** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

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**FORM 10-Q**

** **

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| **x**                                          |   | **QUARTERLY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE**  |
|------------------------------------------------|--------|---------------------------------------------------------------|
| ** **                                     |   | **SECURITIES EXCHANGE ACT OF  1934**                          |
| ** **                                     |   | ** **                                                    |
| For the quarterly period ended  March 31, 2006 |
|                                           |   |                                                          |
| **o**                                          |   | **TRANSITION REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE** |
| ** **                                     |   | **SECURITIES EXCHANGE ACT OF  1934**                          |

 

For the 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**

 

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

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated 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

 

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

 

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Section 12, 13 or 15(d) of the Exchange Act subsequentto the distribution of securities under a plan confirmed by a court.  Yes x    No  o

 

ThePlan of Reorganization of Kaiser Group International, Inc. under Chapter 11 ofthe Bankruptcy Code became effective on December 18, 2000.  The Plan provided, among other things, thatholders of shares of common stock of Kaiser Group International, Inc. receiveshares of common stock of Kaiser Group Holdings, Inc. and that holders ofspecified outstanding debt obligations and other specified claimants receivecash and shares of preferred stock and common stock of Kaiser Group Holdings,Inc., all in accordance with the terms set forth in the Plan. The initialdistribution of securities occurred as of April 17, 2001. 

 

Asof May 12, 2006, there were 1,790,890 shares of Kaiser Group Holdings, Inc.Common Stock, par value $0.01 per share, outstanding.  ** **

 

 

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**KAISER GROUP HOLDINGS, INC.**

**INDEX TO FORM 10-Q**
| **Part I — Financial  Information**                                                                            | ** ** | **Page** |
|--------------------------------------------------------------------------------------------------------------------------|------------|----------|
|                                                                                                                     |       |     |
| Item  1. Financial Statements:                                                                                           |       |     |
|                                                                                                                     |       |     |
| Consolidated Balance Sheets at March 31, 2006 and  December 31, 2005.                                          |       | 3        |
|                                                                                                                     |       |     |
| Consolidated Statements of Operations and  Comprehensive Income for the Three Months Ended March 31, 2006 and 2005. |       | 4        |
|                                                                                                                     |       |     |
| Consolidated Statements of Cash Flows for the Three  Months Ended March 31, 2006 and 2005.                          |       | 5        |
|                                                                                                                     |       |     |
| Notes to Consolidated Financial Statements.                                                                              |       | 6        |
|                                                                                                                     |       |     |
| Item 2.  Management’s Discussion and Analysis of Financial  Condition and Results of Operations.               |       | 12       |
|                                                                                                                     |       |     |
| Item 3.  Quantitative and Qualitative Disclosures About Market  Risk.                                               |       | 17       |
|                                                                                                                     |       |     |
| Item  4.  Controls and Procedures.                                                                                  |       | 17       |
|                                                                                                                     |       |     |
| **Part II  — Other Information**                                                                               |       |     |
| ** **                                                                                                               |       |     |
| Item  1.  Legal Proceedings.                                                                                        |       | 17       |
|                                                                                                                     |       |     |
| Item  1A.  Risk Factors.                                                                                            |       | 18       |
|                                                                                                                     |       |     |
| Item 4.  Submission of Matters to a Vote of Security Holders.                                                       |       | 20       |
|                                                                                                                     |       |     |
| Item 6.Exhibits.                                                                                                         |       | 20       |
|                                                                                                                     |       |     |
| **Signatures**                                                                                                           |       | 24       |

 

