except share amounts)**
| ** **                                                                                                   | ** ** | **September 30,**

**2007** | ** ** | **December 31,**

**2006** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                                                                                   | ** ** | **(unaudited)**             | ** ** | ** **                      | ** ** |
| **ASSETS**                                                                                                   | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| **Current Assets**                                                                                           | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Cash and cash equivalents                                                                                    |       | $                           | 39,913     |                            | $          | 55,779 |   |
| Certificates of deposit                                                                                      |       | 2,911                       |       | 1,268                           |       |
| Marketable securities — available for sale                                                              |       | 9,175                       |       | 9,175                           |       |
| Restricted cash and cash equivalents                                                                         |       | 739                         |       | 3,332                           |       |
| Accounts receivable                                                                                          |       | —                      |       | 35                              |       |
| Prepaid expenses and other current assets                                                                    |       | 236                         |       | 471                             |       |
| Income taxes receivable                                                                                      |       | 11,973                      |       | 8,452                           |       |
| Total Current Assets                                                                                         |       | 64,947                      |       | 78,512                          |       |
|                                                                                                         |       |                        |       |                            |       |
| **Other Assets**                                                                                             | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Investments in and advances to joint venture                                                                 |       | 778                         |       | 2,278                           |       |
| Investment in affiliates                                                                                     |       | 1,000                       |       | 2,800                           |       |
| Deferred tax asset                                                                                           |       | 730                         |       | 2,909                           |       |
| Total Other Assets                                                                                           |       | 2,508                       |       | 7,987                           |       |
| Total Assets                                                                                                 |       | $                           | 67,455     |                            | $          | 86,499 |   |
| ** **                                                                                                   | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**                                                               | ** ** | ** **                  | ** ** | ** **                      | ** ** |
|                                                                                                         |       |                        |       |                            |       |
| **Current Liabilities**                                                                                      | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Accounts payable                                                                                             |       | $                           | 249        |                            | $          | 168 |   |
| Post-retirement benefit plan obligation                                                                      |       | 311                         |       | 6,468                           |       |
| Other accrued expenses                                                                                       |       | 2,719                       |       | 3,001                           |       |
| Dividend payable on common stock                                                                             |       | —                      |       | 10,745                          |       |
| Total Current Liabilities                                                                                    |       | 3,279                       |       | 20,382                          |       |
| ** **                                                                                                   | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| **Commitments and Contingencies**                                                                            | ** ** | ** **                  | ** ** | ** **                      | ** ** |
|                                                                                                         |       |                        |       |                            |       |
| Common stock, par value $0.01 per share:                                                                     |       |                        |       |                            |       |
| Authorized—3,000,000 shares                                                                             |       |                        |       |                            |       |
| Issued and outstanding—1,790,890 shares at September 30, 2007 and  December 31, 2006, respectively |       | 18                          |       | 18                              |       |
| Capital in excess of par                                                                                     |       | 11,796                      |       | 11,796                          |       |
| Retained earnings                                                                                            |       | 52,322                      |       | 54,263                          |       |
| Accumulated other comprehensive income                                                                       |       | 40                          |       | 40                              |       |
| Total Shareholders’ Equity                                                                              |       | 64,176                      |       | 66,117                          |       |
| Total Liabilities and Shareholders’ Equity                                                              |       | $                           | 67,455     |                            | $          | 86,499 |   |

 

See notes to consolidatedfinancial statements.

 

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**KAISER GROUP HOLDINGS, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except per share amounts)**
| ** **                                        | ** ** | **For the Three Months Ended**

**September 30** | ** ** | **For the Nine Months Ended**

**September 30,** | ** ** |
|---------------------------------------------------|------------|---------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|
| ** **                                        | ** ** | **(unaudited)**                                                           | ** ** | **(unaudited)**                                                           | ** ** |
| ** **                                        | ** ** | **2007**                                                                  | ** ** | **2006**                                                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                              |       |                                                                      |       |                                                                      |       |   |   |   |   |
| Gross Revenue:                                    |       | $                                                                         | —     |                                                                      | $          | — |   | $ | — |   | $ | 222 |   |
| Labor and subcontract costs                       |       | —                                                                    |       | —                                                                    |       | — |   | 505 |   |
| Service Loss                                      |       | —                                                                    |       | —                                                                    |       | — |   | (283 | ) |
| Operating Expenses:                               |       |                                                                      |       |                                                                      |       |   |   |   |   |
| Administrative expenses                           |       | 849                                                                       |       | 656                                                                       |       | 2,901 |   | 3,275 |   |
| Reserve for contract losses                       |       | —                                                                    |       | —                                                                    |       | — |   | 3,000 |   |
| Operating Loss                                    |       | (849                                                                      | )          | (656                                                                      | )          | (2,901 | ) | (6,558 | ) |
| Other Income:                                     |       |                                                                      |       |                                                                      |       |   |   |   |   |
| Interest income                                   |       | 450                                                                       |       | 564                                                                       |       | 1,418 |   | 1,330 |   |
| Impairment loss on investment in affiliates       |       | (1,800                                                                    | )          | —                                                                    |       | (1,800 | ) | — |   |
| Loss Before Income Tax                            |       | (2,199                                                                    | )          | (92                                                                       | )          | (3,283 | ) | (5,228 | ) |
| Income tax benefit                                |       | 937                                                                       |       | 232                                                                       |       | 1,342 |   | 2,650 |   |
| (Loss) Income Applicable to Common Shareholders   |       | $                                                                         | (1,262     | )                                                                         | $          | 140 |   | $ | (1,941 | ) | $ | (2,578 | ) |
| Basic and Diluted (Loss) Income Per Common Share: |       |                                                                      |       |                                                                      |       |   |   |   |   |
| Net Income (Loss) Per Share                       |       | $                                                                         | (0.70      | )                                                                         | $          | 0.08 |   | $ | (1.08 | ) | $ | (1.44 | ) |
| Weighted average shares - basic and diluted       |       | 1,791                                                                     |       | 1,791                                                                     |       | 1,791 |   | 1,790 |   |

 

See notes to consolidated financial statements.

 

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**KAISERGROUP HOLDINGS, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

**(In thousands)**
| ** **                                                                   | ** ** | **For the Nine Months ended**

**September 30,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2007**                                                                  | ** ** | **2006** | ** ** |
| ** **                                                                   | ** ** | **(unaudited)**                                                           | ** ** |
| Operating Activities:                                                        |       |                                                                      |       |   |   |
| Net loss                                                                     |       | $                                                                         | (1,941     | ) | $ | (2,578 | ) |
| Adjustments to reconcile net loss to net cash used in operating  activities: |       |                                                                      |       |   |   |
| Deferred taxes                                                               |       | 2,179                                                                     |       | (1,852 | ) |
| Write down of contract receivable                                            |       | —                                                                    |       | 3,000 |   |
| Impairment loss on investment in affiliates                                  |       | 1,800                                                                     |       | — |   |
| Changes in operating assets and liabilities:                                 |       |                                                                      |       |   |   |
| Account receivables                                                          |       | 35                                                                        |       | 168 |   |
| Prepaid expenses and other current assets                                    |       | 235                                                                       |       | 128 |   |
| Accounts payable and accrued expenses                                        |       | (6,358                                                                    | )          | (929 | ) |
| Income taxes receivable                                                      |       | (3,521                                                                    | )          | — |   |
| Income taxes payable                                                         |       | —                                                                    |       | (32,608 | ) |
| Other operating activities                                                   |       | (118                                                                      | )          | 32 |   |
| Net Cash Used in Operating Activities                                        |       | (7,689                                                                    | )          | (34,639 | ) |
| Investing Activities:                                                        |       |                                                                      |       |   |   |
| (Purchase) Maturity of certificates of deposit                               |       | (1,632                                                                    | )          | 982 |   |
| Distributions from 50% Owned Joint Venture                                   |       | 1,500                                                                     |       | 85,000 |   |
| Net Cash (Used) Provided by Investing Activities                             |       | (132                                                                      | )          | 85,982 |   |
| Financing Activities:                                                        |       |                                                                      |       |   |   |
| Dividends Paid                                                               |       | (10,745                                                                   | )          | — |   |
| Transfer from restricted cash                                                |       | 2,700                                                                     |       | — |   |
| Net Cash Used in Financing Activities                                        |       | (8,045                                                                    | )          | — |   |
| (Decrease) Increase in Cash and Cash Equivalents                             |       | (15,866                                                                   | )          | 51,343 |   |
| Cash and Cash Equivalents at Beginning of Period                             |       | 55,779                                                                    |       | 14,633 |   |
| Cash and Cash Equivalents at End of Period                                   |       | $                                                                         | 39,913     |   | $ | 65,976 |   |
|                                                                              |            |                                                                           |            |  |  |  |  |  |  |

 

See notes to consolidated financial statements.

 

5

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**KAISER GROUP HOLDINGS, INC. ANDSUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**FORTHE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

1.             Basis of Presentation

The accompanyingconsolidated financial statements of Kaiser Group Holdings, Inc. andsubsidiaries (“the Company”), except for the December 31 2006 balancesheet (derived from audited financial statements), are unaudited and have beenprepared in accordance with U.S. generally accepted accounting principles (“GAAP”)for interim financial information. Accordingly, they do not include all of theinformation and footnotes required by GAAP for complete financial statements.In the opinion of management, all adjustments, consisting only of normalrecurring accruals, considered necessary for a fair presentation have beenincluded.

These statementsshould be read in conjunction with the Company’s audited consolidated financialstatements and footnotes and the other information included in the Company’sAnnual Report on Form 10-K for the year ended December 31,2006. Certain reclassifications have been made to the prior period financialstatements to conform them to the presentation used in the September 30, 2007financial statements.

Kaiser GroupHoldings, Inc. (“Kaiser Group Holdings” or the “Company”) is a Delawarecorporation that was formed on December 6, 2000 for the purpose of owning allof the outstanding stock of Kaiser Group International, Inc. (“Old Kaiser”),which in turn continues to own the stock of its remaining subsidiaries. On June9, 2000, Old Kaiser and 38 of its domestic subsidiaries voluntarily filed forprotection under Chapter 11 of the United States Bankruptcy Code in theDistrict of Delaware (case nos. 00-2263 to 00-2301). Old Kaiser emerged frombankruptcy with an approved plan of reorganization (which was its SecondAmended Plan of Reorganization and is referred to in this report as the “Planof Reorganization”) that was effective on December 18, 2000 (the “EffectiveDate”).  The Company is deemed a “successorissuer” to Old Kaiser by virtue of Rule 12g-3(a) under the Securities ExchangeAct of 1934. A summary of the Plan of Reorganization for Old Kaiser can befound in a Current Report on Form 8-K dated December 5, 2000 filed by OldKaiser.  In this report, unless the context states otherwise, the terms “we”, “our”and “Kaiser” refer to Kaiser Group Holdings (including Old Kaiser as its predecessor)and its subsidiaries.

As of September30, 2007, apart from resolving remaining bankruptcy claims, the Company had only a limited number ofactivities, assets and liabilities, primarily consisting of:

·                  the ownership of a 50% interest inKaiser-Hill Company, LLC (“Kaiser-Hill”), which serves as the generalcontractor at the U.S. Department of Energy’s (“DOE”) Rocky Flats site nearDenver, Colorado for the performance of a contract for the closure of the site(the “Closure Contract”) (See Note 4).

·                  the closeout of a completed contract for theengineering and construction of a steel mini-mill in the Czech Republic forNova Hut (“Nova Hut”) (See Note 7).

