**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

** **

**FORM 10-Q**

** **
| **x**      | ** ** | **QUARTERLY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE**  |
|------------|------------|---------------------------------------------------------------|
| ** ** | ** ** | **SECURITIES EXCHANGE ACT OF  1934**                          |
| ** ** | ** ** | ** **                                                    |
| ** ** | ** ** | **For the quarterly period ended September 30, 2006**         |
| ** ** | ** ** | ** **                                                    |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE** |
| ** ** | ** ** | **SECURITIES EXCHANGE ACT OF  1934**                          |

** **

**Forthe transition period from          to       **

** **

** **

**Commission File** No. 1-12248

** **

** **

**KAISER GROUP HOLDINGS, INC.**

(successor issuer to KaiserGroup International, Inc.)

(Exact name of registrant asspecified 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’s telephone numberincluding area code:**(703) 934-3413

** **

** **

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

Indicate by check mark whether the registrant is a largeaccelerated filer, 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 shellcompany (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

Indicate by check mark whether the registrant has filedall documents and reports required to be filed by Section 12, 13 or 15(d) ofthe Exchange Act subsequent to the distribution of securities under a planconfirmed by a court.  Yes xNo o

The Plan of Reorganization of Kaiser GroupInternational, Inc. under Chapter 11 of the Bankruptcy Code became effective onDecember 18, 2000.  The Plan provided,among other things, that holders of shares of common stock of Kaiser GroupInternational, Inc. receive shares of common stock of Kaiser Group Holdings,Inc. and that holders of specified outstanding debt obligations and otherspecified claimants receive cash and shares of preferred stock and common stockof Kaiser Group Holdings, Inc., all in accordance with the terms set forth inthe Plan. The initial distribution of securities occurred as of April 17, 2001.

As of November 14, 2006, there were 1,790,890 shares of KaiserGroup Holdings, 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, 2006  (unaudited) and December 31, 2005                                                                |   | 3 |
|                               |       |                                                                                                                                                |   |   |
|                               |       | Consolidated Statements of Operations and Comprehensive  Income (unaudited) for the Three Months and Nine Months Ended September 30,  2006 and 2005 |   | 4 |
|                               |       |                                                                                                                                                |   |   |
|                               |       | Consolidated Statements of Cash Flows (unaudited) for  the Nine Months Ended September 30, 2006 and 2005                                            |   | 5 |
|                               |       |                                                                                                                                                |   |   |
|                               |       | Notes to Consolidated Financial Statements (unaudited)                                                                                              |   | 6-12 |
|                               |       |                                                                                                                                                |   |   |
| Item 2.                            |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                         |   | 12-18 |
|                               |       |                                                                                                                                                |   |   |
| Item 3.                            |       | Quantitative and Qualitative Disclosures About Market  Risk                                                                                         |   | 18 |
|                               |       |                                                                                                                                                |   |   |
| Item 4.                            |       | Controls and Procedures                                                                                                                             |   | 19 |
|                               |       |                                                                                                                                                |   |   |
| **Part  II - Other Information**   |       |                                                                                                                                                |
| ** **                         |       |                                                                                                                                                |
| Item  1.                           |       | Legal  Proceedings                                                                                                                                  |   | 19 |
|                               |       |                                                                                                                                                |   |   |
| Item  1A.                          |       | Risk  Factors                                                                                                                                       |   | 19-21 |
|                               |       |                                                                                                                                                |   |   |
| Item  5.                           |       | Other  Information                                                                                                                                  |   | 21 |
|                               |       |                                                                                                                                                |   |   |
| Item 6.                            |       | Exhibits                                                                                                                                            |   | 21-24 |
|                               |       |                                                                                                                                                |   |   |
| **Signatures**                     |       |                                                                                                                                                |   | 25 |

 

2

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**PART I — FINANCIAL INFORMATION**

**ITEM 1.  FINANCIAL STATEMENTS**

**KAISER GROUP HOLDINGS, INC. ANDSUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share amounts)**
| ** **                                                                                                             | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                             | ** ** | **(unaudited)**              | ** ** | ** **                  | ** ** |
| **Current Assets**                                                                                                     | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| Cash and cash  equivalents                                                                                             |       | $                            | 65,976     |                        | $          | 14,633 |   |
| Certificates of deposit                                                                                                |       | 1,058                        |       | 2,040                       |       |
| Restricted cash and  cash equivalents                                                                                  |       | 3,273                        |       | 3,178                       |       |
| Accounts receivable                                                                                                    |       | 35                           |       | 203                         |       |
| Prepaid expenses and  other current assets                                                                             |       | 478                          |       | 606                         |       |
| Contract receivable,  net                                                                                              |       | —                       |       | 3,000                       |       |
| Income taxes receivable                                                                                                |       | 293                          |       | —                      |       |
| Total Current  Assets                                                                                                  |       | 71,113                       |       | 23,660                      |       |
|                                                                                                                   |       |                         |       |                        |       |
| **Other Assets**                                                                                                       | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| Investments in and  advances to joint venture                                                                          |       | 2,310                        |       | 87,310                      |       |
| Investment in  Affiliates                                                                                              |       | 2,800                        |       | 2,800                       |       |
| Deferred tax asset                                                                                                     |       | 10,067                       |       | 8,215                       |       |
| Other long-term assets                                                                                                 |       | 31                           |       | 39                          |       |
|                                                                                                                   |       | 15,208                       |       | 98,364                      |       |
| Total Assets                                                                                                           |       | $                            | 86,321     |                        | $          | 122,024 |   |
| ** **                                                                                                             | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                         | ** ** | ** **                   | ** ** | ** **                  | ** ** |
|                                                                                                                   |       |                         |       |                        |       |
| **Current Liabilities**                                                                                                | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| Accounts payable                                                                                                       |       | $                            | 112        |                        | $          | 239 |   |
| Post-retirement benefit  plan obligation                                                                               |       | 6,518                        |       | 6,924                       |       |
| Other accrued expenses                                                                                                 |       | 3,039                        |       | 3,435                       |       |
| Income taxes payable                                                                                                   |       | —                       |       | 32,315                      |       |
| Total Current  Liabilities                                                                                             |       | 9,669                        |       | 42,913                      |       |
| ** **                                                                                                             | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| **Commitments and Contingencies**                                                                                      | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| Common stock, par value  $0.01 per share:                                                                              |       |                         |       |                        |       |
| Authorized—3,000,000  shares                                                                                      |       |                         |       |                        |       |
| Issued and  outstanding—1,790,890 and 1,787,640 shares at September 30, 2006 and December  31, 2005, respectively |       | 18                           |       | 18                          |       |
| Capital in excess of  par                                                                                              |       | 11,796                       |       | 14,337                      |       |
| Retained earnings                                                                                                      |       | 64,798                       |       | 64,716                      |       |
| Accumulated other  comprehensive income                                                                                |       | 40                           |       | 40                          |       |
| Total  Shareholders’ Equity                                                                                       |       | 76,652                       |       | 79,111                      |       |
| Total Liabilities and  Shareholders’ Equity                                                                       |       | $                            | 86,321     |                        | $          | 122,024 |   |

 

See notes to consolidatedfinancial statements.

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**KAISER GROUP HOLDINGS, INC. ANDSUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE INCOME(In thousands, except per share amounts)**

 
| ** **                                                                                                                                                                                                                                  | ** ** | **For the Three Months Ended  September 30,** | ** ** | **For the Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                  | ** ** | **2006**                                                               | ** ** | **2005**                                                              | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                                                                                                                                                                                                  | ** ** | **(unaudited)**                                                        | ** ** | **(unaudited)**                                                       | ** ** |
| Gross Revenue                                                                                                                                                                                                                               |       | $                                                                      | —     |                                                                  | $          | 528 |   | $ | 222 |   | $ | 1,545 |   |
| Labor and subcontract costs                                                                                                                                                                                                                 |       | —                                                                 |       | (266                                                                  | )          | (505 | ) | (947 | ) |
| Service Revenue                                                                                                                                                                                                                             |       | —                                                                 |       | 262                                                                   |       | (283 | ) | 598 |   |
|                                                                                                                                                                                                                                        |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Operating  Expenses                                                                                                                                                                                                                         |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Administrative expenses                                                                                                                                                                                                                     |       | 656                                                                    |       | 1,275                                                                 |       | 3,275 |   | 3,831 |   |
| Reserve for ICT Spectrum Settlement                                                                                                                                                                                                         |       | —                                                                 |       | 6,196                                                                 |       | — |   | 6,196 |   |
| Reversal of Reserve for Settlement of Remaining  Class 4 Claims                                                                                                                                                                             |       | —                                                                 |       | (223                                                                  | )          | — |   | (223 | ) |
| Reserve for contract losses                                                                                                                                                                                                                 |       | —                                                                 |       | —                                                                |       | 3,000 |   | — |   |
| Operating Loss                                                                                                                                                                                                                              |       | (656                                                                   | )          | (6,986                                                                | )          | (6,558 | ) | (9,206 | ) |
|                                                                                                                                                                                                                                        |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Other Income:                                                                                                                                                                                                                               |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Equity income in earnings of affiliate, net of  amortization of $0 and $5,285 for the three months ended September 30, 2006  and 2005, respectively, and $0 and $7,047 for the nine months ended September  30, 2006 and 2005, respectively |       | —                                                                 |       | 70,858                                                                |       | — |   | 79,192 |   |
| Interest income                                                                                                                                                                                                                             |       | 564                                                                    |       | 210                                                                   |       | 1,330 |   | 588 |   |
| Reduction of reserve for note receivable                                                                                                                                                                                                    |       | —                                                                 |       | 548                                                                   |       | — |   | 548 |   |
| Interest expense for preferred dividends                                                                                                                                                                                                    |       | —                                                                 |       | (288                                                                  | )          | — |   | (1,099 | ) |
|                                                                                                                                                                                                                                        |       |                                                                   |       |                                                                  |       |   |   |   |   |
| (Loss) Income  Before Income Tax                                                                                                                                                                                                            |       | (92                                                                    | )          | 64,342                                                                |       | (5,228 | ) | 70,023 |   |
| Income tax  benefit (expense)                                                                                                                                                                                                               |       | 232                                                                    |       | (26,836                                                               | )          | 2,650 |   | (29,403 | ) |
|                                                                                                                                                                                                                                        |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Income (Loss) Applicable  to Common Shareholders                                                                                                                                                                                            |       | $                                                                      | 140        |                                                                  | $          | 37,506 |   | ($2,578 | ) | $ | 40,620 |   |
| Basic and  Diluted (Loss) Income Per Common Share:                                                                                                                                                                                          |       |                                                                   |       |                                                                  |       |   |   |   |   |
|                                                                                                                                                                                                                                        |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Net Income (Loss) Per Share                                                                                                                                                                                                                 |       | $                                                                      | 0.08       |                                                                  | $          | 23.25 |   | ($1.44 | ) | $ | 25.18 |   |
| Weighted average  shares for basic and diluted earnings per common share                                                                                                                                                                    |       | 1,791                                                                  |       | 1,613                                                                 |       | 1,790 |   | 1,613 |   |
|                                                                                                                                                                                                                                        |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Comprehensive  Income (Loss)                                                                                                                                                                                                                |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Net Income (Loss)                                                                                                                                                                                                                           |       | $                                                                      | 140        |                                                                  | $          | 37,506 |   | ($2,578 | ) | $ | 40,620 |   |
| Other Comprehensive (Loss) Income:                                                                                                                                                                                                          |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Change in cumulative foreign translation adjustments                                                                                                                                                                                        |       | —                                                                 |       | —                                                                |       | — |   | (1 | ) |
|                                                                                                                                                                                                                                        |       |                                                                   |       |                                                                  |       |   |   |   |   |
| Total  Comprehensive Income (Loss)                                                                                                                                                                                                          |       | $                                                                      | 140        |                                                                  | $          | 37,506 |   | ($2,578 | ) | $ | 40,619 |   |
|                                                                                                                                                                                                                                             |            |                                                                        |            |                                                                       |            |  |  |  |  |  |  |  |  |