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)**

** **
| ** **                                                                                                                  | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                  | ** ** | **(unaudited)**          | ** ** | ** **                  | ** ** |
| **ASSETS**                                                                                                                  |       |                     |       |                        |       |
| **Current Assets**                                                                                                          |       |                     |       |                        |       |
| Cash and cash  equivalents                                                                                                  |       | $                        | 65,589     |                        | $          | 14,633 |   |
| Certificates of  deposit                                                                                                    |       | 2,057                    |       | 2,040                       |       |
| Restricted cash  and cash equivalents                                                                                       |       | 3,207                    |       | 3,178                       |       |
| Accounts  receivable                                                                                                        |       | 95                       |       | 203                         |       |
| Prepaid expenses  and other current assets                                                                                  |       | 629                      |       | 606                         |       |
| Contract  receivable, net                                                                                                   |       | 3,000                    |       | 3,000                       |       |
| Total Current Assets                                                                                                        |       | 74,577                   |       | 23,660                      |       |
|                                                                                                                        |       |                     |       |                        |       |
| **Other Assets**                                                                                                            |       |                     |       |                        |       |
| Investments in  and advances to joint venture                                                                               |       | 7,310                    |       | 87,310                      |       |
| Investment in  Affiliates                                                                                                   |       | 2,800                    |       | 2,800                       |       |
| Deferred tax  asset                                                                                                         |       | 8,163                    |       | 8,215                       |       |
| Other long-term  assets                                                                                                     |       | 38                       |       | 39                          |       |
|                                                                                                                        |       | 18,311                   |       | 98,364                      |       |
| Total Assets                                                                                                                |       | $                        | 92,888     |                        | $          | 122,024 |   |
| ** **                                                                                                                  | ** ** | ** **               | ** ** | ** **                  | ** ** |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                              | ** ** | ** **               | ** ** | ** **                  | ** ** |
|                                                                                                                        |       |                     |       |                        |       |
| **Current Liabilities**                                                                                                     |       |                     |       |                        |       |
| Accounts payable                                                                                                            |       | $                        | 417        |                        | $          | 239 |   |
| Post-retirement  benefit plan obligation                                                                                    |       | 6,789                    |       | 6,924                       |       |
| Other accrued  expenses                                                                                                     |       | 3,308                    |       | 3,435                       |       |
| Income taxes  payable                                                                                                       |       | 3,680                    |       | 32,315                      |       |
| Total Current Liabilities                                                                                                   |       | 14,194                   |       | 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 March 31, 2006 and December 31, 2005, respectively |       | 18                       |       | 18                          |       |
| Capital in  excess of par                                                                                                   |       | 11,796                   |       | 14,337                      |       |
| Retained  earnings                                                                                                          |       | 66,839                   |       | 64,716                      |       |
| Accumulated other  comprehensive income (loss)                                                                              |       | 41                       |       | 40                          |       |
| Total Shareholders’ Equity                                                                                             |       | 78,694                   |       | 79,111                      |       |
| Total Liabilities  and Shareholders’ Equity                                                                            |       | $                        | 92,888     |                        | $          | 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 March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                                                                                         | ** ** | **(Unaudited)**                                                    | ** ** |
| ** **                                                                                                                                         | ** ** | **2006**                                                           | ** ** | **2005** | ** ** |
| Gross Revenue                                                                                                                                      |       | $                                                                  | 103        |   | $ | 520 |   |
| Labor and subcontract costs                                                                                                                        |       | 237                                                                |       | 347 |   |
| Service Revenue                                                                                                                                    |       | (134                                                               | )          | 173 |   |
|                                                                                                                                               |       |                                                               |       |   |   |
| Operating Expenses                                                                                                                                 |       |                                                               |       |   |   |
| Administrative expenses                                                                                                                            |       | 1,405                                                              |       | 1,157 |   |
| Operating Loss                                                                                                                                     |       | (1,539                                                             | )          | (984 | ) |
|                                                                                                                                               |       |                                                               |       |   |   |
| Other Income:                                                                                                                                      |       |                                                               |       |   |   |
| Equity income in earnings of affiliate, net of  amortization of $0 and $881 for the three months ended March 31, 2006  and 2005, respectively |       | —                                                             |       | 4,226 |   |
| Interest income                                                                                                                                    |       | 229                                                                |       | 190 |   |
| Interest expense for preferred dividends                                                                                                           |       | —                                                             |       | (464 | ) |
|                                                                                                                                               |       |                                                               |       |   |   |
| (Loss) Income  Before Income Tax                                                                                                                   |       | (1,310                                                             | )          | 2,968 |   |
| Income tax  (expense) benefit                                                                                                                      |       | 773                                                                |       | (1,317 | ) |
|                                                                                                                                               |       |                                                               |       |   |   |
| (Loss) Income  Applicable to Common Shareholders                                                                                                   |       | ($537                                                              | )          | $ | 1,651 |   |
| Basic and Diluted  (Loss) Income Per Common Share:                                                                                                 |       |                                                               |       |   |   |
| Net (Loss) Income Per Share                                                                                                                        |       | ($0.30                                                             | )          | $ | 1.02 |   |
| Weighted average  shares for basic and diluted earnings per common share                                                                           |       | 1,789                                                              |       | 1,611 |   |
|                                                                                                                                               |       |                                                               |       |   |   |
| Comprehensive (Loss)  Income                                                                                                                       |       |                                                               |       |   |   |
| Net (Loss) Income                                                                                                                                  |       | ($537                                                              | )          | $ | 1,651 |   |
| Other  Comprehensive (Loss) Income:                                                                                                                |       |                                                               |       |   |   |
| Change in cumulative foreign translation adjustments                                                                                               |       | 1                                                                  |       | (4 | ) |
|                                                                                                                                               |       |                                                               |       |   |   |
| Total  Comprehensive (Loss) Income                                                                                                                 |       | ($536                                                              | )          | $ | 1,647 |   |
|                                                                                                                                                    |            |                                                                    |            |  |  |  |  |