·                  a wholly-owned captive insurance companythat has not been issuing new policiessince October 1, 2000 and has solely been involved in resolving remainingclaims made against previously issued policies. In the fourth quarter of 2004, the Company received regulatory approvaland finalized the formation documents of a sponsored captive subsidiary, MSBuilders Insurance Company, to enable our wholly-owned captive insurancecompany to offer derivative captive insurance services to third partyclients.  As of September 30, 2007, MSBuilders Insurance Company has not written any policies.

·                  a contingent obligation to add funds to a capped,post-retirement medical benefit plan for a fixed number of retirees that iscurrently being funded through a Voluntary Employee Beneficiary AssociationPlan established and funded by the Company in the amount of approximately $6.1million, effective April 30, 2007 (See Note 7).

 

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Kaiser AnalyticalManagement Services, Inc. (“KAMS”), accounted for all of the Company’s grossrevenue in 2006.  Under prevailing marketconditions, effective June 30, 2006, the Company determined that there wereinsufficient business prospects for KAMS to expect future revenues.

The Company adopted freshstart reporting in its consolidated balance sheet as of December 31, 2000. TheAmerican Institute of Certified Public Accountants’ Statement of Position 90-7,“Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP90-7”), requires under certain circumstances resulting from a bankruptcy thecreation of a new entity for financial reporting purposes upon the emergence ofan entity from bankruptcy.  Accordingly,the value of the reorganized enterprise becomes the established amount for theemerging balance of shareholders’ equity, and any accumulated deficit of thepredecessor entity is offset against available capital in excess of par,resulting in an emerging retained earnings of zero.  Additionally, assets and liabilities arerecorded at their fair values.

The value of the emergedenterprise used for fresh start reporting as of December 31, 2000 was $87.5million. It was determined by management with the assistance of independentadvisors.  The methodology employedinvolved estimation of the enterprise value taking into consideration adiscounted cash flow analysis.  The discountedcash flow analysis was based on a seven-year cash flow projection prepared bymanagement, taking into consideration the terminal value of its assets andliabilities as of immediately prior to its emergence from bankruptcy onDecember 18, 2000.  Terminal values ofassets and liabilities were determined based either on contracted amounts,actuarial present values and/or management’s estimates of the outcome ofcertain operating activities. Net after-tax cash flows, assuming a 40%effective tax rate, were discounted at 17% in order to take into considerationthe risks and uncertainties inherent in such projections.  The cash flow projections were based onestimates and assumptions about circumstances and events that had not yet takenplace.  Estimates and assumptionsregarding individual retained matters which form the collective composition ofthe overall enterprise value as of December 18, 2000 are inherently subject tosignificant economic and competitive uncertainties and contingencies beyond thecontrol of the Company.  Accordingly,there may be differences between projections and actual results because eventsand circumstances frequently do not occur as expected and may be significant.  More specifically, assumptions within thevaluation related to the amount and timing of the ultimate performance andrelated cash flows of the Company’s investment in Kaiser-Hill have the greatestimpact on the overall enterprise valuation.

2.             GeneralTerms of Plan and Status of Bankruptcy Distributions

The effectivenessof the Plan of Reorganization as of December 18, 2000 did not, in and ofitself, complete the bankruptcy process. The process of resolving claimsinitially filed in the bankruptcy is ongoing.

By far the largestclass of claims (“Class 4”) was made up of creditor claims other than tradecreditor or equity claims.  Class 4claims included holders of Old Kaiser’s senior subordinated notes due2003.  Holders of Class 4 claims allowedby the Bankruptcy Court received a combination of cash and Company preferred (“NewPreferred”) and common stock (“Kaiser Common Stock”) in respect of theirclaims.  Each Class 4 claimant wasentitled to receive one share of New Preferred and one share of Kaiser CommonStock for each $100 of claims, subject to a reduction in the number of sharesof New Preferred issued to such claimant by one share for each $55.00 of cashreceived by the claimant.

Pursuant to theterms of the Plan of Reorganization, the Company was required to complete itsinitial bankruptcy distribution within 120 days of the Effective Date.  Accordingly, to satisfy approximately $136.8million of allowed Class 4 claims, the Company effected its initialdistribution on April 17, 2001.  Theamount of unresolved Class 4 claims remaining at April 17, 2001 was approximately$130.5 million. To address the remaining unresolved claims, the BankruptcyCourt issued an order on March 27, 2001 establishing an Alternative DisputeResolution (“ADR”) procedure whereby the remaining claimants and Old Kaiserproduced limited supporting data relative to their respective positions andengaged in initial negotiation efforts in an attempt to reach an agreed claimdetermination.  If necessary, the partieswere thereafter required to participate in a non-binding mediation before amediator pre-selected by the Bankruptcy Court. All unresolved claims as of March 27, 2001 are subject to the ADRprocess. Since April 17, 2001, the date of the initial distribution,approximately $130.3 million of asserted Class 4 claims have been withdrawn, negotiatedor mediated to an agreed amount, resulting in cash payments approximating $3.0million and issuances of 683 shares of New Preferred (all of which have beenredeemed) and 823 shares of Kaiser Common Stock.  As of September 30, 2007, the aggregate amountof unresolved claims was approximately $0.2 million and is recorded as acomponent of other accrued expenses on the Company’s consolidated balancesheet.

 

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The equity classof claims recognized in the Old Kaiser bankruptcy are “Class 5” claims,consisting of holders of Old Kaiser common stock (“Old Common”) and other “EquityInterests” as defined in the Plan of Reorganization. The Plan of Reorganizationprovides that holders of Equity Interests receive a number of shares of KaiserCommon Stock equal to 17.65% of the number of shares of Kaiser Common Stockissued to allowed Class 4 claimants. In the initial distribution, one share ofKaiser Common Stock was issued for each 96 shares of previously outstanding OldCommon.  During 2005, the Company settleda significant Class 5 claim asserted by the former stockholders of ICT SpectrumConstructors, Inc. (“ICT Spectrum”), which Old Kaiser had acquired in 1998, andissued an aggregate of 175,003 additional shares of Kaiser Common Stock to suchclaimants pursuant to the settlement. With the settlement of the ICT SpectrumClass 5 claim and the subsequent issuance of 175,003 shares of Kaiser CommonStock to such claimants, no Class 5 claims remain unresolved at September 30,2007.

As of September30, 2007, the aggregate amount of unresolved claims was approximately $0.2million and is recorded as a component of other accrued expenses on the Company’sconsolidated balance sheet.  Asdemonstrated by the claim settlements completed since April 17, 2001, and basedon the belief that it is in the best interest of the Company and its currentstockholders, the Company has been settling certain remaining Class 4 claimsentirely for cash payments in lieu of the combination of cash and New Preferredand Kaiser Common Stock as contemplated in the Plan of Reorganization.  The Company intends to continue to use thissettlement alternative during the resolution of remaining Class 4 claims.  The Company expects to resolve the remainingclaims by the end of 2007.  Upon suchfinal resolution, the Company expects to take the necessary steps to close thebankruptcy cases.  Upon such closing, theBankruptcy Court would no longer be involved in the administration of theCompany’s affairs, and the Company’s obligation to pay certain fees and submitperiodic reports to the Bankruptcy Court would be terminated.  Since closing of the cases requiresresolution of all outstanding matters and such resolution is somewhat out ofthe Company’s control, there is a possibility that the cases will not be closedwithin the anticipated time period.

3.             Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net (loss)income by the weighted average number of common shares outstanding for theperiod. Diluted EPS normally includes the weighted-average effect of dilutivesecurities outstanding during the period. Pursuant to the Plan of Reorganization that was effective as of December18, 2000, all then-outstanding common stock equivalents were cancelled.  As a result, the Company has no dilutive oranti-dilutive securities outstanding.

4.             Investment in andAdvances to Joint Venture

The Company’s netinvestment in and advances to joint venture totaled $0.8 million and $2.3****million at September 30, 2007 and December 31, 2006,respectively and consisted solely of the Company’s investment in theKaiser-Hill.  The Company accounts forits 50% ownership in the Kaiser-Hill investment using the equity method.

On October 13, 2005,Kaiser-Hill declared physical completion of the cleanup and closure of the DOE’sRocky Flats site.  On December 8, 2005,the DOE affirmed Kaiser-Hill’s declaration as required under the ClosureContract and the DOE authorized Kaiser-Hill to invoice all remainingperformance fees less a retained amount equaling $5.0 million.  On January 11, 2006, Kaiser-Hillreceived payment for all fees except for the retained amount. The project totalfee expected to be earned by Kaiser-Hill pursuant to the Contract is $510.9million based on Kaiser-Hill’s cost to complete the site closure of $3.44billion.  Through November 12, 2007,Kaiser-Hill has received $510.8 million of such fee from the DOE.

Kaiser-Hillrecognized a substantial amount of fee income from the DOE upon the declarationof physical completion on October 13, 2005 and, accordingly, the Company’sproportionate share of such income was recorded in Equity Income in Earnings ofJoint Venture in the Company’s consolidated statement of operations for theyear ended December 31, 2005.  As aresult, upon the receipt of the $80.0 million cash distribution fromKaiser-Hill on March 1, 2006, and the receipt of $5.0 million distributed fromKaiser-Hill on June 30, 2006, the Company made a corresponding reduction of$85.0 million in its investment in Kaiser-Hill on its balance sheet as ofDecember 31, 2006. The Company received an additional distribution of $1.5million from Kaiser-Hill on February 27, 2007, and made a correspondingreduction of $1.5 million in its investment in Kaiser-Hill on its consolidatedbalance sheet as of March 31, 2007.

TheClosure Contract provides that Kaiser-Hill will earn revenue equal to theactual cost of physical completion plus a performance fee.  The performance fee is based on (1)Kaiser-Hill’s cost to complete the site closure, which must be within the rangeof $3.1 billion and $4.9 billion, (2) the schedule of physical completion,which must be before 2007 and (3) Kaiser-Hill’s safety performance.  At the time of declaration of physicalcompletion on October 13, 2005, Kaiser-Hill’s cost estimate to complete theproject remained at $3.44 billion, which resulted in a total performance feepayable to Kaiser-Hill projectedto be $510.9 million.

 

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Since Kaiser-Hilldeclared physical completion, many of the performance risks have beeneliminated, but contract risks and uncertainties remain. As a result ofdeclaration of physical completion in October 2005, Kaiser-Hill recognized allremaining performance fees under the Closure Contract in 2005 and hasestablished reserves for certain risks and uncertainties related to the ClosureContract.  Kaiser-Hill will reverse thesereserves to the extent it is successful in mitigating or eliminating theseremaining contract risks and uncertainties.

Under the Closure Contract, Kaiser-Hill is notresponsible for, and the DOE pays all costs associated with any liability,including, without limitation, any claims involving strict or absoluteliability and any civil fine or penalty, expense or remediation cost, butlimited to those of a civil nature, which may be incurred by, imposed on, orasserted against Kaiser-Hill arising out of any act or failure to act,condition or exposure which occurred before Kaiser-Hill assumed responsibilityon July 1, 1995 (“pre-existing conditions”). To the extent the acts oromissions of Kaiser-Hill constitute willful misconduct, lack of good faith, orfailure to exercise prudent business judgment on the part of Kaiser-Hill’smanagerial personnel and cause or add to any liability, expense, or remediationcost resulting from pre-existing conditions, Kaiser-Hill is responsible, butonly for the incremental liability, expense or remediation caused byKaiser-Hill.