 

See notes to consolidated financial statements.

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**KAISER GROUPHOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)**

 
| ** **                                                                            | ** ** | **For the Nine Months ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                                            | ** ** | **2006**                                                              | ** ** | **2005** | ** ** |
| ** **                                                                            | ** ** | **(unaudited)**                                                       | ** ** |
| Operating  Activities:                                                                |       |                                                                  |       |   |   |
| Net (loss)  income                                                                    |       | ($2,578                                                               | )          | $ | 40,620 |   |
| Adjustments to reconcile net income (loss) to net  cash used in operating activities: |       |                                                                  |       |   |   |
| Deferred taxes                                                                        |       | (1,852                                                                | )          | 21,138 |   |
| Reserve for ICT Spectrum settlement                                                   |       | —                                                                |       | 6,196 |   |
| Equity in earnings of affiliate                                                       |       | —                                                                |       | (79,193 | ) |
| Writedown of contract receivable                                                      |       | 3,000                                                                 |       | — |   |
| Changes in operating assets and liabilities:                                          |       |                                                                  |       |   |   |
| Account receivables                                                                   |       | 168                                                                   |       | (176 | ) |
| Prepaid expenses and other current assets                                             |       | 128                                                                   |       | (86 | ) |
| Reversal of note receivable reserve                                                   |       | —                                                                |       | (548 | ) |
| Accounts payable and accrued expenses                                                 |       | (929                                                                  | )          | (592 | ) |
| Income taxes payable                                                                  |       | (32,608                                                               | )          | 3,705 |   |
| Other operating activities                                                            |       | 32                                                                    |       | (137 | ) |
| Net Cash Used in Operating Activities                                                 |       | (34,639                                                               | )          | (9,073 | ) |
| Investing  Activities:                                                                |       |                                                                  |       |   |   |
| Redemption (purchase) of certificate of deposit                                       |       | 982                                                                   |       | (1,000 | ) |
| Distributions from affiliate                                                          |       | 85,000                                                                |       | 31,500 |   |
| Net Cash Provided by Investing Activities                                             |       | 85,982                                                                |       | 30,500 |   |
| Financing  Activities:                                                                |       |                                                                  |       |   |   |
| Transfers from restricted cash for the redemption of  preferred stock                 |       | —                                                                |       | 785 |   |
| Transfers to restricted cash                                                          |       | —                                                                |       | (76 | ) |
| Redemption of preferred stock                                                         |       | —                                                                |       | (15,500 | ) |
| Net Cash Used in Financing Activities                                                 |       | —                                                                |       | (14,791 | ) |
| Increase in Cash  and Cash Equivalents                                                |       | 51,343                                                                |       | 6,636 |   |
| Cash and Cash Equivalents  at Beginning of Period                                     |       | 14,633                                                                |       | 12,728 |   |
| Cash and Cash  Equivalents at End of Period                                           |       | $                                                                     | 65,976     |   | $ | 19,364 |   |
|                                                                                       |            |                                                                       |            |  |  |  |  |

 

See notes to consolidated financial statements.

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**KAISER GROUP HOLDINGS, INC. ANDSUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

1.             Basisof Presentation

The accompanyingconsolidated financial statements of Kaiser Group Holdings, Inc. andsubsidiaries (“the Company”), except for the December 31, 2005, balance sheet(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 the information and footnotesrequired by GAAP for complete financial statements.  In the opinion of management, alladjustments, consisting only of normal recurring accruals, considered necessaryfor a fair presentation have been included.

These statements shouldbe 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, 2005 (the “2005 Form10-K”).  Certain reclassifications havebeen made to the prior period financial statements to conform them to thepresentation used in the September 30, 2006 financial statements.

Kaiser Group Holdings,Inc. (“Kaiser Group Holdings” or the “Company”) is a Delaware corporation thatwas formed on December 6, 2000 for the purpose of owning all of the outstandingstock of Kaiser Group International, Inc. (“Old Kaiser”), which in turncontinues to own the stock of its remaining subsidiaries. On June 9, 2000, OldKaiser and 38 of its domestic subsidiaries voluntarily filed for protectionunder Chapter 11 of the United States Bankruptcy Code in the District ofDelaware (case nos. 00-2263 to 00-2301). Old Kaiser emerged from bankruptcywith an approved plan of reorganization (which was its Second Amended Plan ofReorganization and is referred to in this report as the “Plan of Reorganization”)that was effective on December 18, 2000 (the “Effective Date”).  The Company is deemed a “successor issuer” toOld Kaiser by virtue of Rule 12g-3(a) under the Securities Exchange Act of1934. A summary of the Plan of Reorganization for Old Kaiser can be found in aCurrent Report on Form 8-K dated December 5, 2000 filed by Old Kaiser.  In thisreport, unless the context states otherwise, the terms “we”, “our” and “Kaiser”refer to Kaiser Group Holdings (including Old Kaiser as its predecessor) andits subsidiaries.

As ofSeptember 30, 2006, apart from resolving remaining bankruptcy claims, the Company had only a limited number ofactivities, assets and liabilities, primarily consisting of:

·                  theownership of a 50% interest in Kaiser-Hill Company, LLC (“Kaiser-Hill”), whichserves as the general contractor at the U.S. Department of Energy’s (“DOE”)Rocky Flats site near Denver, Colorado for the performance of a contract forthe closure of the site (the “Closure Contract”) (See Notes 4 and 6).

·                  the closeout ofa completed contract for the engineering and construction of a steel mini-millin the Czech Republic for Nova Hut (“Nova Hut”) (See Note 6).

·                  awholly-owned captive insurance company that hasnot been issuing new policies since October 1, 2000 and has solely beeninvolved in resolving remaining claims made against previously issuedpolicies.  In the fourth quarter of 2004,the Company received regulatory approval and finalized the formation documentsof a sponsored captive subsidiary, MS Builders Insurance Company, to enable ourwholly-owned captive insurance company to offer derivative captive insuranceservices to third party clients.  As ofNovember 14, 2006, MS Builders Insurance Company has not written any policies.

·                  anongoing obligation to fund a capped, post-retirement medical benefit plan for afixed number of retirees (See Note 6).

The Company ceasedoperations of its subsidiary, Kaiser Analytical Management Services, Inc. (“KAMS”),which accounted for all of the Company’s year-to-date gross revenue in 2006,effective June 30, 2006.  Underprevailing market conditions, the Company determined that there wereinsufficient business prospects for KAMS to warrant continued operations.

The Companyadopted fresh start reporting in its consolidated balance sheet as of December31, 2000. The American Institute of Certified Public Accountants’ Statement ofPosition 90-7, “Financial Reporting by Entities in Reorganization Under theBankruptcy Code” (“SOP 90-7”), requires under certain circumstances resultingfrom a bankruptcy the creation of a new entity for financial reporting purposesupon the emergence of an entity from bankruptcy.  Accordingly, the value of the reorganizedenterprise becomes the established amount for the emerging balance ofshareholders’ equity, and any accumulated deficit of the predecessor entity isoffset against available paid-in-capital, resulting in an emerging retainedearnings of zero.  Additionally, assetsand liabilities are recorded at their fair values.

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The value of theemerged enterprise used for fresh start reporting as of December 31, 2000 was$87.5 million. It was determined by management with the assistance ofindependent advisors.  The methodologyemployed involved estimation of the enterprise value taking into considerationa discounted cash flow analysis.  Thediscounted cash flow analysis was based on a seven-year cash flow projectionprepared by management, taking into consideration the terminal value of itsassets and liabilities as of immediately prior to its emergence from bankruptcyon December 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 besignificant.  More specifically,assumptions within the valuation related to the amount and timing of theultimate performance and related cash flows of the Company’s investment inKaiser-Hill have the greatest impact on the overall enterprise valuation.

InMay 2005, the Financial Accounting Standards Board (“FASB”) issued Statement ofFinancial Accounting Standard (“SFAS”) No. 154, “Accounting Changes and ErrorCorrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 addresses the requirements for the accounting for and reporting ofa change in accounting principle.  This statement requires retrospectiveapplication to prior periods’ financial statements of changes in accountingprinciple, unless it is impractical to determine period-specific effects or thecumulative effect of the change.  We adopted SFAS No. 154 on January 1,2006. Management does not expect that adoption of SFAS No. 154 will have amaterial impact on our consolidated financial statements.