 

See notes to consolidated financial statements.

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

 
| ** **                                                                            | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|---------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                            | ** ** | **2006**                                                           | ** ** | **2005** | ** ** |
| ** **                                                                            | ** ** | **(Unaudited)**                                                    | ** ** |
| Operating Activities:                                                                 |       |                                                               |       |   |   |
| Net income  (loss)                                                                    |       | ($537                                                              | )          | $ | 1,651 |   |
| Adjustments to  reconcile net income (loss) to net cash used in operating activities: |       |                                                               |       |   |   |
| Deferred taxes                                                                        |       | 52                                                                 |       | (139 | ) |
| Equity in earnings of affiliate                                                       |       | —                                                             |       | (4,226 | ) |
| Changes in  operating assets and liabilities:                                         |       |                                                               |       |   |   |
| Account receivables                                                                   |       | 108                                                                |       | (6 | ) |
| Prepaid expenses and other current assets                                             |       | (23                                                                | )          | (252 | ) |
| Accounts payable and accrued expenses                                                 |       | (84                                                                | )          | (205 | ) |
| Income taxes payable                                                                  |       | (28,635                                                            | )          | 183 |   |
| Other operating activities                                                            |       | 75                                                                 |       | 81 |   |
| Net Cash Used in Operating Activities                                                 |       | (29,044                                                            | )          | (2,913 | ) |
| Investing Activities:                                                                 |       |                                                               |       |   |   |
| Distributions from affiliate                                                          |       | 80,000                                                             |       | 10,500 |   |
| Net Cash Provided by Investing Activities                                             |       | 80,000                                                             |       | 10,500 |   |
| Financing Activities:                                                                 |       |                                                               |       |   |   |
| Transfers to restricted cash                                                          |       | —                                                             |       | (32 | ) |
| Net Cash Used in Financing Activities                                                 |       | —                                                             |       | (32 | ) |
| Increase in Cash  and Cash Equivalents                                                |       | 50,956                                                             |       | 7,555 |   |
| Cash and Cash  Equivalents at Beginning of Period                                     |       | 14,633                                                             |       | 12,728 |   |
| Cash and Cash  Equivalents at End of Period                                           |       | $                                                                  | 65,589     |   | $ | 20,283 |   |
|                                                                                       |            |                                                                    |            |  |  |  |  |

 

See notes to consolidated financial statements.

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

1.             Basisof Presentation

The accompanyingconsolidated financial statements of Kaiser Group Holdings, Inc. andsubsidiaries (“the Company”), except for the December 31 2005 balancesheet (derived from audited financial statements), are unaudited and have beenprepared in accordance with U.S. generally accepted accounting principles (“GAAP”)for interim financial information. Accordingly, they do not include all of theinformation and footnotes required by GAAP for complete financial statements. Inthe opinion of management, all adjustments considered necessary for a fairpresentation 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.Certain reclassifications have been made to the prior period financialstatements to conform them to the presentation used in the March 31, 2006financial statements.