The Closure Contractfurther provides that Kaiser-Hill will be reimbursed for the reasonable cost ofbonds and insurance allocable to the contract and for liabilities and expensesincidental to these liabilities, including litigation costs, to third partiesnot compensated by insurance or otherwise. There is an exception to thisreimbursement provision applicable to liabilities caused by the willfulmisconduct, lack of good faith or failure to exercise prudent business judgmentby Kaiser-Hill’s managerial personnel.

Kaiser-Hill now operatesunder the closeout phase of its Closure Contract with the DOE, primarilyresolving the administrative issues and providing support to the DOE to achieveregulatory closure of the site.  Thecloseout phase of the Closure Contract is a cost reimbursable phase and is notfee - bearing; the Company does not expect that the closeout phase will impactfees earned. Effective December 31, 2005,Kaiser-Hill terminated its remaining employees. Staff necessary to complete closeout activities is being subcontractedor provided by CH2M Hill Companies Ltd. (“CH2M Hill”).

5.             Investment inAffiliates

In 1997, the Company purchased a 4% ownership interest in a limitedliability company (“the LLC”) that leases the land and owns the buildings wherethe Company’s corporate headquarters are located.  Effective October 28, 2000, the Companynegotiated a settlement with the otherowners of the LLC resolving various issues between the Company and the otherowners.  As a part of that resolution,subject to certain contingencies and a time limit of December 31, 2012, theCompany fixed the estimated amount of potential future recovery of theinvestment, upon sale or refinancing of the property at $2.8 million.

As a result of negotiations between the Companyand the other owners of the LLC, relating to the amount of the recovery of theCompany’s investment in the LLC, that took place during the third quarter of2007, the Company reflected an impairment charge of $1.8 million during thequarter ended September 30, 2007, relating to this investment. On November 2,2007, the Company received the sum of $1.0 million from the owners of the LLCrepresenting the full amount of its recovery of its investment in the LLC asagreed upon between the Company and the LLC.

6.             Common Stock

The Company declared a $6.00 per common share cash dividend on December21, 2006 payable to shareholders of record on January 2, 2007. The dividend waspaid on January 16, 2007.  Any futuredetermination to pay cash dividends will be at the discretion of our Boardwhich determines our dividend policy based on our results of operations,capital requirements, and other factors that our Board deems relevant.

7.             Other Contingencies

The Company has various obligations and liabilitiesfrom its continuing operations, including general overhead expenses inconnection with maintaining, operating and winding down the various entitiesand net assets comprising the Company. Additionally, the Company believes contingent liabilities may exist inthe following areas:

Nova Hut

On May 16, 2006, theCompany was informed that an arbitration panel formed under the auspices of theInternational Chamber of Commerce (“ICC”) issued a ruling in the arbitrationproceeding initiated by its subsidiary, Kaiser Netherlands B.V. (“KaiserNetherlands”) concerning the steel mini-mill that was constructed by KaiserNetherlands for Nova Hut, a.s. (now Mittal Steel Ostrava, a.s.) (“Nova Hut”) inOstrava, the Czech Republic.  Thedecision by the arbitration panel is not

 

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appealable.  After calculation of claim and counter-claimaward amounts as decided by the ICC arbitration panel, the net balance awardagainst Kaiser Netherlands, including legal cost and interest amounts, isapproximately $4.1 million in favor of Nova Hut.  The Company does not believe that Nova Huthas recourse to the Company to collect this award amount.  However, Nova Hut has submitted a courtfiling in The Netherlands to enforce the award against Kaiser Netherlands whichhas limited assets.

The Company continues toevaluate its remaining options against Nova Hut and the International FinanceCorporation (“IFC”).  Among the optionsbeing considered are the filing of independent arbitration claims by theCompany (as opposed to Kaiser Netherlands) against Nova Hut and the IFC inaccordance with prior rulings of the Bankruptcy Court.  The Bankruptcy Court has entered an orderstaying the Company’s claim against the IFC pending submission of the disputeto arbitration.  Similarly, theBankruptcy Court has entered an order staying the Company’s bankruptcy claimagainst Nova Hut pending arbitration. The Company recently filed a motion with the Bankruptcy Court to securediscovery against Nova Hut and the IFC, pending the initiation of internationalarbitration proceedings by the Company as previously ordered by the BankruptcyCourt.  In a combined hearing held inDelaware on April 25, 2007, the Bankruptcy Court denied the Company’s motionfor discovery in advance of the initiation of separate arbitration proceedingsagainst the IFC and Nova Hut, respectively. The Company has filed a motion with the District Court seeking appeal ofthe Bankruptcy Court’s denial of the Company’s discovery motion.  This appeal is still pending.

In December 2003, an ICCarbitration panel, under the dispute resolution provisions of the Nova Hutmini-mill subcontract between Kaiser Netherlands and the mini-mill’s mainequipment supplier, Tippins, Inc., issued a final award that was on balancefavorable to Kaiser Netherlands.  As aresult of the ruling, Kaiser Netherlands was relieved of the obligation to payretention to Tippins, and Kaiser Netherlands was awarded a net cash settlementof $2.6 million.  The Company has notrecorded this award due to the uncertainties regarding collectibility.  However, the Company is actively pursuingcollection of this award.

The continued litigationof these disputes has had, and will continue to have, a negative impact on thecash flow of the Company.

Taking into account theresults of the ICC arbitration ruling against Kaiser Netherlands, in the secondquarter of 2006 the Company wrote off the remaining Nova Hut contractreceivable of $3.0 million by recording an additional reserve of $3.0 million.

Kaiser-Hill

On October 13, 2005, Kaiser-Hill declared physicalcompletion of the cleanup and closure of the DOE’s Rocky Flats site.  DOE has reviewed Kaiser-Hill’s declaration asrequired under the Closure Contract. On December 8, 2005, the DOE accepted thephysical completion declaration in accordance with the Closure Contract. Theprojected total fee to be earned pursuant to the Closure Contract is expectedto be $510.9 million based on Kaiser-Hill’s cost to complete the site closureof $3.44 billion.  As of November 12,2007, Kaiser-Hill has received $510.8 million of such fee from the DOE.  A substantial portion of the received feeremains subject to audit.

Under Kaiser-Hill’scontract with the DOE, Kaiser-Hill is not responsible for, and the DOE pays allcosts associated with, any liability, including, without limitation, any claimsinvolving strict or absolute liability and any civil fine or penalty, expense,or remediation cost, but limited to those of a civil nature, which may beincurred by, imposed on, or asserted against Kaiser-Hill arising out of any actor failure to act, condition, or exposure which occurred before Kaiser-Hillassumed responsibility on July 1, 1995 (pre-existing conditions). To the extentthe acts or omissions of Kaiser-Hill constitute willful misconduct, lack ofgood faith, or failure to exercise prudent business judgment on the part ofKaiser-Hill managerial personnel and cause or add to any liability, expense, orremediation cost resulting from pre-existing conditions, Kaiser-Hill isresponsible, but only for the incremental liability, expense, or remediationcaused by Kaiser-Hill.

The Closure Contractfurther provides that Kaiser-Hill will be reimbursed for the reasonable cost ofbonds and insurance allocable to the Rocky Flats contract and for liabilitiesand expenses incidental to these liabilities, including litigation costs, tothird parties not compensated by insurance or otherwise. There is an exceptionto this reimbursement provision applicable to liabilities caused by the willfulmisconduct, lack of good faith or failure to exercise prudent business judgmentby Kaiser-Hill managerial personnel.

As the contract betweenKaiser-Hill and the DOE is cost-reimbursable in nature, the costs invoiced byKaiser-Hill for reimbursement by the DOE are subject to audit by the U.S. government.  Also since the inception of Kaiser-Hill, theCompany invoiced certain management oversight costs to Kaiser-Hill. TheseCompany-invoiced management oversight costs

 

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toKaiser-Hill have been reviewed by the DOE and remain subject to final approval. Government audits at Kaiser-Hill areongoing.  Although Kaiser-Hill and theCompany have historically provided for their estimates of disallowed costs oncost-reimbursable contracts, uncertainties exist with regard to whethergovernment audits will result in any disallowed costs needing to be refunded tothe government customer.  The continuedadequacy of provisions for reserves with regard to unallowable costs isreviewed regularly.

Kaiser-Hill now operatesunder the closeout phase of the DOE Rocky Flats Closure Contract, primarilyresolving open administrative issues and providing support to the DOE toachieve regulatory closure of the site. The closeout phase of the contract is a cost reimbursable phase and isnot fee - bearing; the Company does not expect that the closeout phase willimpact fees earned.

On December 8, 2005, when the DOE accepted physicalcompletion in accordance with the Rocky Flats contract, it authorizedKaiser-Hill to invoice all remaining performance fees less a retained amountequaling $5.0 million which was retained by the DOE for possible contractcontingencies.  On January 11, 2006,Kaiser-Hill received payment for all fees except for the retained amount.  As a result of this payment, on March 1,2006, the Company received an $80.0 million cash distribution (representing its50% share) from Kaiser-Hill.  On April14, 2006, $4.9 million of the remaining $5.0 million retention was released toKaiser-Hill by the DOE.  It cannot bedetermined at this time what portion of the remaining $0.1 million DOEretention balance will ultimately be released and when (if ever) such a releasewould occur.  On June 30, 2006, theCompany received an additional $5.0 million cash distribution fromKaiser-Hill.  On February 27, 2007, theCompany received another cash distribution from Kaiser-Hill in the amount of$1.5 million.

As of November 12, 2007,Kaiser-Hill has withheld approximately $3.6 million from distribution toprovision against potential risks associated with U.S. Government audits.  At this time, it is not possible to predictthe number of years that will be required to complete the government auditprocess.  The Company expects to receiveits 50% share of any distribution of such funds from Kaiser-Hill.

Post-Retirement BenefitPlan Obligation 

In accordance with theterms and provisions of the Plan of Reorganization for Old Kaiser, the Companyremains obligated to continue to fulfill the provisions of Old Kaiser’spreviously curtailed benefits plan, which provides certain medical, retirement,and death benefits to a group of retirees. The Company was self-insured for all benefits payable under the plan.

Since the December 2000approval of the reorganization plan, the Company had been negotiating with theBankruptcy Court-appointed Official Committee of Retirees (“OCR”) to design andimplement a benefits funding plan that would provide for all retiree benefitobligations going forward.   In anadversary claim hearing in the Bankruptcy Court held on April 12, 2006, theCourt accepted the Company’s proposal to establish a Voluntary Employees’Beneficiary Association (“VEBA”) to fund retirees’ future medical and deathbenefits in the present value amount of approximately $6.1 million.  The present value pension obligation of $0.3million will continue to be funded directly by the Company.  As of March 31, 2007, the Company had anaccrued liability of $6.4 million.  TheVEBA was established and funded by the Company in the amount of approximately$6.1 million effective April 30, 2007. Through April 30, 2007, the benefits hadbeen funded by the Company through a claims administrator.

Furthermore, according tothe terms of the Bankruptcy Court decision, after the VEBA has been in placefor five years, the Company will be required to undertake an actuarial analysisof the projected net present value of benefits remaining to be paid out.  If the remaining VEBA fund amount is then notsufficient to pay the estimated present value of future benefits obligations,then the Company will be required to contribute the estimated shortfall amountto the VEBA fund.  It is not possible topredict at this time whether a shortfall in the VEBA fund will exist after aperiod of five years and, if so, the required amount of the Company’scontribution for the shortfall.