InJuly 2006, the FASB issued FASB Interpretation Number 48, “Accounting forUncertainty in Income Taxes, an Interpretation of FASB Statement No.109” (“FIN 48”).  FIN 48 clarifies the accounting foruncertainty in income tax positions and prescribes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return, and providesguidance on derecognition, interest and penalties, accounting in the interimperiods and transition.  The provisionsof FIN 48 are effective for fiscal years beginning after December 15,2006.  The Company is currently assessingthe impact, if any, of the interpretation on our consolidated financialstatements.

In September 2006, theFASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). ThisStatement defines fair value, establishes a framework for measuring fair valueand expands disclosures about fair value measurements. SFAS No. 157 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years. We arecurrently assessing the impact, if any, of SFAS No. 157 on ourconsolidated financial statements.

In September 2006, theFASB issued SFAS No. 158, “Employer’s Accounting for Defined Benefit Pensionand Other Postretirement Plans (an amendment of FASB Statements No. 87, 88,106, and 123R)” (“SFAS No. 158”). The objectives of SFAS No. 158 are foran employer to: (1) recognize the overfunded or underfunded status of asingle-employer defined benefit postretirement plan as an asset or liability inits statement of financial position and to recognize changes in funded statusin comprehensive income in the year in which the changes occur; and (2) measurethe plan status as of the date of its year-end statement of financial position.SFAS No. 158 is effective for the requirement to recognize the funded status ofa benefit plan and the disclosure requirements as of the end of the fiscal yearending after December 15, 2006. The requirement to measure plan assets andbenefit obligations as of the date of the employer’s fiscal year-end statementof financial position shall be effective for fiscal years ending after December15, 2008. We are currently assessing the impact, if any, of SFAS No. 158on our consolidated financial statements.

In September 2006, theSecurities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No.108, “Considering the Effects of Prior Year Misstatements when QuantifyingMisstatements in Current Year Financial Statements” (“SAB 108”), to addressdiversity in practice in quantifying financial statement misstatements. SAB 108requires quantification of financial statement misstatements based on theeffects of the misstatements on each of the company’s financial statements andthe related financial statement disclosures. We are currently assessing theimpact, if any, of SAB 108 on our consolidated financial statements.

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2.             General Terms ofPlan and Status of Bankruptcy Distributions

The effectiveness of thePlan of Reorganization as of December 18, 2000 did not, in and of itself,complete the bankruptcy process. The process of resolving claims initiallyfiled in the bankruptcy is ongoing.

By far the largest classof claims (“Class 4”) was made up of creditor claims other than trade creditoror equity claims.  Class 4 claimsincluded holders of Old Kaiser’s senior subordinated notes due 2003.  Holders of Class 4 claims allowed by thebankruptcy 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 the terms ofthe Plan of Reorganization, the Company was required to complete its initialbankruptcy 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 wasapproximately $130.5 million. To address the remaining unresolved claims, theBankruptcy Court issued an order on March 27, 2001 establishing an AlternativeDispute Resolution (“ADR”) procedure whereby the remaining claimants and OldKaiser produced limited supporting data relative to their respective positionsand engaged in initial negotiation efforts in an attempt to reach an agreedclaim determination.  If necessary, theparties were thereafter required to participate in a non-binding mediationbefore a mediator pre-selected by the Bankruptcy Court.  All unresolved claims as of March 27, 2001are subject to the ADR process. Since April 17, 2001, the date of the initialdistribution, approximately $130.1 million of asserted Class 4 claims have beenwithdrawn, negotiated or mediated to an agreed amount, resulting in cashpayments approximating $2.8 million and issuances of 683 shares of NewPreferred (all of which have been redeemed) and 823 shares of Kaiser CommonStock.  As of September 30, 2006, theaggregate amount of unresolved claims was approximately $0.4 million.

The equity class ofclaims recognized in the Old Kaiser bankruptcy are “Class 5” claims, consistingof 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 shareholders 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 30,2006.

As of September 30, 2006,the aggregate amount of unresolved claims was approximately $0.4 million.  As demonstrated by the claim settlementscompleted since April 17, 2001, and based on the belief that it is in the bestinterest of the Company and its current shareholders, the Company has beensettling certain remaining Class 4 claims entirely for cash payments in lieu ofthe combination of cash and New Preferred and Kaiser Common Stock ascontemplated in the Plan of Reorganization. The Company intends to continue to use this settlement alternativeduring the resolution of remaining Class 4 claims.  The Company expects to resolve the remainingclaims, and to reach a final resolution of issues related to the retireebenefit plans by the end of 2006 (see Note 6). Upon such final resolution, the Company expects to take the necessarysteps to close the bankruptcy cases. Upon such closing, the Bankruptcy Court would no longer be involved inthe administration of the Company’s affairs, and the Company’s obligation topay certain fees and submit periodic reports to the Bankruptcy Court would beterminated.  Since closing of the casesrequires resolution of all outstanding matters and such resolution is somewhatout of the Company’s control, there is a possibility that the cases will not beclosed within the anticipated time period.

In the first quarter of2004, the Company recorded a $1.4 million liability for future claimsettlements based upon the Company’s estimate of unresolved claims at thattime.  During 2004 and 2005, the Companysettled various Class 4 claims reducing approximately $1.0 million of thisliability.  Based upon the Company’sestimate of unresolved claims at September 30, 2006, $0.4 million remains inthis reserve.

3.                       EarningsPer Share

Basic earnings per share (“EPS”) is computed by dividingnet income by the weighted average number of common shares outstanding for theperiod. Diluted EPS includes the weighted-average effect of dilutive securitiesoutstanding during the period.  Pursuantto the Plan of Reorganization that was effective as of December 18, 2000, allthen-outstanding common stock equivalents were cancelled.  The Company had no dilutive or anti-dilutivesecurities outstanding during the three and nine months ended September 30,2006, and 2005.  Therefore, the sameweighted average number of common shares outstanding was used to compute basicand diluted EPS.

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Share reconciliation: As disclosed in the Company’s December 31, 2005 Form 10-K, since 2001,the Company has been attempting to reconcile the number of shares that wereissued by the Company’s transfer agent in the initial distribution in2001.  The Company has not previouslyrecognized the issuance of 11,599 shares of Kaiser Common Stock by the transferagent.  Because the Company has beenunsuccessful in disputing the issuance of these shares, during 2005 the Companyretroactively restated the number of outstanding shares to reflect the issuanceof the 11,599 shares as of June 2001. For purposes of the September 30, 2006 and September 30, 2005 financialstatements weighted average shares for basic and diluted earnings per sharewere 1,790,890 and 1,613,270, respectively.

4.                       InvestmentsIn and Advances To Joint Venture

Summarized unaudited financial information ofKaiser-Hill was as follows as of September 30 (in thousands):

|                          | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------|------------|----------|------------|----------|------------|
|                     |       |     |       |     |       |
| Current assets           |       | $        | 44,636     |     | $          | 62,151 |   |
| Non-current assets       |       | —   |       | 254,082  |       |
| Current liabilities      |       | 40,017   |       | 70,129   |       |
| Non-current  liabilities |       | —   |       | 66,134   |       |
|                          |            |          |            |          |            |  |  |

 

|               | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **    | ** ** | **September 30,  2006**     | ** ** | **September 30,  2005**    | ** ** | **September 30,  2006** | ** ** | **September 30,  2005** | ** ** |
|          |       |                             |       |                            |       |   |   |   |   |
| Gross revenue |       | $                                | 21,858     |                            | $          | 261,007 |   | $ | 87,931 |   | $ | 601,210 |   |
| Net  income   |       | -                                |       | 152,288                         |       | - |   | 172,480 |   |
|               |            |                                  |            |                                 |            |  |  |  |  |  |  |  |  |

 

OnOctober 13, 2005, Kaiser-Hill declared physical completion of the cleanup andclosure of the DOE’s Rocky Flats site. With the certainty of declaration of physical completion, at September30, 2005, Kaiser-Hill recognized a substantial balance of the remainingperformance fee.

OnDecember 8, 2005, the DOE accepted physical completion in accordance with theClosure Contract.  The project total feeexpected to be earned by Kaiser-Hill pursuant to the Contract is $510.9 millionbased on Kaiser-Hill’s cost to complete the site closure of $3.44 billion.  Through November 14, 2006, Kaiser-Hill hasreceived $510.8 million of such fee from the DOE.

Kaiser-Hillnow operates under the closure phase of its contract with the DOE, primarilyresolving the administrative issues and providing support to the DOE to achieveregulatory closure of the site.  Thecloseout phase of the contract is a cost reimbursable phase and is not feebearing, nor does the closeout phase impact fees earned.

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 ofAffiliate in the Company’s consolidated statement of operations for the yearended December 31, 2005.  As a result,upon the receipt of the $80.0 million cash distribution from Kaiser-Hill onMarch 1, 2006, and the receipt of $5.0 million distributed from Kaiser-Hill onJune 30, 2006, the Company has made a corresponding reduction of $85.0 millionin its investment in Kaiser-Hill on its balance sheet as of September 30, 2006.

Aspart of the Company’s adoption of fresh-start reporting as of December 31,2000, the Company increased the carrying value of the Company’s investment inKaiser-Hill by $21.1 million, and the Company has been amortizing suchincreased carrying value over an estimated life of the Kaiser-Hill investmentof approximately 6 years.  BecauseKaiser-Hill declared physical completion of the site on October 13, 2005, atSeptember 30, 2005 the Company wrote off the then remaining $5.3 millionunamortized balance as a reduction to the equity income of earnings ofaffiliate.

OnOctober 13, 2005, Kaiser-Hill declared physical completion of the cleanup andclosure of the DOE’s Rocky Flats site. Given the completion of the project in 2005, Kaiser-Hill did not haveany fee earnings during the quarter ended September 30, 2006; therefore, therewere no associated equity earnings in the Company’s consolidated statement ofoperations for the quarter ended September 30, 2006.

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5.             MandatorilyRedeemable Preferred Stock

On November 17, 2005, the Company redeemed all of theremaining outstanding shares of New Preferred held by non-affiliates.  As a result, at December 31, 2005, afterconsideration of shares in treasury of 101,471, the Company had no shares ofNew Preferred outstanding.  In January2006, pursuant to approval by the Company’s Board, the treasury shares werecancelled leaving no shares outstanding or in treasury.  In the quarter ended March 31, 2006, the Companyreduced the capital in excess of par of $2.7 million that was recorded uponissuance of the New Preferred shares to affiliates with a correspondingincrease to Retained Earnings.