Kaiser Group Holdings, Inc.(“Kaiser Group Holdings” or the “Company”) is a Delaware corporation that wasformed 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,Old Kaiser 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 frombankruptcy with an approved plan of reorganization (which was its SecondAmended Plan of Reorganization and is referred to in this report as the “Planof Reorganization”) that was effective on December 18, 2000 (the “EffectiveDate”). The Company is deemed a “successor issuer” to Old Kaiser by virtue of Rule 12g-3(a) underthe Securities Exchange Act of 1934. A summary of the Plan of Reorganizationfor Old Kaiser can be found in a Current Report on Form 8-K dated December 5,2000 filed by Old Kaiser. In this report,unless the context states otherwise, the terms “we”, “our” and “Kaiser” referto Kaiser Group Holdings (including Old Kaiser as its predecessor) and itssubsidiaries.

Currently,apart from resolving remaining bankruptcy claims, the Company has only a limited number of activities, assets andliabilities, primarily consisting of:

·                  the ownership ofa 50% interest in Kaiser-Hill Company, LLC (“Kaiser-Hill”), which serves as thegeneral contractor at the U.S. Department of Energy’s (“DOE”) Rocky Flats sitenear Denver, Colorado for the performance of a contract for the closure of thesite (the “Closure Contract”) (See Notes 4 and 6).

·                  thecloseout and resolution of a completed contract for the engineering andconstruction of a steel mini-mill in 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 issued policies.In the fourth quarter of 2004, the Company received regulatory approval andfinalized the formation documents of a sponsored captive subsidiary, MSBuilders Insurance Company, to enable our wholly-owned captive insurancecompany to offer derivative captive insurance services to third party clients. Asof May 12, 2006, MS Builders Insurance Company has not written anypolicies.

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

·                  a wholly-owned subsidiary, Kaiser AnalyticalManagement Services, Inc. (“KAMS”), which we formed in April 2004to take over the operations of the Analytical Services Division of Kaiser-Hill.KAMS provides analytical management services such as sample planning, samplemanagement, records management, performance assessment and data management inthe general areas of health and safety, geotechnical, environmental and wastemanagement, and deactivation and decommissioning.

The Companyadopted fresh start reporting in its consolidated balance sheet as of December 31,2000. The American Institute of Certified Public Accountants’ Statement ofPosition 90-7, “Financial Reporting by Entities in Reorganization Underthe Bankruptcy Code” (“SOP 90-7”), requires under certain circumstancesresulting from a bankruptcy the creation of a new entity for financialreporting purposes upon the emergence of an entity from bankruptcy. Accordingly,the value of the reorganized enterprise becomes the established amount for theemerging balance of shareholders’ equity, and any accumulated deficit of thepredecessor entity is offset against available paid-in-capital, resulting in anemerging retained earnings of zero. Additionally, assets and liabilities arerecorded at their fair values.

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The value of theemerged enterprise used for fresh start reporting as of December 31, 2000was $87.5 million. It was determined by management with the assistance ofindependent advisors. The methodology employed involved estimation of theenterprise value taking into consideration a 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 of assets and liabilities weredetermined based either on contracted amounts, actuarial present values and/ormanagement’s estimates of the outcome of certain operating activities. Netafter-tax cash flows, assuming a 40% effective tax rate, were discounted at 17%in order to take into consideration the risks and uncertainties inherent insuch projections. The cash flow projections were based on estimates andassumptions about circumstances and events that had not yet taken place. Estimatesand assumptions regarding individual retained matters which form the collectivecomposition of the overall enterprise value as of December 18, 2000 areinherently subject to significant economic and competitive uncertainties andcontingencies beyond the control of the Company. Accordingly, there may bedifferences between projections and actual results because events andcircumstances frequently do not occur as expected and may be significant. Morespecifically, assumptions within the valuation related to the amount and timingof the ultimate performance and related cash flows of the Company’s investmentin Kaiser-Hill have the greatest impact on the overall enterprise valuation.