8.             NewAccounting Standards

InJune 2006, the Financial Accounting Standards Board, (“FASB”) issued FASBInterpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”).FIN 48 is an interpretation of FASB Statement No. 109, “Accounting forIncome Taxes,” and seeks to reduce the diversity in practice associated withcertain aspects of measurement and recognition in accounting for income taxes.In addition, FIN 48 provides guidance on de-recognition, classification,interest and penalties, and accounting in interim periods and requires expandeddisclosure with respect to the uncertainty in income taxes.   We adopted the provisions of FIN 48 onJanuary 1, 2007. The Company recognizes accrued interest related tounrecognized tax benefits in interest expense and penalties in operatingexpense. No amounts were accrued for payment of interest and penalties atJanuary 1, 2007. There was no cumulative effect as a result of applying FIN 48.No adjustment was made to retained earnings on our opening consolidated balancesheet.

 

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InSeptember 2006, the FASB issued Statements of Financial AccountingStandards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No.157 defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles, and expands disclosures about fairvalue measurements. SFAS No. 157 applies to existing accounting pronouncementsthat require or permit fair value measurements in which FASB had previouslyconcluded fair value is the most relevant measurement attribute. Accordingly,SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007, with early adoption encouraged. The Company iscurrently evaluating the impact the adoption of this statement will have on itsconsolidated financial statements.

InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Optionfor Financial Assets and Financial Liabilities-Including an amendment of FASBStatement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities tochoose to measure eligible items at fair value at specified election dates.Unrealized gains and losses on items for which the fair value option has beenelected are reported in earnings at each subsequent reporting date. The fairvalue option (i) may be applied instrument by instrument, with certainexceptions, (ii) is irrevocable (unless a new election date occurs) and(iii) is applied only to entire instruments and not to portions ofinstruments. SFAS No. 159 is effective for the Company on January 1, 2008and is not expected to have a significant impact on the Company’s consolidatedfinancial statements.

**I****TEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

***Overview***

Since the Plan of Reorganization of Old Kaiser under Chapter 11 of theBankruptcy Code became effective on December 18, 2000, we have completed theinitial bankruptcy distributions to allowed claimholders, continued to progressin resolving remaining outstanding bankruptcy claims, managed our remainingassets, wound down unnecessary elements of previous activities and corporatestructure, redeemed all of the New Preferred shares outstanding and formed twonew business opportunities, KAMS and MS Builders Insurance Company. We do notexpect future revenues from our KAMS subsidiary as we ceased active operationsof that subsidiary as of June 30, 2006.

Following the effectiveness of the Plan of Reorganization, we now haveonly a limited number of activities, assets and liabilities, primarilyconsisting of the following:

·                  We own Kaiser-Hill equally with CH2MHill.  Kaiser-Hill has been our majorsource of income.  Kaiser-Hill served asthe general contractor at the DOE’s Rocky Flats site. Kaiser-Hill has performedfor the Department of Energy at this site since 1995 and in January 2000 wasawarded a new contract to manage the closure of the site.  The level of success experienced byKaiser-Hill in achieving timely closure of the Rocky Flats site, and the costof achieving such closure, have been and continue to be the primarydeterminants of our long-term financial performance following the completion ofthe bankruptcy reorganization process.

·                  On May 16, 2006, we were informed that anarbitration panel formed under the auspices of the ICC issued a ruling in thearbitration proceeding initiated by our subsidiary, Kaiser Netherlands,concerning the steel mini-mill that was constructed by Kaiser Netherlands forNova Hut, a.s. (now Mittal Steel Ostrava, a.s.) in Ostrava, the CzechRepublic.  After calculation of theamounts awarded on the claim and counterclaim, the net balance award againstKaiser Netherlands, including legal cost and interest amounts, is approximately$4.1 million in favor of Nova Hut.  We donot believe that Nova Hut has recourse against us to collect this amount.  We are currently evaluating our remainingoptions against Nova Hut and the IFC. Taking into account the results of the ICC arbitration ruling againstKaiser Netherlands, in the second quarter of 2006 we wrote off the remainingNova Hut contract receivable of $3.0 million by recording an additional reserveof $3.0 million.

·                  We own a captiveinsurance company that has not been issuing new policies since October 1, 2000and has solely been involved in resolving remaining claims made againstpreviously issued policies.  In thefourth quarter of 2004, we received regulatory approval and finalized theformation documents of a sponsored captive subsidiary, MS Builders InsuranceCompany, to enable our wholly-owned captive insurance company to offerderivative captive insurance services to third party clients.  As of November 12, 2007, MS BuildersInsurance Company has not written any policies.

·                  We have an ongoingobligation to fund a capped post-employment medical, pension, and death benefitplan for 

 

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afixed group of retirees.  Effective April30, 2007, a VEBA has been established in the amount of $6.1 million to coverthe medical and death benefit obligations. We have a one-time obligation to fund any shortfall in the VEBA, asdescribed in Note 7 to the unaudited consolidated financial statements includedin Item 1 of Part I Financial Statements, of this report. We will continue tofund the present value pension obligation of $0.3 million directly.

***Outlook***

*Potential**Kaiser-Hill Distribution*. As we look forward, a significant factor in determining the value of ourCommon Stock is the closeout performance of Kaiser-Hill and the completion ofthe U.S. Government’s related project audits.

On October 13, 2005, Kaiser-Hilldeclared physical completion of the clean up and closure of the DOE’s RockyFlats site.  On December 8, 2005, the DOEaccepted the physical completion in accordance with the contract.  The projected total fee to be earned pursuantto the contract is estimated to be $510.9 million based on Kaiser-Hill’s costto complete the site closure of $3.44 billion. As of November 12, 2007, Kaiser-Hill had received $510.8 million of suchfee from the DOE.

On December 8, 2005, when the DOE accepted physicalcompletion in accordance with the Rocky Flats Closure Contract, it authorizedKaiser-Hill to invoice all remaining performance fees less a retained amountequaling $5.0 million which was retained by the DOE for possible contractcontingencies.  On January 11, 2006,Kaiser-Hill received payment for all fees except for the retained amount.  As a result of this payment, on March 1,2006, the Company received an $80.0 million cash distribution (representing its50% share) from Kaiser-Hill.  As of March31, 2006, Kaiser-Hill had received $505.9 million of the $510.9 million duefrom the DOE. On April 14, 2006, $4.9 million of the remaining $5.0 million wasreleased to Kaiser-Hill by the DOE.  Itcannot be determined at this time what amount, if any, of the remaining $0.1million DOE retention balance will ultimately be released and when, if ever,such a release will occur.  On June 30,2006, the Company received an additional $5.0 million cash distribution fromKaiser-Hill (representing its 50% share). On February 27, 2007, the Company received another $1.5 million cashdistribution from Kaiser-Hill (representing its 50% share).

Kaiser-Hill now operates under the closeout phase of its contract withthe DOE, primarily resolving open administrative issues and providing supportto the DOE to achieve regulatory closure of the site.  The closeout phase of the contract is a costreimbursable phase and is not fee-bearing; the Company does not expect that thecloseout phase will impact fees earned.

As of November 12, 2007,Kaiser-Hill has withheld approximately $3.6 million from distribution toprovision against potential risks associated with U.S. Government audits. Weexpect to receive our 50% share of any distribution of such funds byKaiser-Hill.

At this time, it is notpossible to predict the number of years that will be required to complete thegovernment audit process.

*Nova Hut.* We arecurrently evaluating our remaining options against Nova Hut and the IFC.  Among the options being considered is filingindependent arbitration claims by Kaiser Holdings (as opposed to KaiserNetherlands) against Nova Hut and the IFC in accordance with prior rulings ofthe Bankruptcy Court.  The BankruptcyCourt has entered an order staying our bankruptcy claim against the IFC pendingsubmission of the dispute for arbitration. Similarly, the Bankruptcy Court has entered an order staying ourbankruptcy claim against Nova Hut, pending submission of the dispute toarbitration.

The continued litigationof these disputes has had, and will continue to have, a negative impact on ourcash flow.

Taking into account theresults of the ICC arbitration ruling against Kaiser Netherlands, in the secondquarter of 2006 we wrote off the remaining Nova Hut contract receivable of $3.0million by recording an additional reserve of $3.0 million.

*Odd-Lot Tender Offer.* Our Kaiser Common Stock is currentlyregistered under the Securities Exchange Act of 1934 (the “Exchange Act”), andconsequently we are subject to reporting obligations of the Exchange Act.

On October 25, 2007, theCompany initiated a tender offer to purchase all shares of Common Stock held bystockholders who owned of record or beneficially fewer than 100 shares as ofthe close of business on October 22, 2007 and who continue to hold such sharesthrough the expiration of the tender offer (November 30, 2007, unless the offeris extended) (“the Offer”).  If, afterthe Company purchases shares in the Offer, the Company has fewer than 300stockholders of record, as calculated under the rules and regulations of the ExchangeAct, we may file a Form 15 with the SEC, as a result of which our registrationof the Common Stock and our duty to file reports with the SEC (“SEC ReportingObligations”) under Sections 13(a) and 15(d) of the Exchange Act would cease,and we would no longer be a reporting company. This would mean that 

 

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we would no longer berequired to file with the SEC certain reports and forms, including Forms 10-K,10-Q and 8-K and proxy statements.  Insuch event, thereafter, the Company would provide information about itsquarterly and annual financial results to its remaining stockholders by othermeans, such as through its website.

***Critical Accounting Policies and SignificantEstimates***

The preparation of financial statements inconformity with GAAP requires that we make estimates and assumptions affectingthe assets and liabilities (including contingent assets and liabilities)reported at the date of the Consolidated Financial Statements and the incomestatement amounts reported for the periods presented.  We base our estimates on historicalexperience and on various other assumptions that we believe to be reasonableunder the circumstances.  Actual resultsmay differ from these estimates under different assumptions or conditions.

Our accountingmeasurements that are most affected by our estimates of future events are:

·                  Recoverability of accounts receivable and investments;

·                  Income tax provision, deferred tax assets andliabilities;

·                  Use of the equity method ofaccounting for Kaiser-Hill, an affiliate that we have the ability tosignificantly influence but not control. In accordance with the equity method of accounting, we record ourproportionate share of the affiliate’s income or losses;

·                  Estimated fees on the Kaiser-Hill joint venture.Estimating future costs, contract contingencies and revenues and profits, is aprocess requiring a high degree of judgment. In the event of a change in total estimated contract cost or profit, thecumulative effect of such change is recorded in the period the change inestimate occurs.  Now that the contracthas been declared complete, additional revenue recognition and ourprofitability from the Kaiser-Hill contract may be adversely affected to theextent that estimated cost to complete or incentive or award fee estimates arerevised upon audit from the U. S. Government. The Kaiser-Hill contract containsincentive provisions for increased or decreased revenue and profit based onactual performance against established cost targets and schedule-relatedgoals.  Incentive fees have been includedin estimated contract revenue at the time the amounts can be reasonablydetermined and are reasonably assured based on historical experience and otherobjective criteria.  Should total costsof the project be revised based upon the results of U. S. Government audits,previously recognized revenues could be reversed and/or future period revenuescould be reduced; and

·                  Our liability in connection with a post-employmentmedical benefit plan for a fixed group of retirees.  This liability is affected by changes in thediscount rate and certain actuarial assumptions.  Should actual rates and results differ fromthe assumptions used, revisions to the liability would be required resulting inadditional income statement charges.