TheCompany’s certificate of incorporation authorizes the issuance of 2,000,000shares of New Preferred. The New Preferred was shown at a liquidation value of$55.00 per share and is a series of authorized preferred stock designated as “Series1 Redeemable Cumulative Preferred Stock,” and had a par value of $0.01 pershare. The New Preferred ranks ahead of Kaiser Common Stock.  The certificate of incorporation of theCompany and Delaware law permit the Board of Directors to issue additionalseries of preferred stock, except that the Board of Directors may not authorizethe issuance of any securities that rank senior to or on a parity with the NewPreferred, without the consent of holders of at least two-thirds of the NewPreferred.  New Preferred was originallyissued as settlement for Class 4 claims. As mentioned in Note 2, because the Company has been settlingcertain remaining Class 4 claims entirely for cash payments in lieu of thecombination of cash and New Preferred and Kaiser Common Stock as contemplatedin the Plan of Reorganization, the Company has no plans to issue additionalshares of New Preferred.

The Company adopted FAS 150, “Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity,”effective July 1, 2003.  Due to themandatorily redeemable feature of the New Preferred, the New Preferred wasreclassified from mezzanine equity to a long term liability on the consolidatedbalance sheet, and the preferred stock dividends were reclassified to interestexpense on the consolidated statement of operations effective July 1, 2003.  There was no transition adjustment recognizedupon adoption of FAS 150.

Cumulative dividends, classified as interest expensesubsequent to July 1, 2003, on the New Preferred were payable on a quarterlybasis, as of April 30, July 31, October 31 and January 31, either in cash at anannual rate of 7% of the liquidation preference per share or in additionalshares of New Preferred at an annual rate of 12% of the per share liquidationpreference. Dividends accrued on the New Preferred commencing with the initialdistribution date, April 17, 2001. Dividends were not paid to any affiliate ofthe Company on account of that affiliate’s ownership of shares of preferredstock as long as there was New Preferred shares held by any non-affiliatedentities or parties. Upon the November 17, 2005 redemption of the207,431 shares of remaining outstanding New Preferred held by non-affiliates,the Company no longer has a dividend payment requirement.

6.             OtherContingencies

The Company has variousobligations and liabilities from its operations, including general overheadexpenses in connection with maintaining, operating and winding down the variousentities and net assets comprising the Company. Additionally, the Company believes contingent liabilities may exist inthe following areas:

Nova Hut

On May 16, 2006,the Company was informed that an arbitration panel formed under the auspices ofthe International Chamber of Commerce (“ICC”) issued a ruling in thearbitration proceeding initiated by its subsidiary, Kaiser Netherlands B.V. (“KNBV”)concerning the steel mini-mill that was constructed by KNBV for Nova Hut, a.s.(now Mittal Steel Ostrava, a.s.) in Ostrava, the Czech Republic.  The decision by the arbitration panel is notappealable.  After calculation of claimand counter-claim award amounts as decided by the ICC arbitration panel, thenet balance award against KNBV, including legal cost and interest amounts, isapproximately $4.1 million in favor of Mittal Steel Ostrava.  The Company does not believe that MittalSteel Ostrava has recourse to the Company to collect this award amount.

The Companycontinues to evaluate its remaining options against Mittal Steel Ostrava andthe International Finance Corporation (“IFC”). Among the options being considered are the filing of independentarbitration claims by the Company (as opposed to its KNBV subsidiary) againstMittal Steel Ostrava and the IFC in accordance with prior rulings of theBankruptcy Court for the United States District Court in Delaware.  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 Mittal Steel Ostrava pending arbitration.

In December 2003,an ICC arbitration panel, under the dispute resolution provisions of the NovaHut mini-mill subcontract between KNBV and the min-mill’s main equipmentsupplier, Tippins, Inc., issued a final award that was on balance favorable toKNBV.  As a result of the ruling, KNBVwas relieved of the obligation to pay retention to Tippins, and KNBV wasawarded a net cash settlement of $2.6 million. The Company has not recorded this award due to the uncertainties regardingcollectibility.  However, the Companycontinues to evaluate its options for collection.

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The continuedlitigation of these disputes has had, and will continue to have, a negativeimpact on the cash flow of the Company.

Taking intoaccount the results of the ICC arbitration ruling against KNBV, 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 physical completion of the cleanup and closure ofthe DOE’s Rocky Flats site.  DOE hasreviewed Kaiser-Hill’s declaration as required under the Closure Contract. OnDecember 8, 2005, the DOE accepted the physical completion declaration inaccordance with the Closure Contract. The projected total fee to be earnedpursuant to the Closure Contract is expected to be $510.9 million based onKaiser-Hill’s cost to complete the site closure of $3.44 billion.  As of November 14, 2006, Kaiser-Hill hasreceived $510.8 million of such fee from the DOE.  A substantial portion of the received feeremains subject to audit.

UnderKaiser-Hill’s contract with the DOE, Kaiser-Hill is not responsible for, andthe DOE pays all costs associated with, any liability, including, withoutlimitation, any claims involving strict or absolute liability and any civilfine or penalty, expense, or remediation cost, but limited to those of a civilnature, which may be incurred by, imposed on, or asserted against Kaiser-Hillarising out of any act or failure to act, condition, or exposure which occurredbefore Kaiser-Hill assumed responsibility on July 1, 1995 (pre-existingconditions). To the extent the acts or omissions of Kaiser-Hill constitutewillful misconduct, lack of good faith, or failure to exercise prudent businessjudgment on the part of Kaiser-Hill managerial personnel and cause or add toany liability, expense, or remediation cost resulting from pre-existingconditions, Kaiser-Hill is responsible, but only for the incremental liability,expense, or remediation caused by Kaiser-Hill.

TheClosure Contract further provides that Kaiser-Hill will be reimbursed for thereasonable cost of bonds and insurance allocable to the Rocky Flats contractand for liabilities and expenses incidental to these liabilities, including litigationcosts, to third parties not compensated by insurance or otherwise. There is anexception to this reimbursement provision applicable to liabilities caused bythe willful misconduct, lack of good faith or failure to exercise prudentbusiness judgment by Kaiser-Hill managerial personnel.

Asthe contract between Kaiser-Hill and the DOE is cost-reimbursable in nature,the costs invoiced by Kaiser-Hill for reimbursement by the DOE are subject toaudit by the U.S. government.  Also sincethe inception of Kaiser-Hill, the Company invoiced certain management oversightcosts to Kaiser-Hill.  Government auditsat Kaiser-Hill are ongoing.  AlthoughKaiser-Hill and the Company have historically provided for their estimates ofdisallowed costs on cost-reimbursable contracts, uncertainties exist withregard to whether government audits will result in any disallowed costs needingto be refunded to the government customer. The continued adequacy of provisions for reserves with regard tounallowable costs is reviewed regularly.

Kaiser-Hillnow operates under the closeout phase of the DOE Rocky Flats Closure Contract,primarily resolving open administrative issues and providing support to the DOEto achieve regulatory closure of the site. The closeout phase of the Contract is a cost reimbursable phase and isnot fee bearing, nor does the closeout phase impact fees earned.

On December 8,2005, when the DOE accepted physical completion in accordance with the RockyFlats contract, it authorized Kaiser-Hill to invoice all remaining performancefees less a retained amount equaling $5.0 million which was retained by the DOEfor possible contract contingencies.  OnJanuary 11, 2006, Kaiser-Hill received payment for all fees except for theretained amount.  As a result of this payment,on March 1, 2006, the Company received an $80.0 million cash distribution(representing its 50% share) from Kaiser-Hill. On April 14, 2006, $4.9 million of the remaining $5.0 million retentionwas released to Kaiser-Hill by the DOE. It cannot be determined at this time what portion of the remaining $0.1million DOE retention balance will ultimately be released and when (if ever)such a release would occur.  On June 30,2006, the Company received an additional $5.0 million cash distribution fromKaiser-Hill.

Kaiser-Hillis continuing its internal review and reconciliation of contract financial andadministrative closeout issues.  As ofNovember 14, 2006, Kaiser-Hill has withheld approximately $7.0 million fromdistribution until these closeout issues are resolved.  The Company expects to receive its 50% shareof any distribution of such funds by Kaiser-Hill.

Itis expected that the Company will be required to fund its 50% share of a yet tobe determined accounting reserve in Kaiser-Hill to provision against potentialrisks associated with U.S. Government audits. At this time, it is not possible to predict the number of years thatwill be required to complete the government audit process.

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Post-Retirement BenefitPlan Obligation

In accordance withthe terms and provisions of the Second Amended Plan of Reorganization for OldKaiser, the Company remains obligated to continue to fulfill the provisions ofOld Kaiser’s previously curtailed benefits plan, which provides certain medicaland death benefits to a group of retirees. All of the benefit derived from the plan is fully covered by the Company’sself-insurance.  With respect to theretirees covered by the medical and death self-insured plan, the benefits arefunded to a claims administrator as participants’ insurance claims arereimbursed.

No newparticipants can be added to the plan. The net present value benefit obligation, as of September 30, 2006, wasapproximately $6.4 million.  This amountwill continue to decrease as the population of covered participants declinesfor the purposes of medical benefits and as death benefits are paid out.

Since the December2000 approval of the reorganization plan, the Company has been negotiating withthe Delaware Bankruptcy Court-appointed Official Committee of Retirees (“OCR”)to design and implement a benefits funding plan that would provide for allretiree benefit obligations going forward.  In an adversary claim hearing in the Delaware Bankruptcy Court held onApril 12, 2006, the Court accepted the Company’s proposal to establish aVoluntary Employees’ Beneficiary Association (“VEBA”) to fund retirees’ futuremedical and death benefits in the present value amount of approximately $6.1million.  The present value pensionobligation of $0.3 million will continue to be funded directly by theCompany.  As of September 30, 2006, theCompany had an accrued liability of $6.5 million.  Upon final establishment of the VEBA, suchliability will be adjusted to the net present value.  Legal and administrative arrangements forestablishment of the VEBA are in the process of final documentation.

Furthermore,according to the terms of the Delaware Bankruptcy Court decision, after theVEBA has been in place for five years, the Company will be required toundertake an actuarial analysis of the projected net present value of benefitsremaining to be paid out.  If theremaining VEBA fund amount is then not sufficient to pay the estimated presentvalue of future benefits obligations, then the Company will be required tocontribute the estimated shortfall amount to the VEBA fund.  It is not possible to predict at this timewhether a shortfall in the VEBA fund would exist after a period of five yearsand, if so, what the Company’s contribution requirement for a shortfall amountwould be in this circumstance.