In May 2005,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting 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 andreporting of a change in accounting principle. This statement requiresretrospective application to prior periods’ financial statements of changes inaccounting principle, unless it is impractical to determine period-specificeffects or the cumulative effect of the change. We adopted SFAS No. 154 onJanuary 1, 2006. Management does not expect that adoption of SFAS No. 154will have a material impact on our consolidated financial statements.

2.             GeneralTerms of Plan 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 tradecreditor or equity claims. Class 4 claims included holders of Old Kaiser’ssenior subordinated notes due 2003. Holders of Class 4 claims allowed bythe bankruptcy court received a combination of cash and Company preferred (“NewPreferred”) and common stock (“Kaiser Common Stock”) in respect of their claims.Each Class 4 claimant was entitled to receive one share of New Preferredand one share of Kaiser Common Stock for each $100 of claims, subject to areduction in the number of shares of New Preferred issued to such claimant byone share for each $55.00 of cash received 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, tosatisfy approximately $136.8 million of allowed Class 4 claims, theCompany effected its initial distribution on April 17, 2001. The amount ofunresolved 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 anAlternative Dispute Resolution (“ADR”) procedure whereby the remainingclaimants and Old Kaiser produced limited supporting data relative to theirrespective positions and engaged in initial negotiation efforts in an attemptto reach an agreed claim determination. If necessary, the parties werethereafter required to participate in a non-binding mediation before a mediatorpre-selected by the Bankruptcy Court. All unresolved claims as of March 27,2001 are subject to the ADR process. Since April 17, 2001, the date of theinitial distribution, $130.0 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 March 31, 2006, the aggregate amount of unresolved claims wasless than $1.0 million.

The equity class ofclaims recognized in the Old Kaiser bankruptcy are “Class 5” claims,consisting of holders of Old Kaiser common stock (“Old Common”) and other “EquityInterests” as defined in the Plan of Reorganization. The Plan of Reorganizationprovides that holders of Equity Interests receive a number of shares of KaiserCommon Stock equal to 17.65% of the number of shares of Kaiser Common Stockissued to allowed Class 4 claimants. In the initial distribution, oneshare of Kaiser Common Stock was issued for each 96 shares of previouslyoutstanding Old Common. During 2005, the Company settled a significant Class 5claim asserted by the former shareholders of ICT Spectrum Constructors, Inc.(“ICT Spectrum”), which Old Kaiser had acquired in 1998, and issued anaggregate of 175,003 additional shares of Kaiser Common Stock to such claimantspursuant to the settlement. With the settlement of the ICT Spectrum Class 5claim and the subsequent issuance of 175,003 shares of Kaiser Common Stock tosuch claimants, no Class 5 claims remain unresolved at March 31,2006.

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As of March 31,2006, the aggregate amount of unresolved claims was less than $1.0 million. Asdemonstrated by the claim settlements completed since April 17, 2001, andbased on the belief that it is in the best interest of the Company and itscurrent shareholders, the Company has been settling certain remaining Class 4claims entirely for cash payments in lieu of the combination of cash and NewPreferred and Kaiser Common Stock as contemplated in the Plan of Reorganization.The Company intends to continue to use this settlement alternative during theresolution of remaining Class 4 claims. The Company expects to resolve theremaining claims, and to reach a final resolution of issues related to theretiree benefit plans  by the end of 2006(see Note 6). Upon such final resolution, the Company expects to take thenecessary steps to close the bankruptcy cases. Upon such closing, theBankruptcy Court would no longer be involved in the administration of theCompany’s affairs, and the Company’s obligation to pay certain fees and submitperiodic reports to the Bankruptcy Court would be terminated. Since closing ofthe cases requires resolution of all outstanding matters and such resolution issomewhat out of the Company’s control, there is a possibility that the caseswill not be closed 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 that time.During 2004 and 2005, the Company settled various Class 4 claims reducingapproximately $1.0 million of this liability on its balance sheet. Based uponthe Company’s estimate of unresolved claims at March 31, 2006, $0.4million remains in this reserve.