***NewAccounting Pronouncements***

InJune 2006, the Financial Accounting Standards Board, (“FASB”) issued FASBInterpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”).FIN 48 is an interpretation of FASB Statement No. 109, “Accounting forIncome Taxes,” and seeks to reduce the diversity in practice associated withcertain aspects of measurement and recognition in accounting for income taxes.In addition, FIN 48 provides guidance on de-recognition, classification,interest and penalties, and accounting in interim periods and requires expandeddisclosure with respect to the uncertainty in income taxes.   We adopted the provisions of FIN 48 onJanuary 1, 2007. There was no cumulative effect as a result of applyingFIN 48. No adjustment was made to retained earnings on our opening consolidatedbalance sheet.

InSeptember 2006, the FASB issued Statements of Financial AccountingStandards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No.157 defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles, and expands disclosures about fairvalue measurements. SFAS No. 157 applies to existing accounting pronouncementsthat require or permit fair value measurements in which FASB had previouslyconcluded fair value is the most relevant measurement attribute. Accordingly,SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007, with early adoption encouraged. The Company iscurrently evaluating the impact the adoption of this statement will have on itsconsolidated financial statements.

 

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InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Optionfor Financial Assets and Financial Liabilities-Including an amendment of FASBStatement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities tochoose to measure eligible items at fair value at specified election dates.Unrealized gains and losses on items for which the fair value option has beenelected are reported in earnings at each subsequent reporting date. The fairvalue option (i) may be applied instrument by instrument, with certainexceptions, (ii) is irrevocable (unless a new election date occurs) and(iii) is applied only to entire instruments and not to portions ofinstruments. SFAS No. 159 is effective for the Company on January 1, 2008and is not expected to have a significant impact on the Company’s consolidatedfinancial statements.

**RESULTS OF OPERATIONS**

*Gross Revenues*

We had no gross revenues for thethree and nine month periods ended September 30, 2007. For the comparableperiods of 2006, gross revenues were $0.0 million and $0.2 million,respectively.  The Company’s grossrevenues reported for the first nine months in 2006 are directly attributableto the operations of KAMS.  Grossrevenues of KAMS decreased in 2007 due to the wind-down and completion of workat the DOE’s Rocky Flats site, at which KAMS provided services. Future revenueis not expected from our KAMS subsidiary. Gross revenues in the nine monthperiod ended September 30, 2006, from KAMS operations resulted primarily fromthe performance of laboratory audits and data validation services.

*Equity Income(Loss) In Earnings of Joint Venture*

Our current primary remaining sourceof income is our 50% ownership in Kaiser-Hill. We own Kaiser-Hill equally withCH2M Hill. The financial information contained herein for Kaiser-Hill isreflected on the equity basis.

*Contract Provisions for Revenue and Performance Award*

Kaiser-Hill’scontract with the DOE provides that Kaiser-Hill earn revenue equal to theactual cost of physical completion plus a performance fee.  The performance fee is determined based on(1) Kaiser-Hill’s cost to complete the site closure, which must be within therange of $3.1 billion and $4.9 billion, (2) the schedule of physicalcompletion, which must be before 2007 and (3) Kaiser-Hill’s safety performance.  On October 13, 2005, Kaiser-Hill declaredphysical completion of the cleanup and closure of the DOE’s Rocky Flatssite.  At the time of declaration ofphysical completion on October 13, 2005, Kaiser-Hill’s cost estimate tocomplete the project remained at $3.44 billion, which resulted in a performancefee payable to Kaiser-Hill projected to be $510.9 million, of which $255.0 million had previouslybeen received.  On December 8, 2005, theDOE affirmed Kaiser-Hill’s declaration as required under the contract and theDOE authorized Kaiser-Hill to invoice all remaining performance fees less aretained amount equaling $5.0 million. On January 11, 2006, Kaiser-Hill received payment for all remaining feesexcept the retained amount.  As a resultof this payment, on March 1, 2006, the Company received an $80.0 million cashdistribution (representing its 50% share) from Kaiser-Hill.  On April 14, 2006, $4.9 million of theremaining $5.0 million retention was released to Kaiser-Hill by DOE.  It cannot be determined at this time whatportion of the remaining $0.1 million DOE retention balance will ultimately bereleased and when (if ever) such a release would occur.  On June 30, 2006, the Company received anadditional $5.0 million cash distribution from Kaiser-Hill.  On February 27, 2007, the Company receivedanother $1.5 million cash distribution from Kaiser-Hill.  As of November 12, 2007, Kaiser-Hill hadreceived $510.8 million of the $510.9 million fee due from the DOE pendingcompletion of the closeout phase of the contract.

Since Kaiser-Hilldeclared physical completion, many of the performance risks have beeneliminated, but contract risks and uncertainties remain.  As a result ofdeclaration of physical completion in October 2005, Kaiser-Hill recognized allremaining performance fees under the contract in 2005 and has establishedreserves for certain risks and uncertainties related to the contract (seedetails described below in “— Closure Contract Billing Provisions”).  Kaiser-Hill will reverse these reserves tothe extent it is successful in mitigating or eliminating these remainingcontract risks and uncertainties.

Kaiser-Hillrecognized a substantial amount of the fee income from the DOE upon thedeclaration of physical completion on October 13, 2005 and, accordingly, theCompany’s proportionate share of such income was recorded in Equity Income inEarnings of Affiliates in its consolidated statement of operations for the yearended December 31, 2005. For the three and nine months ended September 30, 2007,we reported no income from our 50% ownership in Kaiser-Hill. In the future, wemay have additional income from Kaiser-Hill to report to the extent Kaiser-Hillreleases certain retained reserve amounts, as mentioned in “—the Outlook”above.

*Closure Contract Billing Provisions*

****Fromthe inception of Kaiser-Hill’s contract with the DOE in February 2000 throughDecember 31, 2006, Kaiser-Hill invoiced the DOE for the performance fee basedon the contract provisions of approximately $510.9 million, and collected an****

**** ****

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****aggregateof $510.8 million in fees from the DOE****.  It is not known when, if ever, the remainingDOE retention balance of $0.1 million will be released to Kaiser-Hill.  By contract, this remaining retention balanceamount cannot be released until final contract closeout.

Fee payments made by theDOE to Kaiser-Hill, less certain non-reimbursable costs and reserve andretention amounts, have been distributed to the joint venture owners uponreceipt.  Kaiser-Hill has historicallyincurred expenses that are not reimbursable by DOE pursuant to applicableFederal regulations.  Accordingly, suchexpenses, which Kaiser-Hill estimates could total approximately 15% to 20% ofthe total award fee, are deducted from the total fee earned and collected byKaiser-Hill prior to any distributions to either of its two owners.  From Kaiser-Hill’s inception through November12, 2007, Kaiser-Hill had distributed $194.2 million in cash to each of its twoowners.

Asof November 12, 2007, Kaiser-Hill has withheld approximately $3.6 million fromdistribution to provision against potential risks associated with U.S.Government audits.  As discussed above,Kaiser-Hill also may receive an additional $0.1 million that has been retainedby DOE.  The Company expects to receiveits 50% share of any future distributions of such funds by Kaiser-Hill.

The Company receiveddistributions in the aggregate amount of****$85.0 millionfrom Kaiser-Hill during 2006.  As aresult, the Company had reduced its investment in Kaiser-Hill on its balancesheet by $85.0 million as of December 31, 2006. On February 27, 2007, the Company received another $1.5 million cashdistribution from Kaiser-Hill.  TheCompany has further reduced its investment in Kaiser-Hill on its consolidatedbalance sheet by $1.5 million as of March 31, 2007.

Kaiser-Hillnow operates under the closeout phase of its contract with the DOE, primarilyresolving open administrative issues and providing support to the DOE toachieve regulatory closure of the site. The closeout phase of the contract is a cost - reimbursable phase and isnot fee - bearing; the Company does not expect that the closeout phase willimpact fees earned.  Effective December31, 2005, Kaiser-Hill terminated its remaining employees. Staff necessary tocomplete closeout activities is subcontracted or provided by CH2M Hill.

*Administrative Expenses*

Administrative expenses for the three months and ninemonths ended September 30, 2007 were $0.8 million and $2.9 million, respectively,an increase of $0.1 million and a decrease of $0.3 million, respectively,compared to the three and nine months ended September 30, 2006, which is dueprimarily to a fluctuation in legal fees.

Our cost to provide certain on-going post-retirement medical****benefits to a fixed number of retirees isalso treated as an administrative expense. In the three and nine month periodsended September 30, 2007, the expenses related to this plan were $0.0 millionand $0.3 million, respectively, compared to $0.1 million and $0.7 million forthe three and nine month periods ended September 30, 2006.

*Impairment Loss on Investment in Affiliates*

As a result of recent negotiations between the Company and the otherowners of the LLC, the Company reduced the carrying value of its Investment inAffiliates to $1.0 million by recording an impairment charge of $1.8 millionduring the third quarter, which reflects the realizable value of the asset.

* Interest Income*

Interest income for the three and nine months ended September 30, 2007was $0.5 million and $1.4 million, respectively, which represents a decrease of$0.1 million and an increase of $0.1 million, respectively, compared to thethree and nine month period ended September 30, 2006.

*Income Tax Benefit/Expense*

We recorded an income tax benefit of $0.9 million and $1.3 million onoperating loss from operations of $2.2 million and $3.3 million, respectively,during the three and nine months ended September 30, 2007. Our effective incometax rates of 43% and 41%, respectively, for the three and nine months endedSeptember 30, 2007, reflect realizable value of income taxes receivables andthe non-taxability of certain income for federal income tax purposes. For thethree and nine months ended September 30, 2006, we recorded an income taxbenefit of $0.2 million and $2.7 million, respectively, on operating loss fromoperations of $0.1 million and $5.2 million, respectively.

 

16

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**LIQUIDITYAND CAPITAL RESOURCES**

*Operating Activities*

We used $7.7 million of cash during the nine months ended September 30,2007, compared to $34.6 million for the nine months ended September 30, 2006.The $26.9 million decrease in the use of cash for the nine months endedSeptember 30, 2007, compared to the nine months ended September 30, 2006, wasprimarily due to a decrease in income tax payments made in 2007 compared to2006.

As a result of recent negotiations between the Company and the otherowners of the LLC, the Company reduced the carrying value of its Investment inAffiliates to $1.0 million by recording an impairment charge of $1.8 millionduring the third quarter, which reflects the realizable value of the asset. OnNovember 2, 2007, the Company received the sum of $1.0 million from the ownersof the LLC representing the full amount of its recovery of investment in theLLC as agreed upon between the Company and the LLC.

*InvestingActivities*

We used $0.1 million ininvesting activities during the nine months ended September 30, 2007, includingpurchase of a certificate of deposit and a $1.5 million distribution fromKaiser-Hill, compared to $86.0 million received for the nine months endedSeptember 30, 2006. The DOE accepted physical completion in accordance with theRocky Flats Contract in the last quarter of 2005 and Kaiser-Hill received allremaining project fees except for the DOE retention amount of $0.1 million inthe quarter ended June 30, 2006, resulting in the $85 million cash distributionto us during the first nine months of 2006.

*Financing Activities*

During the nine months ended September 30, 2007, we used $10.8 million ofcash to pay a cash dividend to our common stockholders.   For the nine months ended September 30,2006, we engaged in no financing activities.