**I****TEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

***General Overview***

Since the Plan of Reorganization of Old Kaiser underChapter 11 of the Bankruptcy Code became effective on December 18, 2000, wehave completed the initial bankruptcy distributions to allowed claimholders,continued to progress in resolving remaining outstanding bankruptcy claims,managed our remaining assets, wound down unnecessary elements of previousactivities and corporate structure, redeemed all of the New Preferred sharesoutstanding and formed a new business opportunity, MS Builders InsuranceCompany.

Following the effectiveness of the Plan of Reorganization,we now have only a limited number of activities, assets and liabilities,primarily consisting of the following:

·                  We ownKaiser-Hill equally with CH2M Hill. Kaiser-Hill has been our major source of income.  Kaiser-Hill served as the general contractorat the DOE’s Rocky Flats site. Kaiser-Hill has performed for the Department of Energy at this sitesince 1995 and in January 2000 was awarded a new contract to manage the closureof the site.  The level of successexperienced by Kaiser-Hill in achieving timely closure of the Rocky Flats site,and the cost of 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,the Company was informed that an arbitration panel formed under the auspices ofthe International Chamber of Commerce (“ICC”) issued a ruling in thearbitration proceeding initiated by its subsidiary, Kaiser Netherlands B.V. (“KNBV”),concerning the steel mini-mill that was constructed by KNBV for Nova Hut, a.s.(now Mittal Steel Ostrava, a.s.) in Ostrava, the Czech Republic.  After calculation of the amounts awarded onthe claim and counterclaim, the net balance award against KNBV, including legalcost and interest amounts, is approximately $4.1 million in favor of MittalSteel Ostrava.  The Company does notbelieve that Mittal Steel Ostrava has recourse against the Company to collectthis amount.  The Company is currentlyevaluating its remaining options against Mittal Steel Ostrava and theInternational Finance Corporation (“IFC”). Taking into account the results of the ICC arbitration ruling againstKNBV, in the second quarter of 2006 the Company wrote off the remaining NovaHut contract receivable of $3.0 million by recording an additional reserve of$3.0 million.

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·                  We own a captive insurance company that has notbeen issuing new policies since October 1, 2000 and has solely been involved inresolving remaining claims made against previously issued policies.  In the fourth quarter of 2004, we receivedregulatory approval and finalized the formation documents of a sponsoredcaptive subsidiary, MS Builders Insurance Company, to enable our wholly-ownedcaptive insurance company to offer derivative captive insurance services tothird party clients.  As of November 14,2006, MS Builders Insurance Company has not written any policies.

·                  We have an ongoing obligation to fund a cappedpost-employment medical benefit plan for a fixed group of retirees.  Once the former employee VEBA is established,we have a one-time obligation to fund any shortfall, as described in Note 6 tothe unaudited consolidated financial statements included under Item 1,Financial Statements, of Part 1 of this report.

Effective June 30, 2006, we ceased operations of oursubsidiary, Kaiser Analytical Management Services, Inc. (“KAMS”), whichaccounted for all of our year-to-date gross revenue in 2006. Underprevailing market conditions, we determined that there were insufficientbusiness prospects for KAMS to warrant continued operations.

***Outlook***

*Potential**Kaiser-Hill Distribution*.  As we look forward, a significant factor indetermining the value of our common stock is the closeout performance ofKaiser-Hill and the completion of the U.S. Government’s related project audits.

On October 13, 2005, Kaiser-Hill declared physical completion of theclean up and closure of the DOE’s Rocky Flats site.  On December 8, 2005, the DOE accepted thephysical 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.

Kaiser-Hill now operates under the closeout phase of itscontract with the DOE, primarily resolving open administrative issues andproviding support to the DOE to achieve regulatory closure of the site.  The closeout phase of the contract is a costreimbursable phase and is not fee bearing nor does the closeout phase impactfees earned.

On December 8,2005, when the DOE accepted physical completion in accordance with the RockyFlats contract, it authorized Kaiser-Hill to invoice all remaining performancefees less a retained amount equaling $5.0 million which was retained by the DOEfor possible contract contingencies.  OnJanuary 11, 2006, Kaiser-Hill received payment for all fees except for theretained amount.  As a result of thispayment, on March 1, 2006, the Company received an $80.0 million cashdistribution (representing its 50% share) from Kaiser-Hill.  As of March 31, 2006, Kaiser-Hill hadreceived $505.9 million of the $510.9 million due from the DOE. On April 14,2006, $4.9 million of the remaining $5.0 million was released to Kaiser-Hill bythe DOE.  It cannot be determined at thistime what amount, if any, of the remaining $0.1 million DOE retention balancewill ultimately be released and when, if ever, such a release will occur.  On June 30, 2006, the Company received anadditional $5.0 million cash distribution from Kaiser-Hill (representing its50% share).

Kaiser-Hillis continuing its internal review and reconciliation of contract financial andadministrative closeout issues.  As ofNovember 14, 2006, Kaiser-Hill has withheld approximately $7.0 million fromdistribution until these closeout issues are clarified further.  The Company expects to receive its 50% shareof any distribution of such funds by Kaiser-Hill.

Itis expected that the Company will be required to fund its 50% share of a yet tobe determined accounting reserve in Kaiser-Hill to provision against potentialrisks associated with U.S. Government audits. At this time, it is not possible to predict the number of years thatwill be required to complete the government audit process.

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*Nova Hut.*  TheCompany is currently evaluating its remaining options against Mittal SteelOstrava and the IFC.  Among the optionsbeing considered are the filing of independent arbitration claims by theCompany (as opposed to its KNBV subsidiary) against Mittal Steel Ostrava andthe IFC in accordance with prior rulings of the Bankruptcy Court inDelaware.  The Bankruptcy Court hasentered an order staying the Company’s bankruptcy claim against the IFC pendingsubmission of the dispute for arbitration. Similarly, the Bankruptcy Court has entered an order staying the Company’sbankruptcy claim against Mittal Steel Ostrava pending submission of the disputeto arbitration.

The continuedlitigation of these disputes has had, and will continue to have, a negativeimpact on the cash flow of the Company.

Taking intoaccount the results of the ICC arbitration ruling against KNBV, 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.

*ProposedReverse Split*.**Our Kaiser Common Stock is currently registered under theSecurities Exchange Act of 1934 (the “Exchange Act”), and consequently we aresubject to reporting obligations of the Exchange Act.  In special meetings on March 31, 2005, andJune 20, 2005, our Board unanimously approved a 1-for-20 reverse split of theKaiser Common Stock. The Company, in conjunction with its Board, continues toassess the considerations involving a possible reverse split andderegistration.  Proceeding with thereverse split would require that we amend the Company’s Certificate ofIncorporation, which requires stockholder approval.  If we determine to submit a proposal relatingto a reverse split to our stockholders for decision at the next Annual Meetingof Stockholders, we will include details about the reverse split in the proxymaterials delivered to our stockholders in connection with such meeting.**** It is anticipatedthat such a reverse split would be in a ratio that would reduce the number ofrecord holders of Kaiser Common Stock to below 300, which would allow us toterminate our reporting obligations under the Exchange Act and continueoperations as a non-reporting company. In that event, we would file a Form 15 with the Securities and ExchangeCommission (“SEC”).  Upon filing of theForm 15, our reporting obligations under the Exchange Act would be suspended,meaning that we would no longer be required to file with the SEC certainreports and forms, including Forms 10-K, 10-Q and 8-K and proxystatements.  In such event, thereafter,the Company would provide information about its quarterly and annual financialresults to its remaining stockholders by other means, such as through its website and in press releases.

*Critical Accounting Policies and SignificantEstimates*

Thepreparation of financial statements in conformity with GAAP requires that wemake estimates and assumptions affecting the assets and liabilities (includingcontingent assets and liabilities) reported at the date of the ConsolidatedFinancial Statements and the income statement amounts reported for the periodspresented.  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:

·                  Recoverabilityof accounts receivable and investments;

·                  Income taxprovision, deferred tax assets and liabilities;

·                  Use of the equity method of accounting forKaiser-Hill, an affiliate that we have the ability to significantly influencebut not control.  In accordance with theequity method of accounting, we record our proportionate share of the affiliate’sincome or losses;

·                  Estimated feeson the Kaiser-Hill joint venture. Estimating future costs, contract contingenciesand revenues and profits, is a process requiring a high degree ofjudgment.  In the event of a change intotal estimated contract cost or profit, the cumulative effect of such changeis recorded in the period the change in estimate occurs.  Now that the contract has been declaredcomplete, additional revenue recognition and our profitability from theKaiser-Hill contract may be adversely affected to the extent that estimatedcost to complete or incentive or award fee estimates are revised upon audit fromthe U. S. Government. The Kaiser-Hill contract contains incentive provisionsfor increased or decreased revenue and profit based on actual performanceagainst established cost targets and schedule-related goals.  Incentive fees have been included in estimatedcontract revenue at the time the amounts can be reasonably determined and arereasonably assured based on historical experience and other objectivecriteria.  Should total costs of theproject 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 inconnection with a post-employment medical benefit plan for a fixed group ofretirees.  This liability is affected bychanges in the discount rate, medical cost trend rates and certain actuarialassumptions.  Should actual rates andresults differ from the assumptions used, revisions to the liability would berequired resulting in additional income statement charges.

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***New Accounting Standards***

InMay 2005, the Financial Accounting Standards Board (“FASB”) issued Statement ofFinancial Accounting Standard (“SFAS”) No. 154, “Accounting Changes and ErrorCorrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS No. 154”).  SFAS No. 154 addressesthe requirements for the accounting for, and reporting of, a change inaccounting principle.  This statement requires retrospective applicationto prior periods’ financial statements of changes in accounting principle, unlessit is impractical to determine period-specific effects or the cumulative effectof the change.  We adopted SFAS No. 154 effective January 1, 2006.Management does not expect that adoption of SFAS No. 154 will have a materialimpact on our consolidated financial statements.