3.               Earnings Per 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. Pursuant to the Plan of Reorganization that waseffective as of December 18, 2000, all then-outstanding common stockequivalents were cancelled and no common stock equivalents have been issuedsince that date. As a result, the Company has no dilutive or anti-dilutivesecurities outstanding.

Share reconciliation: As disclosed in the Company’s annual report on Form 10-K forthe year ended December 31, 2005, since 2001, the Company has beenattempting to reconcile the number of shares that were issued by the Company’stransfer agent in the initial distribution in 2001. The Company had notpreviously recognized the issuance of 11,599 shares of Kaiser Common Stock bythe transfer agent. Because the Company has been unsuccessful in disputing theissuance of these shares, during 2005 the Company retroactively restated thenumber of outstanding shares to reflect the issuance of the 11,599 shares as ofJune 2001. For purposes of the March 31, 2006 and March 31, 2005financial statements weighted average shares for basic and diluted earnings pershare were 1,789,265 and 1,611,369, respectively.

4.               Investments In and Advances To Joint Venture

 Summarizedunaudited financial information of Kaiser-Hill was as follows as of March 31(in thousands):

 

|                          | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------|------------|----------|------------|----------|------------|
| Current assets           |       | $        | 56,594     |     | $          | 125,529 |   |
| Non-current assets       |       | —   |       | 124,153  |       |
| Current liabilities      |       | 41,975   |       | 123,844  |       |
| Non-current  liabilities |       | —   |       | 66,134   |       |
|                          |            |          |            |          |            |  |  |

 

|               | ** ** | **Three Months Ended** | ** ** |
|---------------|------------|----------------------------------|------------|
| ** **    | ** ** | **March 31,2006**           | ** ** | **March 31, 2005** | ** ** |
| Gross revenue |       | $                                | 45,841     |   | $ | 173,371 |   |
| Net  income   |       | —                           |       | 10,213 |   |
|               |            |                                  |            |  |  |  |  |

 

OnOctober 13, 2005, Kaiser-Hill declared physical completion of the cleanupand closure of the DOE’s Rocky Flats site. With the certainty of declaration ofphysical completion, at September 30, 2005, Kaiser-Hill recognized asubstantial balance of the remaining performance fee.

OnDecember 8, 2005, the DOE accepted physical completion in accordance withthe Closure Contract. The project total fee expected to be earned byKaiser-Hill pursuant to the Contract is $510.0 million based on Kaiser-Hill’scost to complete the site closure of $3.44 billion. Through May 12, 2006,Kaiser-Hill has received $509.9 million of such fee from the DOE.

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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. The closeout phase of the Contract is a costreimbursable phase and is not fee bearing, nor does the closeout phase impactfees 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 $80.0million cash distribution from Kaiser-Hill on March 1, 2006, the Companymade a corresponding reduction in its investment in Kaiser-Hill on its balancesheet.

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. Because Kaiser-Hill declared physical completion ofthe site on October 13, 2005, at September 30, 2005 the Company wroteoff the then remaining $5.3 million unamortized balance as a reduction to theequity income of earnings of affiliate.

OnOctober 13, 2005, Kaiser-Hill declared physical completion of the cleanupand closure of the DOE’s Rocky Flats site. Given the completion of the projectin 2005, Kaiser-Hill did not have any fee earnings during the quarter ended March 31,2006; therefore, there were no associated equity earnings in the Company’sconsolidated statement of operations for the quarter ended March 31, 2006.

5.   MandatorilyRedeemable Preferred Stock

On November 17, 2005, the Company redeemed all ofthe remaining outstanding shares of New Preferred held by non-affiliates. As aresult, at December 31, 2005, and March 31, 2006, excluding sharesheld in in treasury of 101,471, the Company had no shares of New Preferredoutstanding. In January 2006, pursuant to approval by the Company’s Board,the treasury shares were cancelled leaving no shares outstanding or in treasury.The Company has reduced the capital in excess of par of $2.7 million that wasrecorded upon issuance of the preferred shares to affiliates with an associatedentry 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 “Series 1Redeemable Cumulative Preferred Stock,” and had a par value of $0.01 per share.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, becausethe Company has been settling certain remaining Class 4 claimsentirely for cash payments in lieu of the combination of cash and New Preferredand Kaiser Common Stock as contemplated in the Plan of Reorganization, theCompany has no plans to issue additional shares of New Preferred at March 31,2006.