*Liquidity and Capital Resource Outlook*

We currently haveno debt. We continue to finance the bankruptcy distribution requirements andfollow-on working capital needs primarily through the use of the availablecash. Based on (i) current expectations for operating activities and results,(ii) expected Kaiser-Hill distributions, (iii) our current availablecash position, (iv) recent trends and projections in liquidity and capitalneeds (including funds that may be needed in connection with any potentialgoing private transactions), (v) current expectations of total allowedclaims upon the completion of the bankruptcy proceedings, and(vi) estimated amounts necessary to satisfy our obligation to providefuture benefits to a fixed group of retirees, management believes we havesufficient liquidity to cover our future operating needs and income taxrequirements.  We have established and funded a VEBA in theamount of approximately $6.1 million effective April 30, 2007.

*Other Matters*

We have various obligations andliabilities from our continuing operations, including general overhead expensesin connection with maintaining, operating and winding down the variousentities. Additionally, we believe contingent liabilities may exist in theareas described in Note 7 to the Consolidated Financial Statements.

**ITEM 3. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK**

We do not believe we have significant exposures to market risk. Theinterest rate risk associated with our obligation to fund a capped retireemedical obligation is not sensitive to interest rate risk other than throughthe determination of the present value of its remaining obligationthereunder.  The company has certificatesof deposit and marketable securities generally at prevailing market rates. A10% hypothetical increase or decrease in the average annual prime rate wouldnot result in a material impact to the company’s financial position or resultsof operations.

 

17

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**ITEM 4. CONTROLS AND PROCEDURES**

As of September 30, 2007, anevaluation was performed under the supervision and with the participation ofthe Company’s management, including the Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures (as defined in Rule 13a-15(e) or15d-15(e) under the Exchange Act). Based on that evaluation, theCompany’s management, including the Chief Executive Officer and Chief FinancialOfficer, concluded that the Company’s disclosure controls and procedures wereeffective as of September 30, 2007. There were no significant changes in theCompany’s internal control over financial reporting (as defined inRule 13a-15(f) or 15d-15(f) ) that occurred during theperiod covered by this report that have materially affected, or that arereasonably likely to materially affect, our internal control over financialreporting.

**PART II** — **OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS**

See Item 3, “Legal Proceedings” in the Annual Report on Form 10-Kfor the year ended December 31, 2006. For a discussion of materialdevelopments with respect to such legal proceedings during the quarter endedSeptember 30, 2007, see Note 7 of the Notes to Consolidated FinancialStatements included in Part I hereof.

**ITEM 1A. RISK FACTORS**

**RISK FACTORS RELATING TO KAISER HOLDINGS AND FORWARD-LOOKINGSTATEMENTS**

This Quarterly Report onForm 10-Q and our other periodic filings with the Securities andExchange Commission and written or oralstatements made by our officers and directors to the press, potentialinvestors, securities analysts and others, may contain forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. Theseforward-looking statements are not historical facts, but rather arepredictions, and generally can be identified by use of statements that includeterms such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan”or “foresee” or other words or phrases of similar import. Similarly, statementsthat describe or contain informationrelated to matters such as our intent, belief, or expectation with respect tofinancial performance, claims resolution, cash availability, stock redemptionplans, contract awards and performance, potential acquisitions and jointventures****and cost-cutting measuresare forward-looking statements. These forward-looking statements oftenreflect a number of assumptions and involve known and unknown risks,uncertainties and other factors that could cause our actual results to differmaterially from those currently anticipated in these forward-lookingstatements. In light of these risks and uncertainties, including thosedescribed below, the forward-looking events might or might not occur. Weundertake no obligation to publicly update any forward-looking statement,whether as a result of new information, future events or otherwise.

**We face significant contingencies, which may adversely impact ourability to fund our continuing operations and to undertake new operations.**

*We do not have a significant business plan beyondKaiser-Hill, and we may undertake new activities with start-up and other risks.*

Our long-term future profitability will bedependent, to a significant degree, on the extent to which we carry outactivities other than through Kaiser-Hill, particularly since Kaiser-Hill hasentered the closeout phase of its contract with the DOE and we have receivedmost of the funds we expect to receive from our investment in Kaiser-Hill.Unless and until we further develop plans for such operations, we are unable todetermine either the amount of risk that future operations will involve orwhether we have the ability to realize long-term profitability.  The business opportunities we have beenexploring or have begun to explore, such as completion of the process to enableMS Builders Insurance Company to offer derivative captive insurance services,are in the development stage, are dependent to some extent on external marketfactors, may take a long time to develop, and may never be profitable orsuccessful at all.  Since June 30, 2006,KAMS has generated no revenues and we may have similar experiences with otherbusiness opportunities that we undertake. We currently have no active operations and are exploring potentialacquisition and other strategic opportunities. However, we may not be able toidentify attractive acquisition or strategic opportunities for ourcompany.  In addition, efforts we make todevelop business operations separate from Kaiser-Hill may involve start-upactivities with risks specific to activities of this type, or may involveactivities with which we are not familiar, any of which may adversely impactour financial condition, cash flow and operating results.  A decrease in our cash flows and operatingresults could result in a decrease in the value of our common stock.

 

18

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*We have had to, and may continue to have to, drawdown existing cash balances to fund current operating cash needs.*

In light of physical completion of Kaiser-Hill’s contract with the DOE,until and unless the Company is successful in developing a new revenue basethrough new commercial activities or undertakings, it is anticipated that theCompany will need to rely on existing cash balances to fund its continuingoperations, including overhead costs. For the quarter ended September 30, 2007, the Company generated $0.0million in gross revenues and $0.5 million in interest income while generatingoperating losses of $0.8 million, which were funded by cash on hand.  This draw down in cash balances could resultin a decrease in the value of Kaiser Common Stock.  Furthermore, if the Company does not establishnew operating activities, its existing cash balances could become insufficientto satisfy its overhead costs.  TheCompany has not identified an attractive potential acquisition or strategicopportunity in the last year, and management cannot predict if and when such anopportunity may arise.  In the meantime,the Company generated no revenues in the first nine months of 2007 and thesecond half of 2006, from KAMS.  If theCompany does not begin to generate revenues again, it will continue to operateat a loss and will be required to fund all of its operating costs with cash onhand.

*Ifwe deregister our common stock under the Exchange Act, the amount ofinformation about us that is publicly available will be reduced, and theliquidity of our common stock will further decrease.*

Our Board ofDirectors continues to consider alternatives for terminating the registrationof our common stock under the Exchange Act.  On October 25, 2007, wecommenced the Offer.  If, after wepurchase shares in the Offer, we have fewer than 300 stockholders of record, ascalculated under the rules and regulations of the Exchange Act, we may file aForm 15 with the SEC, as a result of which our registration of the Common Stockand our SEC Reporting Obligations under Sections 13(a) and 15(d) of theExchange Act would cease, and we would no longer be a reporting company.  If we were to deregister our common stockunder the Exchange Act, we would no longer be required to file information withthe SEC or provide certain information to our stockholders under the ExchangeAct, and many provisions of the Exchange Act would become inapplicable tous.  Therefore, deregistration would substantially reduce the informationwe would be required to furnish to our stockholders.  We intend to use available cash to purchaseshares tendered and accepted for purchase in the Offer.

Furthermore, ourcommon stock is currently traded on the Pink Sheets. Broker-dealers oftendecline to trade in Pink Sheet stocks given that the market for such securitiesis often limited, the stocks are more volatile, and the risks to investors aregreater. These factors may reduce the potential market for our common stock byreducing the number of potential investors, and if we deregister our commonstock, the number of potential investors may be reduced further.  Themarket for our common stock has been relatively illiquid in the past, andderegistration may make it even more difficult for investors in our commonstock to sell shares to third parties or to otherwise dispose of them. Thiscould cause our stock price to decline. Additionally, there can be no assurancethat our Common Stock will continue to trade on the Pink Sheets.

*We may be unsuccessful funding the benefits funding plan tosatisfy our obligation to provide future benefits to a fixed group of retirees.*

The Company remainsobligated to continue to fulfill the provisions of Old Kaiser’s previouslycurtailed benefits plan, which provides certain medical and death benefits to agroup of retirees.  All of the benefitsderived from the plan are fully covered by the Company’s self-insurance.

Since the December 2000approval of the reorganization plan, the Company had been negotiating withthe  Official Committee of Retirees (“OCR”)appointed by the Bankruptcy Court to design and implement a benefits fundingplan that would provide for all retiree benefit obligations going forward.   In an adversary claim hearing in theBankruptcy Court held on April 12, 2006, the Bankruptcy Court accepted theCompany’s proposal to establish a Voluntary Employees’ Beneficiary Association(“VEBA”)to fund retirees’ future medical and death benefits in the present value amountof approximately $6.1 million.  Thepresent value pension obligation of $0.3 million will continue to be fundeddirectly by the Company.  Effective April30, 2007, the VEBA was established and funded in the amount of approximately$6.1 million.

According to the terms ofthe Bankruptcy Court decision, after the VEBA has been in place for five years,the Company will be required to undertake an actuarial analysis of theprojected net present value of benefits remaining to be paid out.  If the remaining VEBA fund amount is then notsufficient to pay the estimated present value benefits obligation, then theCompany will be required to contribute the estimated shortfall amount to theVEBA fund.  It is not possible to predictat this time whether a shortfall in the VEBA fund would exist after a period offive years and, if so, what the Company’s contribution requirement for ashortfall amount would be in this circumstance. A requirement to fund asignificant shortfall in the VEBA fund could result in a decrease in the valueof Kaiser Common Stock.

 

19

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* *

*We may be unable to obtain performance guarantees,which may limit our ability to undertake new activities.*

 

Given the reorganization history of Old Kaiser, we may not be able toobtain satisfactory contract performance guaranty mechanisms, such as performancebonds and letters of credit, on satisfactory terms or at all, to the extentsuch mechanisms are needed for new activities and projects.  These factors could limit the nature of thebusiness activities in which we can engage, which may adversely impact our cashflow and operating results and result in a decrease in the value of our commonstock.

 

*We may be unable to generate funds to meet our cashflow needs, and we may be unable to access additional capital.*

 

We have used available cash and interest earned on available cash tomeet our cash flow obligations for the past twelve months. We may be unable togenerate sufficient funds to meet our cash flow needs in the future.  In the event our cash needs exceed our currentestimates, we may not be able to obtain additional capital to meet those needson favorable terms, or at all.  Inparticular, due to the reorganization history of Old Kaiser and currentfinancial markets, additional capital may not be available to us.  An inability to gain access to additionalcapital could also limit our ability to undertake new activities.  Ultimately, an inability to meet our existingobligations or to undertake new activities could adversely impact our cash flowand operating results.  A decrease in ourcash flows and operating results could result in a decrease in the value of ourcommon stock.

 

*There are risks associated with the resolution ofadditional financial and administrative contract closeout issues that mayaffect the timing and award of future cash distributions  from Kaiser-Hill to the Company.*

 

On October 13, 2005, Kaiser-Hill declared physical completion of thecleanup and closure of the DOE’s Rocky Flats site.  Kaiser-Hill has withheld approximately $3.6million from the DOE final distribution, pending resolution of certainfinancial and administrative contract closeout issues, including thoseassociated with the potential risks arising from U.S. Government audits.  It is possible that there will be disputesbetween the U.S. Government and Kaiser-Hill as to how these issues should beaddressed and dealt with.  Such disputescould delay or reduce future distributions of cash from Kaiser-Hill to theCompany and could cause a decrease in the value of our common stock.