InJuly 2006, the FASB issued FASB Interpretation Number 48, “Accounting forUncertainty in Income Taxes, an Interpretation of FASB Statement No. 109”(“FIN 48”).  FIN 48 clarifies theaccounting for uncertainty in income tax positions and prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return,and provides guidance on derecognition, interest and penalties, accounting inthe interim periods and transition.  Theprovisions of FIN 48 are effective for fiscal years beginning after December15, 2006.  The Company is currentlyassessing the impact, if any, of the interpretation on our consolidatedfinancial statements.

In September 2006, theFASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). ThisStatement defines fair value, establishes a framework for measuring fair valueand expands disclosures about fair value measurements. SFAS No. 157 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years. We arecurrently assessing the impact, if any, of SFAS No. 157 on our consolidatedfinancial statements.

In September 2006, theFASB issued SFAS No. 158, “Employer’s Accounting for Defined Benefit Pensionand Other Postretirement Plans (an amendment of FASB Statements No. 87, 88,106, and 123R)” (“SFAS No. 158”). The objectives of SFAS No. 158 are foran employer to: (1) recognize the overfunded or underfunded status of asingle-employer defined benefit postretirement plan as an asset or liability inits statement of financial position and to recognize changes in funded statusin comprehensive income in the year in which the changes occur; and (2) measurethe plan status as of the date of its year-end statement of financial position.SFAS No. 158 is effective for the requirement to recognize the funded status ofa benefit plan and the disclosure requirements as of the end of the fiscal yearending after December 15, 2006. The requirement to measure plan assets andbenefit obligations as of the date of the employer’s fiscal year-end statementof financial position shall be effective for fiscal years ending after December15, 2008. We are currently assessing the impact, if any, of SFAS No. 158on our consolidated financial statements.

In September 2006, the SECissued Staff Accounting Bulletin No. 108, “Considering the Effects of PriorYear Misstatements when Quantifying Misstatements in Current Year FinancialStatements” (“SAB 108”), to address diversity in practice in quantifyingfinancial statement misstatements. SAB 108 requires quantification of financialstatement misstatements based on the effects of the misstatements on each ofthe company’s financial statements and the related financial statementdisclosures. We are currently assessing the impact, if any, of SAB 108 on ourconsolidated financial statements.

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**RESULTS OF OPERATIONS**

*Gross Revenues*

The Company’s gross revenues forthe nine months ended September 30, 2006 are directly attributable to theoperations of Kaiser Analytical Management Services, Inc. (“KAMS”), whichceased operations effective June 30, 2006.  The Company had no gross revenue source in the third quarter of2006.  Gross revenues of KAMS were $0.0million for the three month period ending September 30, 2006, and $0.2 millionfor the nine month period ended September 30, 2006.  For the comparable periods of 2005, grossrevenues were $0.5 million and $1.5 million, respectively.  Gross revenues of KAMS decreased in 2006 dueto the wind-down and completion of work at the DOE’s Rocky Flats site.  Gross revenues in 2006 from KAMS operationsresulted primarily from the performance of laboratory audits and datavalidation services.

*Equity IncomeIn Earnings of Affiliate*

Ourcurrent major remaining source of income is a 50% ownership inKaiser-Hill.  We own Kaiser-Hill equallywith CH2M Hill.  The financialinformation contained herein for Kaiser-Hill is reflected on the equity basis.

* Contract Provisions for Revenue andPerformance Award*

Kaiser-Hill’s contract with the DOE provides that Kaiser-Hill earnrevenue equal to the actual cost of physical completion plus a performancefee.  The performance fee is determinedbased on (1) Kaiser-Hill’s cost to complete the site closure, which must bewithin the range of $3.1 billion and $4.9 billion, (2) the schedule of physicalcompletion, which must be before 2007 and (3) Kaiser-Hill’s safetyperformance.  On October 13, 2005,Kaiser-Hill declared physical completion of the cleanup and closure of the DOE’sRocky Flats site.  At the time ofdeclaration of physical completion on October 13, 2005, Kaiser-Hill’s costestimate to complete the project remained at $3.44 billion, which resulted in aperformance fee payable to Kaiser-Hill projected to be $510.9 million,of which $255.0 million had previously been received.  On December 8, 2005, the DOE affirmedKaiser-Hill’s declaration as required under the contract and the DOE authorizedKaiser-Hill to invoice all remaining performance fees less a retained amountequaling $5.0 million.  On January 11,2006, Kaiser-Hill received payment for all remaining fees except the retainedamount.  On April 14, 2006, Kaiser-Hillreceived payment of $4.9 million from the $5.0 million withheld amount.  As of November 14, 2006, Kaiser-Hill hasreceived $510.8 million of the $510.9 million fee due from 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.

For the three and ninemonths ended September 30, 2006, we reported no income from our 50% ownershipin Kaiser-Hill because during 2005, Kaiser-Hill recorded all of the contractfee income, less applicable reserves, due from the DOE. In the future, we mayhave additional income from Kaiser-Hill to report to the extent Kaiser-Hillreleases certain retained reserve amounts, as mentioned above.

*Closure Contract Billing Provisions*

****From the inception of Kaiser-Hill’scontract with the DOE in February 2000 through September 30, 2006, Kaiser-Hillinvoiced the DOE for the performance fee based on the contract provisions ofapproximately $510.9 million, and collected an aggregate of $510.8 million infees from the DOE****. It is not known when, if ever, the remaining DOE retention balance of$0.1 million will be released to Kaiser-Hill. By contract, this remaining retention balance amount can not be releaseduntil final contract closeout.

Fee payments madeby the DOE 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 throughSeptember 30, 2006, Kaiser-Hill has distributed $192.7 million in cash to eachof its two owners.

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Kaiser-Hill is continuing its internal review and reconciliation ofcontract financial and administrative closeout issues.  As of November 14, 2006, Kaiser-Hill haswithheld approximately $7.0 million from distribution until these closeoutissues are resolved.  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.

Kaiser-Hill recognized asubstantial amount of the fee income from the DOE upon the declaration ofphysical completion on October 13, 2005 and, accordingly, the Company’sproportionate share of such income was recorded in Equity Income in Earnings ofAffiliate in its consolidated statement of operations for the year endedDecember 31, 2005.  The Company receiveddistributions in the aggregate amount of****$85.0 millionfrom Kaiser-Hill during the nine months ended September 30, 2006.  As a result, the Company had reduced itsinvestment in Kaiser-Hill on its balance sheet by $85.0 million as of September30, 2006.

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 nor does the closeout phase impactfees earned.  Effective December 31,2005, Kaiser-Hill terminated its remaining employees. Staff necessary tocomplete closeout activities is subcontracted or provided by CH2M Hill.

For both the threeand nine months ended September 30, 2006, we reported no income from our 50%ownership in Kaiser-Hill because during 2005, Kaiser-Hill recorded all of thecontract fee income, less applicable reserves, due from the DOE. In the future,we may have additional income from Kaiser-Hill to report to the extentKaiser-Hill determines that certain recorded reserves, as mentioned above, areno longer necessary. For the three and nine months ended September 30, 2005, wereported income of****$76.1 millionand $86.2 million**,** respectively from our 50%ownership of Kaiser-Hill.****As part of ouradoption of fresh-start reporting as of December 31, 2000, we increased thecarrying value of our investment in Kaiser-Hill by $21.1 million, and we wereamortizing that difference over an estimated life of the Kaiser-Hill investmentof approximately 6 years. At June 30, 2005, $5.3 million of the differenceremained unamortized. Upon Kaiser-Hill’s declaration of physical completion onOctober 13, 2005, we wrote off at September 30, 2005, the then remaining $5.3million unamortized balance.

*Administrative Expenses*

Administrative expensesfor the three and nine months ended September 30, 2006 were $0.7****million and $3.3 million, respectively, a reduction of $0.6****million****and $0.5million**,**respectively, compared to the threeand nine months ended September 30, 2005.

Our cost to provide certain on-going post-retirementmedical****benefits to a fixed numberof retirees is also treated as an administrative expense.  In the three and nine month periods endedSeptember 30, 2006, the expenses related to this plan were $0.1 million and$0.7 million, respectively, compared to $0.2 million and $0.7 million for thethree and nine month periods ended September 30, 2005, respectively.

*Reserve for Contract Losses*

Due to the results of the ICC arbitration ruling in thesecond quarter of 2006, the Company wrote off the remaining Nova Hut contractreceivable by recording an additional reserve of $3.0 million.

* Interest Income*

Interestincome for the three and nine months ended September 30, 2006 was $0.6 millionand $1.3 million, respectively, which represents an increase of $0.4 millionand $0.7 million, respectively, compared to the three and nine month periodended September 30, 2005.

*Interest Expense*

As a result of the adoption of Statement of FinancialAccounting Standards No. 150, “Accounting for Certain Financial Instrumentswith Characteristics of both Liabilities and Equity” (“SFAS No. 150”),effective July 1, 2003, and the classification of the Series 1 Redeemable Cumulative Preferred Stock (“New Preferred”)as a liability, preferred stock dividends are reflected as interest expense. Weincurred no interest expense for the threeand nine months periods ended September 30, 2006, compared to interest expensefor the three and nine months periods ended September 30, 2005 of****$0.3 million and $1.1****million,respectively.  The decrease in interestexpense is due to redemption of all outstanding preferred stock in the fourthquarter of 2005.

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*Income Tax Expense*

We recorded an income tax benefit of $0.2 million and$2.7 million on operating loss from continuing operations of $0.1 million and$5.2 million**,**respectively, during the threeand nine months ended September 30, 2006. Our income tax benefit for the three and nine months ended September 30,2006 primarily reflects the non-taxability of certain income for federal incometax purposes.  For the three and ninemonths ended September 30, 2005, we recorded an income tax expense of****$26.8 million and $29.4 million, respectively, on operatingincome from continuing operations****of $64.3million and $70.0 million, respectively. Our income tax expense for both thethree and nine months ended September 30, 2005, reflects the non-deductibilityof certain expenditures for federal income tax purposes.

**LIQUIDITY AND CAPITAL RESOURCES**

*Operating Activities*

We used $34.6 million of cash during the nine monthsended September 30, 2006, compared to $9.1 million for the nine months endedSeptember 30, 2005.  The $25.5 millionincrease in the use of cash for the nine months ended September 30, 2006,compared to the nine months ended September 30, 2005, was primarily due to anincrease in income tax payments made in 2006 compared to 2005.