The Company adopted FAS 150, “Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity,”effective July 1, 2003. Due to the mandatorily redeemable feature of theNew Preferred, the New Preferred was reclassified from mezzanine equity to along term liability on the consolidated balance sheet, and the preferred stockdividends were reclassified to interest expense on the consolidated statementof operations effective July 1, 2003. There was no transition adjustmentrecognized upon adoption of FAS 150.

Cumulative dividends, classified as interest expensesubsequent to July 1, 2003, on the New Preferred were payable on aquarterly basis, as of April 30, July 31, October 31 and January 31,either in cash at an annual rate of 7% of the liquidation preference per shareor in additional shares of New Preferred at an annual rate of 12% of the pershare liquidation preference. Dividends accrued on the New Preferred commencingwith the initial distribution date, April 17, 2001. Dividends were notpaid to any affiliate of the Company on account of that affiliate’s ownershipof shares of preferred stock as long as there was New Preferred shares held byany non-affiliated entities or parties. Upon the November 17, 2005redemption of the 207,431 shares of remaining outstanding New Preferred held bynon-affiliates, the Company no longer has a dividend payment requirement.

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6.               Other Contingencies

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 Companybelieves contingent liabilities may exist in the following areas:

Nova Hut ** **

Although OldKaiser sold its Metals Mining and Industry business unit in August 2000,it retained its Netherlands subsidiary, Kaiser Netherlands, B.V., which hadbeen responsible for a turnkey engineering and construction services contractfor the construction of a steel mini-mill in the Czech Republic for Nova Hut. Afterconstruction of the mini-mill was complete in 2000, the contract with Nova Hutprovided for a maximum of three possible performance tests. The firstperformance test was completed on November 13, 2000. Kaiser Netherlandsbelieves that the first performance test was successful and that Nova Hutshould have agreed to final acceptance of the mini-mill and made final paymentof amounts accrued by Kaiser Netherlands throughout the project, including feeand retention amounts with release of performance guarantee instruments. NovaHut, however, asserted that the first test was not successful. KaiserNetherlands believes that such contention may have been put forth in responseto severe financial constraints on Nova Hut’s operations resulting fromweakening conditions in the worldwide steel market and the significant amountsthat Kaiser Netherlands believed it was contractually due. As of March 31,2006, this dispute has not been resolved, and Kaiser Netherlands continues topursue legal action to enforce its rights. Until recently, the primary legalvenue of this dispute has been the Delaware bankruptcy proceeding for OldKaiser, where the Company has asserted claims against Nova Hut and theInternational Finance Corporation (“IFC”). The Delaware bankruptcy court hadpreviously ruled that the Company, as opposed to Kaiser Netherlands, couldproceed with prosecution of its specific claims against Nova Hut and IFC in theDelaware bankruptcy court venue. Both Nova Hut and IFC appealed this rulingand, during the first quarter 2004, the Delaware bankruptcy court’s decisionregarding the IFC was overturned by the District Court, ruling that the IFCenjoys sovereign immunity from prosecution. Kaiser Holdings filed an appealwith the U.S. Court of Appeals for the Third Circuit regarding this decision infavor of the IFC and, on February 25, 2005, the Third Circuit overturnedthe District Court’s decision. The IFC’s request for a rehearing of the case bythe Third Circuit was refused. The IFC then petitioned the Delaware bankruptcycourt to stay proceedings pending completion of the Kaiser Netherlands-Nova Hutarbitration proceeding discussed below. This IFC motion was granted. Withregard to the Nova Hut appeal, the District Court has ruled that U.S.bankruptcy proceedings should also be stayed pending completion of arbitrationproceedings.