 

*There are potential risks associated with U.S.Government audits of Kaiser-Hill which could result in disallowed costs or costreclassifications requiring refunds of cash from Kaiser-Hill to the DOE.*

 

As the contract between Kaiser-Hill and the DOE contains costreimbursement provisions, the costs invoiced by Kaiser-Hill for reimbursementby the DOE are subject to audit by the U.S. Government.  Government audits of costs invoiced byKaiser-Hill are ongoing and are expected to take many years to complete.  Although Kaiser-Hill has historically providedits estimates of disallowed costs, uncertainties exist with regard to thegovernment audit of Kaiser-Hill.  To theextent that costs are disallowed and cash refunds are made to the DOE, futurecash distributions from Kaiser-Hill to the Company would be reduced and couldcause a decrease in the value of our common stock.

** **

**ITEM 6. EXHIBITS**

**Exhibits (listed according to the number assignedin the table in Item 601 of Regulation S-K)**

 
| 2      |   | Second Amended Plan of Reorganization (Incorporated  by reference to Exhibit 2 to Current Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                       |
| 3.1    |   | Certificate of Incorporation of Kaiser Group  Holdings, Inc. (Incorporated by reference to Exhibit 3(i) to Current Report  on Form 8-K (Registrant No. 1-12248) filed with the Commission on  December 14, 2000)                                                      |
|   |   |                                                                                                                                                                                                                                                                       |
| 3.2    |   | By-laws of Kaiser Group Holdings, Inc. (Incorporated  by reference to Exhibit 3(ii) to Current Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                           |
|   |   |                                                                                                                                                                                                                                                                       |
| 4      |   | Form of Put Agreement relating to preferred stock of  Kaiser Group Holdings, Inc. (Incorporated by reference to Exhibit 4 to  Current Report on Form 8-K (Registrant No. 1-12248) filed with the Commission  on December 14, 2000)                                    |
|   |   |                                                                                                                                                                                                                                                                       |
| 10.1   |   | Kaiser Group International, Inc. Employee Stock  Ownership Plan (as amended and restated as of January 1, 1996) (Incorporated  by reference to Exhibit No. 10(b) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000) |

 

20

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|   |   |                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2   |   | Amendment No. 1 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, effective January 1, 1998 (Incorporated by  reference to Exhibit No. 10(b)(1) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.3   |   | Amendment No. 2 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, effective January 1, 1996 (Incorporated by  reference to Exhibit No. 10(b)(2) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.4   |   | Amendment No. 3 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, dated April 19, 1999 (Incorporated by  reference to Exhibit No. 10(b)(3) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.5   |   | Amendment No. 4 to Kaiser Group International, Inc.  Employee Stock Ownership Plan dated June 25, 1999 (Incorporated by reference  to Exhibit No. 10(b)(4) to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on April 17, 2000)                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.6   |   | Trust Agreement with Vanguard Fiduciary Trust  Company, dated as of August 31, 1995, in connection with the ICF Kaiser  International, Inc. Employee Stock Ownership Plan (Incorporated by reference  to Exhibit No. 10(c) to Registration Statement on Form S-1 (Registrant No.  33-64655) filed with the Commission on November 30, 1995) |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.7   |   | ICF Kaiser International, Inc. Retirement Plan (as  amended and restated as of March 1, 1993, and further amended with respect to  name change only as of June 26, 1993) (Incorporated by reference to Exhibit  No. 10(d) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on October 15, 1993)         |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.8   |   | Amendment No. 1 to ICF Kaiser International, Inc.  Retirement Plan, dated April 24, 1995 (Incorporated by reference to Exhibit  No. 10(d)(1) to Annual Report on Form 10-K (Registrant No. 1- 12248) filed  with the Commission on May 23, 1995)                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.9   |   | Amendment No. 2 to ICF Kaiser International, Inc.  Retirement Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(d)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996)                 |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.10  |   | Amendment No. 3 to ICF Kaiser International, Inc.  Retirement Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(d)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.11  |   | Amendment No. 4 to ICF Kaiser International, Inc.  Retirement Plan, dated April 19, 1999 (Incorporated by reference to Exhibit  No. 10(d)(4) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.12  |   | Amendment No. 5 to ICF Kaiser International, Inc.  Retirement Plan, dated June 25, 1999 (Incorporated by reference to Exhibit  No. 10(d)(5) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.13  |   | Amendment No. 6 to ICF Kaiser International, Inc.  Retirement Plan, dated August 30, 1999 (Incorporated by reference to Exhibit  No. 10(d)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.14  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Retirement Plan, dated April 13, 2000 (Incorporated by reference to Exhibit  10(d)(7) on Form 8-K (Registrant No. 1-12248) filed with the Commission on  May 2, 2000)                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.15  |   | Amendment No. 8 to ICF Kaiser International, Inc.  Retirement Plan, dated June 8, 2000 (Incorporated by reference to Exhibit  10(d)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on September 6, 2000)                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.16  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Retirement Plan, dated June 19, 2003 (Incorporated by reference to Exhibit  10(c)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on August 14, 2003)                                                                                            |

 

 

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|   |   |                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.17  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Retirement Plan, dated March 17, 2004 (Incorporated by reference to Exhibit  10(c)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on May 24, 2004)                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.18  |   | Trust Agreement with Vanguard Fiduciary Trust  Company, dated as of August 31, 1995, in connection with the ICF Kaiser  International, Inc. Retirement Plan (Incorporated by reference to Exhibit No.  10(e) to Registration Statement on Form S-1 (Registrant No. 33-64655) filed  with the Commission on November 30, 1995)           |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.19  |   | ICF Kaiser International, Inc. Section 401(k) Plan  (as amended and restated as of March 1, 1993, and further amended with  respect to name change only as of June 26, 1993) (Incorporated by reference  to Exhibit No. 10(f) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on October 15, 1993) |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.20  |   | Amendment No. 1 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 24, 1995 (Incorporated by reference to  Exhibit No. 10(p)(1) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on May 23, 1995)                                                                                     |
| 10.21  |   | Amendment No. 2 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(p)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996)         |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.22  |   | Amendment No. 3 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(q)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.23  |   | Amendment No. 4 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 8, 1999 (Incorporated by reference to  Exhibit No. 10(k)(4) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on April 17, 2000)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.24  |   | Amendment No. 5 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated June 25, 1999 (Incorporated by reference to  Exhibit No. 10(k)(5) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on April 17, 2000)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.25  |   | Amendment No. 6 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 13, 2000 (Incorporated by reference to  Exhibit 10(k)(6) on Form 8-K (Registrant No. 1-12248) filed with the  Commission on May 2, 2000)                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.26  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 1, 2001 (Incorporated by reference to  Exhibit No. 10(m)(7) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on April 2, 2001)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.27  |   | Amendment No. 8 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 10, 2002 (Incorporated by reference to  Exhibit 10(e)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.28  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated June 19, 2003 (Incorporated by reference to  Exhibit 10(e)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.29  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated March 17, 2004 (Incorporated by reference to  Exhibit 10(e)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on May 24, 2004)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.30  |   | Amendment No. 11 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated November 11, 2004 (Incorporated by reference to  Exhibit 10(e)(11) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on November 15, 2004)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.31  |   | Amendment No. 12 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 12, 2005 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)*                                                                                     |

 

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|   |   |                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.32  |   | Amendment No. 13 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 30, 2005 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)*                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.33  |   | Amendment No. 14 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 18, 2006 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)*                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.34  |   | Amendment No. 1 to Kaiser Analytical Management  Services, Inc. Section 401(k) Plan, dated February 15, 2006 (Incorporated by  reference to Exhibit 10.31 to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on March 28, 2006)*                                                                                  |
| 10.35  |   | Trust Agreement with Vanguard Fiduciary Trust  Company, dated as of March 1, 1989, in connection with the ICF Kaiser  International, Inc. Section 401(k) Plan (Incorporated by reference to Exhibit  No. 28(b) to Registration Statement on Form S-8 (Registrant No. 33-51460) filed  with the Commission on August 31, 1992)                    |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.36  |   | Contract between Kaiser-Hill Company, LLC and the  U.S. Department of Energy dated January 24, 2000 (Incorporated by reference  to Exhibit No. 10(o) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on April 17, 2000)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.37  |   | Modification M116 to Contract between Kaiser-Hill  Company, LLC and the U.S. Department of Energy , effective March 24, 2004  (Incorporated by reference to Exhibit 10(g)(1) to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on March 30, 2004)                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.38  |   | Assignment of Membership Interest in Hunters Branch  Leasing, LLC by and between Kaiser Holdings Unlimited, Inc. (Assignor) and  Nutley Partners, LC (Assignee), dated January 1, 2001 (Incorporated by  reference to Exhibit No. 10(i) to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on April 2, 2001) |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.39  |   | Subcontract between The S.M. Stoller Corporation and  Kaiser Group Holdings, Inc., dated June 30, 2004 (Incorporated by reference  to Exhibit No. 10(i) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on August 13, 2004)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.40  |   | Kaiser Group Holdings, Inc. 2002 Equity Compensation  Plan, as amended (Incorporated by reference to Exhibit No. 10 to Registration  Statement on Form S-8 (Registration No. 333-107912) filed with the Commission  on August 13, 2003)*                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.41  |   | Amended and Restated Employment Agreement with John  T. Grigsby, Jr., President and Chief Executive Officer, effective as of  December 18, 2000 (Incorporated by reference to Exhibit No. 10(m) to  Registration Statement on Form S-4 (Registrant No. 333-100640) filed with the  Commission on October 18, 2002)*                         |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.42  |   | Transition Agreement between Kaiser Group Holdings,  Inc. and John T. Grigsby, Jr. effective as of August 31, 2004 (Incorporated  by reference to Exhibit 99 to Current Report on Form 8-K (Registration No.  1-12248) filed with the Commission on September 1, 2004)*                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.43  |   | Separation Agreement between Kaiser Group Holdings,  Inc. and Marian P. Hamlett effective February 8, 2006 (Incorporated by  reference to Exhibit 10.1 to Current Report on Form 8-K (Registration No.  1-12248) filed with the Commission on February 9, 2006)*                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.44  |   | Executive Employment Agreement between Kaiser Group  Holdings, Inc. and Douglas W. McMinn, effective December 4, 2006  (Incorporated by reference to Exhibit 10.44 to Annual Report on Form 10-K  (Registration No. 1-12248) filed with the Commission on March 30,  2007)*                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.45  |   | Executive Employment Agreement between Kaiser Group  Holdings, Inc. and Dr. Nicholas Burakow, effective December 4, 2006  (Incorporated by reference to Exhibit 10.45 to Annual Report on Form 10-K  (Registration No. 1-12248) filed with the Commission on March 30,  2007)*                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 31.1   |   | Certification of Chief Executive Officer, pursuant  to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as  amended                                                                                                                                                                                                          |

 

23

----

 
|   |   |                                                                                                                                    |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| 31.2   |   | Certification of Chief Financial Officer, pursuant  to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as  amended |
|   |   |                                                                                                                                    |
| 32.1   |   | Certification of Chief Executive Officer, pursuant  to 18 U.S.C. Section 1350                                                           |
|   |   |                                                                                                                                    |
| 32.2   |   | Certification of Chief Financial Officer, pursuant  to 18 U.S.C. Section 1350                                                           |

 

----

*******                    Represents Compensation Arrangements**

** **

24

----

 