*InvestingActivities*

We received $85.0 million indistributions from Kaiser-Hill during the nine months ended September 30, 2006compared to **$**31.5 million for the nine monthsended September 30, 2005.  The increaseof Kaiser-Hill cash distributions is a result of the DOE’s acceptance ofphysical completion in accordance with the Rocky Flats Contract and the receiptby Kaiser-Hill of all project fees except for the DOE retention amount of $0.1million.

*Financing Activities*

During the nine months ended September 30, 2006, therewere no financing activities to report. For the nine months ended September 30, 2005, we redeemed $15.5 millionliquidation preference of New Preferred using $0.8 million of excess restrictedcash and $14.7 million of unrestricted cash.

*Liquidity and Capital ResourceOutlook*

Wecurrently have no debt. We continue to finance the bankruptcy distributionrequirements and follow-on working capital needs in part through the use of theavailable cash and distributions from Kaiser-Hill.  Based on (i) current expectations foroperating activities and results, (ii) expected Kaiser-Hill distributions,(iii) our current available cash position, (iv) recent trends and projectionsin liquidity and capital needs, (v) current expectations of total allowedclaims upon the completion of the bankruptcy proceedings, and (vi) an estimateof amounts necessary to satisfy our obligation to provide future benefits to afixed group of retirees, management believes we have sufficient liquidity tocover our future operating needs and income tax requirements.  With theretirement of the remaining outstanding New Preferred on November 17, 2005, weno longer have future interest payment requirements on preferred stock.

*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 believecontingent liabilities may exist in the areas described in Note 6 to theConsolidated Financial Statements.

**ITEM 3.   QUANTITATIVE AND QUALITATIVE INFORMATIONABOUT MARKET RISK**

We do not believe that we have significant exposures tomarket risk because we do not presently have any debt.  The interest rate risk associated with ourobligation to fund a capped retiree medical obligation is not sensitive tointerest rate risk other than with respect to the determination of the presentvalue of our remaining obligation thereunder. A 10% increase or decrease in the average annual prime rate would resultin a decrease in the carrying value of the plan obligation but would not changethe actual cost of the plan.

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**ITEM 4.  CONTROLS ANDPROCEDURES**

As of September 30, 2006, 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).  Basedon that evaluation, the Company’s management, including the Chief ExecutiveOfficer and Chief Financial Officer, concluded that the Company’s disclosurecontrols and procedures were effective as of September 30, 2006.  There were no significant changes in theCompany’s internal control over financial reporting (as defined in Rule13a-15(f) or 15d—15(f)) that occurred during the period covered by this reportthat have materially affected, or that are reasonably likely to materiallyaffect, our internal control over financial reporting.

**PART II - OTHERINFORMATION**

**ITEM 1.  LEGAL PROCEEDINGS**

See Item 3, “Legal Proceedings” in the Annual Report onForm 10-K for the year ended December 31, 2005. For a discussion of material developments with respect to such legalproceedings during the quarter ended September 30, 2006, see Note 6 of theNotes to Consolidated Financial Statements included in Part I hereof.

**Item 1A. RISK FACTORS**

**RISK FACTORS RELATING TO KAISERHOLDINGS AND FORWARD-LOOKING STATEMENTS**

This Quarterly Report onForm 10-Q contains, 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 1933 andSection 21E of the Securities Exchange Act of 1934.  These forward-looking statements are nothistorical facts, but rather are predictions, and generally can be identifiedby use of statements that include terms such as “believe,” “expect,” “anticipate,”“estimate,” “intend,” “plan” or “foresee” or other words or phrases of similarimport.  Similarly, statements thatdescribe or contain information related tomatters such as our intent, belief, or expectation with respect to financialperformance, claims resolution, cash availability, stock redemption plans,contract awards and performance, potential acquisitions and joint ventures****and cost-cutting measures areforward-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 anduncertainties, including those described below, the forward-looking eventsmight or might not occur.  We undertakeno obligation to publicly update any forward-looking statement, whether as aresult of new information, future events or otherwise.

**We facesignificant contingencies, which may adversely impact our ability to fund ourcontinuing operations and to undertake new operations.**

*We do not have a significant businessplan beyond Kaiser-Hill, and we may undertake new activities with start-up andother risks.*

Our long-term future profitability will be dependent, to a significantdegree, on the extent to which we carry out activities other than throughKaiser-Hill, particularly since Kaiser-Hill has entered the closeout phase ofits contract with the DOE and we have received most of the funds we expect toreceive from our investment in Kaiser-Hill. Unless and until we further developplans for such operations, we are unable to determine either the amount of riskthat future operations will involve or whether we have the ability to realizelong-term profitability.  The businessopportunities we have begun to explore, such as completion of the process toenable MS Builders Insurance Company to offer derivative captive insuranceservices, are in early stages, may take a long time to develop, and may neverbe profitable or successful at all.  Asof June 30, 2006, we closed down the operations of KAMS, which we hadestablished in 2004, and we may have similar experiences with other businessopportunities that we undertake.  Wecurrently have no active operations and are exploring potential acquisition andother strategic opportunities.  However,we may not be able to identify attractive acquisition or strategicopportunities for our company.  Inaddition, efforts we make to develop business operations separate fromKaiser-Hill may involve start-up activities with risks specific to activitiesof this type, or may involve activities with which we are not familiar, any ofwhich may adversely impact our financial condition, cash flow and operatingresults.  A decrease in our cashflows and operating results could result in a decrease in the value of ourcommon stock.

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*We havehad to, and may continue to have to, draw down existing cash balances to fundcurrent operating cash needs.*

In light ofphysical completion of Kaiser-Hill’s contract with the DOE, until and unlessthe Company is successful in developing a new revenue base through newcommercial activities or undertakings, it is anticipated that the Company willneed to rely on existing cash balances to fund its continuing operations,including overhead costs.  In the thirdquarter of 2006, the Company generated no gross revenues and funded alloperating expenses with existing cash.  Thisdraw down in cash balances could result in a decrease in the value of ourcommon stock.  Furthermore, if theCompany does not establish new operating activities, its existing cash balancescould become insufficient to satisfy its overhead costs.

*We may be unsuccessful inimplementing and funding an acceptable benefits funding plan to satisfy ourobligation to provide future benefits to a fixed group of retirees.*

The Companyremains obligated to continue to fulfill the provisions of Old Kaiser’spreviously curtailed benefits plan, which provides certain medical and deathbenefits to a group of retirees.  All ofthe benefits derived from the plan are fully covered by the Company’sself-insurance.

Since the December 2000approval of the reorganization plan, the Company has been negotiating with theDelaware Bankruptcy Court-appointed Official Committee of Retirees (“OCR”) todesign and implement a benefits funding plan that would provide for all retireebenefit obligations going forward.   Inan adversary claim hearing in the Delaware Bankruptcy Court held on April 12,2006, the Court accepted the Company’s proposal to establish a VoluntaryEmployees’ Beneficiary Association (“VEBA”) to fund retirees’ future medicaland death benefits in the present value amount of approximately $6.1million.  The present value pensionobligation of $0.3 million will continue to be funded directly by the Company.

Furthermore, according tothe terms of the Delaware Bankruptcy Court decision, after the VEBA has been inplace for five years, the Company will be required to undertake an actuarialanalysis of the projected net present value of benefits remaining to be paidout.  If the remaining VEBA fund amountis then not sufficient to pay the estimated present value benefits obligation,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 would exist after aperiod of five years and, if so, what the Company’s contribution requirementfor a shortfall amount would be in this circumstance. A requirement to fund asignificant shortfall in the VEBA fund could result in a decrease in the valueof our common stock.

*We may beunable to obtain performance guarantees, which may limit our ability toundertake new activities.*

Given the reorganization history of Old Kaiser,we may not be able to obtain satisfactory contract performance guarantymechanisms, such as performance bonds and letters of credit, on satisfactoryterms or at all, to the extent such mechanisms are needed for new activities andprojects.  These factors could limit thenature of the business activities in which we can engage, which may adverselyimpact our cash flow and operating results and result in a decrease inthe value of our common stock.

*We may be unable to generate funds tomeet our cash flow needs, and we may be unable to access additional capital.*

We may be unable to continue to generate sufficient funds to meet ourcash flow needs.  In the event our cashneeds exceed our current estimates, we may not be able to obtain additionalcapital to meet those needs on favorable terms, or at all.  In particular, due to the reorganizationhistory of Old Kaiser and current financial markets, additional capital may notbe available to us.  An inability to gainaccess to additional capital could also limit our ability to undertake newactivities.  Ultimately, an inability tomeet our existing obligations or to undertake new activities could adverselyimpact our cash flow and operating results. A decrease in our cash flows and operating results could resultin a decrease in the value of our common stock.

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**Ourremaining primary source of funding is distributions from Kaiser-Hill, which issubject to uncertainties that may adversely impact the potential value of ourcommon stock**.

*There arerisks associated with the resolution of additional financial and administrativecontract closeout issues that may affect the timing and award of future cashdistributions  from Kaiser-Hill to theCompany.*

On October 13,2005, Kaiser-Hill declared physical completion of the cleanup and closure ofthe DOE’s Rocky Flats site.  Kaiser-Hillhas withheld approximately $7.0 million from the DOE final distribution**,** pending resolution of certain financial and administrativecontract closeout issues, including those associated with the Kaiser-Hill costreconciliation process.  It is possiblethat there will be disputes between the DOE and Kaiser-Hill as to how theseissues should be addressed and dealt with. Such disputes could delay or reduce future distributions of cash fromKaiser-Hill to the Company and could cause a decrease in the value of ourcommon 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 historicallyprovided its estimates of disallowed costs, uncertainties exist with regard tothe government audit of Kaiser-Hill.  Tothe extent that costs are disallowed and cash refunds are made to the DOE,future cash distributions from Kaiser-Hill to the Company would be reduced andcould cause a decrease in the value of our common stock.

**ITEM 5.  OTHER INFORMATION**

Our Annual Meeting ofstockholders will be held in the auditorium at 9302 Lee Highway, Fairfax, VA22031-1207 on Thursday, April 26, 2007 at 10:30 a.m. EST.

Any stockholder wishing topresent a proposal to be included in the proxy statement for the 2007 AnnualMeeting of Stockholders may submit such proposal in writing to Kaiser GroupHoldings, Inc., 9300 Lee Highway, Fairfax, VA 22031-1207.  Such proposals must be received no later thanThursday, December 14, 2006.  Submittinga stockholder proposal does not guarantee that we will include it in our proxystatement.