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report on Form 10-Q to be signed onits behalf by the undersigned thereunto duly authorized.
|                    |   | **KAISER GROUP HOLDINGS, INC.**                 |
|-------------------------|--------|-------------------------------------------------|
|                    |   | (Registrant)                                    |
| Date: November 13, 2007 |   |                                            |
|                    |   |                                            |
|                    |   |                                            |
|                    |   | /s/ Nicholas Burakow                            |
|                    |   | Nicholas Burakow, Ph.D.,                        |
|                    |   | Executive Vice President and  Chief Financial   |
|                    |   | Officer (Duly authorized  officer and principal |
|                    |   | financial officer)                              |

 

25

----

 

**EXHIBITINDEX**
| **Exhibit   No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                             |
|-------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2                 |       | Second Amended Plan of Reorganization (Incorporated  by reference to Exhibit 2 to Current Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                      |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 3.1               |       | Certificate of Incorporation of Kaiser Group  Holdings, Inc. (Incorporated by reference to Exhibit 3(i) to Current Report  on Form 8-K (Registrant No. 1-12248) filed with the Commission on December  14, 2000)                                                                                                                            |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 3.2               |       | By-laws of Kaiser Group Holdings, Inc. (Incorporated  by reference to Exhibit 3(ii) to Current Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                 |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 4                 |       | Form of Put Agreement relating to preferred stock of  Kaiser Group Holdings, Inc. (Incorporated by reference to Exhibit 4 to Current  Report on Form 8-K (Registrant No. 1-12248) filed with the Commission on  December 14, 2000)                                                                                                          |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.1              |       | Kaiser Group International, Inc. Employee Stock  Ownership Plan (as amended and restated as of January 1, 1996) (Incorporated  by reference to Exhibit No. 10(b) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                       |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.2              |       | Amendment No. 1 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, effective January 1, 1998 (Incorporated by  reference to Exhibit No. 10(b)(1) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                      |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.3              |       | Amendment No. 2 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, effective January 1, 1996 (Incorporated by  reference to Exhibit No. 10(b)(2) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                      |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.4              |       | Amendment No. 3 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, dated April 19, 1999 (Incorporated by  reference to Exhibit No. 10(b) (3) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                          |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.5              |       | Amendment No. 4 to Kaiser Group International, Inc.  Employee Stock Ownership Plan dated June 25, 1999 (Incorporated by reference  to Exhibit No. 10(b)(4) to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on April 17, 2000)                                                                             |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.6              |       | Trust Agreement with Vanguard Fiduciary Trust  Company, dated as of August 31, 1995, in connection with the ICF Kaiser  International, Inc. Employee Stock Ownership Plan (Incorporated by reference  to Exhibit No. 10(c) to Registration Statement on Form S-1 (Registrant No.  33-64655) filed with the Commission on November 30, 1995) |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.7              |       | ICF Kaiser International, Inc. Retirement Plan (as  amended and restated as of March 1, 1993, and further amended with respect to  name change only as of June 26, 1993) (Incorporated by reference to Exhibit  No. 10(d) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on October 15, 1993)         |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.8              |       | Amendment No. 1 to ICF Kaiser International, Inc.  Retirement Plan, dated April 24, 1995 (Incorporated by reference to Exhibit  No. 10(d)(1) to Annual Report on Form 10-K (Registrant No. 1- 12248) filed  with the Commission on May 23, 1995)                                                                                            |
|              |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.9              |       | Amendment No. 2 to ICF Kaiser International, Inc.  Retirement Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(d)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996)                 |

 

 

 

26

----

 

 
| 10.10  |   | Amendment No. 3 to ICF Kaiser International, Inc.  Retirement Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(d)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.11  |   | Amendment No. 4 to ICF Kaiser International, Inc.  Retirement Plan, dated April 19, 1999 (Incorporated by reference to Exhibit  No. 10(d)(4) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.12  |   | Amendment No. 5 to ICF Kaiser International, Inc.  Retirement Plan, dated June 25, 1999 (Incorporated by reference to Exhibit  No. 10(d)(5) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.13  |   | Amendment No. 6 to ICF Kaiser International, Inc.  Retirement Plan, dated August 30, 1999 (Incorporated by reference to Exhibit  No. 10(d)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.14  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Retirement Plan, dated April 13, 2000 (Incorporated by reference to Exhibit  10(d)(7) on Form 8-K (Registrant No. 1-12248) filed with the Commission on  May 2, 2000)                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.15  |   | Amendment No. 8 to ICF Kaiser International, Inc.  Retirement Plan, dated June 8, 2000 (Incorporated by reference to Exhibit  10(d)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on September 6, 2000)                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.16  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Retirement Plan, dated June 19, 2003 (Incorporated by reference to Exhibit  10(c)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on August 14, 2003)                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.17  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Retirement Plan, dated March 17, 2004 (Incorporated by reference to Exhibit  10(c)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on May 24, 2004)                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.18  |   | Trust Agreement with Vanguard Fiduciary Trust  Company, dated as of August 31, 1995, in connection with the ICF Kaiser  International, Inc. Retirement Plan (Incorporated by reference to Exhibit No.  10(e) to Registration Statement on Form S-1 (Registrant No. 33-64655) filed  with the Commission on November 30, 1995)           |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.19  |   | ICF Kaiser International, Inc. Section 401(k) Plan  (as amended and restated as of March 1, 1993, and further amended with  respect to name change only as of June 26, 1993) (Incorporated by reference  to Exhibit No. 10(f) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on October 15, 1993) |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.20  |   | Amendment No. 1 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 24, 1995 (Incorporated by reference to  Exhibit No. 10(p)(1) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on May 23, 1995)                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.21  |   | Amendment No. 2 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(p)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996)         |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.22  |   | Amendment No. 3 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(q)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                    |

 

 

 

27

----

 

 
| 10.23  |   | Amendment No. 4 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated April 8, 1999  (Incorporated by reference to Exhibit No. 10(k)(4) to Annual Report on Form  10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.24  |   | Amendment No. 5 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated June 25, 1999  (Incorporated by reference to Exhibit No. 10(k)(5) to Annual Report on Form  10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.25  |   | Amendment No. 6 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated April 13, 2000  (Incorporated by reference to Exhibit 10(k)(6) on Form 8-K (Registrant No.  1-12248) filed with the Commission on May 2, 2000)                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.26  |   | Amendment No. 7 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated January 1, 2001  (Incorporated by reference to Exhibit No. 10(m)(7) to Annual Report on Form  10-K (Registrant No. 1-12248) filed with the Commission on April 2, 2001)                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.27  |   | Amendment No. 8 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated December 10, 2002  (Incorporated by reference to Exhibit 10(e)(8) to Quarterly Report on Form  10-Q (Registrant No. 1-12248) filed with the Commission on August 14, 2003)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.28  |   | Amendment No. 9 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated June 19, 2003  (Incorporated by reference to Exhibit 10(e)(9) to Quarterly Report on Form  10-Q (Registrant No. 1-12248) filed with the Commission on August 14, 2003)                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.29  |   | Amendment No. 10 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated March 17, 2004  (Incorporated by reference to Exhibit 10(e)(10) to Quarterly Report on Form  10-Q (Registrant No. 1-12248) filed with the Commission on May 24, 2004)                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.30  |   | Amendment No. 11 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated November 11, 2004  (Incorporated by reference to Exhibit 10(e)(11) to Quarterly Report on Form  10-Q (Registrant No. 1-12248) filed with the Commission on November 15, 2004)                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.31  |   | Amendment No. 12 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated December 12, 2005  (Incorporated by reference to Exhibit 10.31 to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on March 28, 2006)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.32  |   | Amendment No. 13 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated December 30, 2005  (Incorporated by reference to Exhibit 10.32 to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on March 28, 2006)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.33  |   | Amendment No. 14 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated January 18, 2006  (Incorporated by reference to Exhibit 10.33 to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on March 28, 2006)                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.34  |   | Amendment No. 1 to  Kaiser Analytical Management Services, Inc. Section 401(k) Plan, dated  February 15, 2006 (Incorporated by reference to Exhibit 10.34 to Annual  Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on  March 28, 2006)                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.35  |   | Trust Agreement with  Vanguard Fiduciary Trust Company, dated as of March 1, 1989, in connection  with the ICF Kaiser International, Inc. Section 401(k) Plan (Incorporated by  reference to Exhibit No. 28(b) to Registration Statement on Form S-8  (Registrant No. 33-51460) filed with the Commission on August 31, 1992) |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| 10.36  |   | Contract between  Kaiser-Hill Company, LLC and the U.S. Department of Energy dated January 24,  2000 (Incorporated by reference to Exhibit No. 10(o) to Annual Report on Form  10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)                                                                     |

 

 

 

28

----

 

 
| 10.37  |   | Modification M116 to Contract between Kaiser-Hill  Company, LLC and the U.S. Department of Energy, effective March 24, 2004  (Incorporated by reference to Exhibit 10(g)(1) to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on March 30, 2004)                                                            |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.38  |   | Assignment of Membership Interest in Hunters Branch  Leasing, LLC by and between Kaiser Holdings Unlimited, Inc. (Assignor) and  Nutley Partners, LC (Assignee), dated January 1, 2001 (Incorporated by  reference to Exhibit No. 10(i) to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on April 2, 2001) |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.39  |   | Subcontract between The S.M. Stoller Corporation and  Kaiser Group Holdings, Inc., dated June 30, 2004 (Incorporated by reference  to Exhibit No. 10(i) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on August 13, 2004)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.40  |   | Kaiser Group Holdings, Inc. 2002 Equity Compensation  Plan, as amended (Incorporated by reference to Exhibit No. 10 to Registration  Statement on Form S-8 (Registration No. 333-107912) filed with the Commission  on August 13, 2003)                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.41  |   | Amended and Restated Employment Agreement with John  T. Grigsby, Jr., President and Chief Executive Officer, effective as of  December 18, 2000 (Incorporated by reference to Exhibit No. 10(m) to  Registration Statement on Form S-4 (Registrant No. 333-100640) filed with the  Commission on October 18, 2002)*                         |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.42  |   | Transition Agreement between Kaiser Group Holdings,  Inc. and John T. Grigsby, Jr. effective as of August 31, 2004 (Incorporated  by reference to Exhibit 99 to Current Report on Form 8-K (Registration No.  1-12248) filed with the Commission on September 1, 2004)*                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.43  |   | Separation Agreement between Kaiser Group Holdings,  Inc. and Marian P. Hamlett effective February 8, 2006 (Incorporated by  reference to Exhibit 10.1 to Current Report on Form 8-K (Registration No.  1-12248) filed with the Commission on February 9, 2006)*                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.44  |   | Executive Employment Agreement between Kaiser Group  Holdings, Inc. and Douglas W. McMinn, effective December 4, 2006  (Incorporated by reference to Exhibit 10.44 to Annual Report on Form 10-K  (Registration No. 1-12248) filed with the Commission on March 30,  2007)*                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.45  |   | Executive Employment Agreement between Kaiser Group  Holdings, Inc. and Dr. Nicholas Burakow, effective December 4, 2006  (Incorporated by reference to Exhibit 10.45 to Annual Report on Form 10-K  (Registration No. 1-12248) filed with the Commission on March 30,  2007)*                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 31.1   |   | Certification of Chief Executive Officer, pursuant  to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as  amended **                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 31.2   |   | Certification of Chief Financial Officer, pursuant  to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as  amended **                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 32.1   |   | Certification of Chief Executive Officer, pursuant  to 18 U.S.C. Section 1350 **                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 32.2   |   | Certification of Chief Financial Officer, pursuant  to 18 U.S.C. Section 1350 **                                                                                                                                                                                                                                                            |

 

----

*                    Designates management or compensatory plans orarrangements.

**             Filed herewith.

 

29

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