The matters to be discussed atthe Annual Meeting will be described in detail in a Proxy Statement to bemailed to stockholders on or about March 27, 2007.

**ITEM 6.  EXHIBITS**

**Exhibits(listed according to the number assigned in the table in Item 601 of RegulationS-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 theCommission on December 14, 2000)

3.1                                 Certificate of Incorporation of Kaiser Group Holdings, Inc. (Incorporated byreference 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 GroupHoldings, Inc. (Incorporated by reference to Exhibit 3(ii) to Current Report onForm 8-K (Registrant No. 1-12248) filed with the Commission on December 14,2000)

4                                          Form of Put Agreement relating to preferred stockof Kaiser Group Holdings, Inc. (Incorporated by reference to Exhibit 4 toCurrent Report on Form 8-K (Registrant No. 1-12248) filed with the Commissionon December 14, 2000)

10.1                           Kaiser Group International, Inc. Employee StockOwnership 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 theCommission 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 theCommission on April 17, 2000)

10.3                           AmendmentNo. 2 to Kaiser Group International, Inc.Employee Stock Ownership Plan, effective January 1, 1996  (Incorporatedby reference to Exhibit No. 10(b)(2) to Annual Report on Form 10-K (RegistrantNo. 1-12248) filed with the Commission on April 17, 2000)

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10.4                           Amendment No. 3 to Kaiser Group International,Inc. Employee Stock Ownership Plan, dated April 19, 1999 (Incorporated byreference to Exhibit No. 10(b) (3) to Annual Report on Form 10-K (RegistrantNo. 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 byreference 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 TrustCompany, dated as of August 31, 1995, in connection with  the ICF Kaiser International, Inc. EmployeeStock Ownership Plan (Incorporated by reference to Exhibit No. 10(c) toRegistration Statement on Form S-1 (Registrant No. 33-64655) filed with theCommission on November 30, 1995)

10.7                           ICFKaiser International, Inc. Retirement Plan (as amended and restated as of March1, 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 onForm 10-Q (Registrant No. 1-12248) filed with the Commission on October 15,1993)

10.8                           Amendment No. 1 to ICF KaiserInternational, Inc. Retirement Plan, dated April 24, 1995 (Incorporated byreference 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 KaiserInternational, Inc. Retirement Plan, datedDecember 15, 1995 (Incorporated by reference to Exhibit No. 10(d)(2) toTransition Report on Form 10-K (Registrant No. 1-12248) for the transitionperiod from March 1, 1995 to December 31, 1995 filed with the Commission onMarch 29, 1996)

10.10                     Amendment No. 3 to ICF Kaiser International, Inc.Retirement Plan, dated December 13, 1996 (Incorporated by reference to ExhibitNo. 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 KaiserInternational, Inc. Retirement Plan, datedApril 19, 1999 (Incorporated by reference to Exhibit No. 10(d)(4) to AnnualReport on Form 10-K (Registrant No. 1-12248) filed with the Commission on April17, 2000)

10.12                     Amendment No. 5 to ICF KaiserInternational, Inc. Retirement Plan, datedJune 25, 1999 (Incorporated by reference to Exhibit No. 10(d)(5) to AnnualReport on Form 10-K (Registrant No. 1-12248) filed with the Commission on April17, 2000)

10.13                     Amendment No. 6 to ICF KaiserInternational, Inc. Retirement Plan, datedAugust 30, 1999 (Incorporated by reference to Exhibit No. 10(d)(6) to AnnualReport on Form 10-K (Registrant No. 1-12248) filed with the Commission on April17, 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 Form10-Q (Registrant No. 1-12248) filed with the Commission on May 24, 2004)

10.18                     Trust Agreement with Vanguard Fiduciary TrustCompany, dated as of August 31, 1995, in connection with the ICF KaiserInternational, Inc. Retirement Plan (Incorporated by reference to Exhibit No.10(e) to Registration Statement on Form S-1 (Registrant No. 33-64655) filedwith the Commission on November 30, 1995)

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10.19                     ICF KaiserInternational, 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 Form10-Q (Registrant No. 1-12248) filed with the Commission on October 15, 1993)

10.20                     Amendment No. 1 to ICF KaiserInternational, Inc. Section 401(k) Plan, datedApril 24, 1995 (Incorporated by reference to Exhibit No. 10(p)(1) to AnnualReport on Form 10-K (Registrant No. 1-12248) filed with the Commission on May23, 1995)

10.21                     Amendment No. 2 to ICF Kaiser International, Inc.Section 401(k) Plan, dated December 15, 1995 (Incorporated by reference toExhibit 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 withthe Commission on March 29, 1996)

10.22                     Amendment No. 3 to ICF KaiserInternational, Inc. Section 401(k) Plan, datedDecember 13, 1996 (Incorporated by reference to Exhibit No. 10(q)(3) toRegistration Statement on Form S-1 (Registrant No. 333-19519) filed with theCommission on January 10, 1997)

10.23                     Amendment No. 4 to ICF KaiserInternational, Inc. Section 401(k) Plan, datedApril 8, 1999 (Incorporated by reference to Exhibit No. 10(k)(4) to AnnualReport on Form 10-K (Registrant No. 1-12248) filed with the Commission on April17, 2000)

10.24                     Amendment No. 5 to ICF KaiserInternational, Inc. Section 401(k) Plan, datedJune 25, 1999 (Incorporated by reference to Exhibit No. 10(k)(5) to AnnualReport on Form 10-K (Registrant No. 1-12248) filed with the Commission on April17, 2000)

10.25                     Amendment No. 6 to ICF Kaiser International, Inc.Section 401(k) Plan, dated April 13, 2000 (Incorporated by reference to Exhibit10(k)(6) on Form 8-K (Registrant No. 1-12248) filed with the Commission on May2, 2000)

10.26                     Amendment No. 7 to ICF Kaiser International, Inc.Section 401(k) Plan, dated January 1, 2001 (Incorporated by reference toExhibit No. 10(m)(7) to Annual Report on Form 10-K (Registrant No. 1-2248)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 toExhibit 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 Exhibit10(e)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed withthe 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 Exhibit10(e)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed withthe 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 toExhibit 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 toExhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-2248) filed withthe 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 toExhibit 10.32 to Annual Report on Form 10-K (Registrant No. 1-2248) filed withthe 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 toExhibit 10.33 to Annual Report on Form 10-K (Registrant No. 1-2248) filed withthe Commission on March 28, 2006)*

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10.34                     Amendment No. 1 to Kaiser Analytical ManagementServices, Inc. Section 401(k) Plan, dated February 15, 2006 (Incorporated byreference to Exhibit 10.34 to Annual Report on Form 10-K (Registrant No.1-2248) filed with the Commission on March 28, 2006)*

10.35                      Trust Agreement with Vanguard Fiduciary TrustCompany, dated as of March 1, 1989, in connection with the ICF KaiserInternational, Inc. Section 401(k) Plan (Incorporated by reference to ExhibitNo. 28(b) to Registration Statement on Form S-8 (Registrant No. 33-51460) filedwith the Commission on August 31, 1992)

10.36                     Contract between Kaiser-Hill Company, LLC and theU.S. Department of Energy dated January 24, 2000 (Incorporated by reference toExhibit No. 10(o) to Annual Report on Form 10-K (Registrant No. 1-12248) filedwith the Commission on April 17, 2000)

10.37                     ModificationM116 to Contract between Kaiser-HillCompany, 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 ofMembership Interest in Hunters Branch Leasing, LLC by and between Kaiser HoldingsUnlimited, Inc. (Assignor) and NutleyPartners, LC (Assignee), dated January 1, 2001 (Incorporated byreference 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 Corporationand Kaiser Group Holdings, Inc., dated June 30, 2004 (Incorporated byreference 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. 2002Equity Compensation Plan, as amended (Incorporated by reference to Exhibit No.10 to Registration Statement on Form S-8 (Registration No. 333-107912) filedwith the Commission on August 13, 2003)*

10.41                     Amended andRestated Employment Agreement with John T. Grigsby, Jr., President and ChiefExecutive Officer, effective as of December 18, 2000 (Incorporated by referenceto 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                     TransitionAgreement between Kaiser Group Holdings, Inc. and John T. Grigsby, Jr.effective as of August 31, 2004 (Incorporated by reference to Exhibit 99 toCurrent Report on Form 8-K (Registration No. 1-12248) filed with the Commissionon September 1, 2004)*

10.43                     Separation Agreement betweenKaiser 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. 1-2248) filed with the Commission on February 9, 2006.

10.44                     Summary of 2006 Annual ExecutiveOfficer Compensation (Incorporated by reference to Exhibit 10.44 to AnnualReport on Form 10-K (Registrant No. 1-2248) filed with the Commission on March28, 2006)*

31.1                           Certification of ChiefExecutive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the SecuritiesExchange Act of 1934, as amended

31.2                           Certification of ChiefFinancial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the SecuritiesExchange Act of 1934, as amended

32.1         Certificationof Chief Executive Officer, pursuant to 18 U.S.C. Section 1350

32.2         Certificationof Chief Financial Officer, pursuant to 18 U.S.C. Section 1350

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*                    Represents Compensation Agreements.

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**SIGNATURES**

Pursuant to the requirements of the Securities ExchangeAct of 1934, the registrant has duly caused this report on Form 10-Q to besigned on its behalf by the undersigned thereunto duly authorized.
|                         | ** ** | **KAISER GROUP HOLDINGS,  INC.**                |
|-------------------------|------------|-------------------------------------------------|
|                    |       | (Registrant)                                    |
|                    |       |                                            |
|                    |       |                                            |
| Date: November 14, 2006 |       |                                            |
|                    |       | /s/ Nicholas Burakow                            |
|                    |       | Nicholas Burakow, Ph.D.,                        |
|                    |       | Executive Vice President and  Chief Financial   |
|                    |       | Officer (Duly authorized  officer and principal |
|                    |       | financial officer)                              |

** **

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**EXHIBIT INDEX**
| Exhibit  No. | ** ** | **Description**                                                                                                                         | ** ** | ** ** |
|--------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
|         |       |                                                                                                                                    |
| 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                                                           |

 

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