In January 2004,Kaiser Netherlands filed arbitration claims against Nova Hut in the amount of$51.1 million with the International Chamber of Commerce (“ICC”). In November 2004,Kaiser Netherlands’ claim against Nova Hut was amended to include late interestand other charges and now totals $67.5 million. The arbitration panel has beenconstituted, and a hearing was held in September 2005. At present, we expecta decision to be issued before the end of the second quarter of 2006. Nova Huthas submitted a $49.7 million counterclaim against Kaiser Netherlands in thesesame ICC proceedings. At this time, the Company is unable to predict theoutcome of the arbitration. The Company intends to vigorously defend theclaims.

In December 2003,the ICC, under the dispute resolution provisions of the Nova Hut mini-millsubcontract between Kaiser Netherlands and the mini-mill’s main equipmentsupplier, Tippins, Inc., issued a final award that was on balancefavorable to Kaiser Netherlands. As a result of the ruling, Kaiser Netherlandswas relieved of the obligation to pay additional retention to Tippins, andKaiser Netherlands was awarded a net cash settlement of $2.6 million. TheCompany has not recorded this award due to the uncertainties regardingcollectibility. However, the Company intends to vigorously pursue collection ofthis award.

Thecontinued litigation of these disputes has had, and will continue to have, a negativeimpact on the cash flow of Kaiser Netherlands and Kaiser Holdings.

The components of “Contract receivable, net” consistentirely of the carrying value of the net assets of the Nova Hut project. Basedon the Company’s continued concern over Nova Hut’s financial difficulties andthe lack of a settlement resulting from an earlier bankruptcy court-sponsoredmediation in the fourth quarter of 2003, the Company further reduced thecarrying value of the remaining Nova Hut contract receivable from $6.0 millionto $3.0 million by recording an additional reserve of $3.0 million, net of a$1.1 million income tax benefit, through a charge to “Loss from DiscontinuedOperations”. This reserve is in addition to a reserve recorded in 2001, whichreduced the carrying value of the Nova Hut contract receivable from $21.6million to $6.0 million by recording a reserve of approximately $9.8 million,net of a $5.8 million income tax benefit,through a charge to “Loss from Discontinued Operations.”  These adjustments to the contract receivablecarrying value were determined based on the Company’s late 2003 estimate ofNova Hut’s ability to pay such liability.

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Kaiser-Hill****

On October 13,2005, Kaiser-Hill declared physical completion of the cleanup and closure ofthe DOE’s Rocky Flats site. DOE has reviewed Kaiser-Hill’s declaration asrequired under the Closure Contract. On December 8, 2005, the DOE acceptedthe physical completion declaration in accordance with the Closure Contract.The projected total fee to be earned pursuant to the Closure Contract isexpected to be $510.0 million based on Kaiser-Hill’s cost to complete the siteclosure of $3.44 billion. As of March 31, 2006, Kaiser-Hill has received$505.0 million, and as of  May 12,2006, Kaiser-Hill has received $509.9 million of such fee from the DOE. Asubstantial portion of the received fee remains 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’s 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, includinglitigation costs, to third parties not compensated by insurance or otherwise.There is an exception to this reimbursement provision applicable to liabilitiescaused by the willful misconduct, lack of good faith or failure to exerciseprudent business judgment by Kaiser-Hill’s 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 since the inception of Kaiser-Hill, theCompany invoiced certain management oversight costs to Kaiser-Hill. Governmentaudits at Kaiser-Hill are ongoing. Although Kaiser-Hill and the Company havehistorically provided for their estimates of disallowed costs oncost-reimbursable contracts, uncertainties exist with regard to whethergovernment audits will result in any disallowed costs needing to be refunded tothe government customer. The continued adequacy of provisions for reserves withregard to unallowable 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 Contractis a cost reimbursable phase and is not fee bearing, nor does the closeoutphase 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. On January 11, 2006, Kaiser-Hillreceived payment for all fees except for the retained amount. As a result ofthis payment, on March 1, 2006, the Company received an $80.0 million cashdistribution (representing its 50% share) from Kaiser—Hill. On April 14,2006, $4.9 million of the remaining $5.0 million retention was released by theDOE. It can not be determined at this time what proportion of the remaining$0.1 million DOE retention balance will ultimately be released and when (ifever) such a release would occur.

In addition to the$4.9 million retention amount released by the DOE on April 14, 2006,Kaiser-Hill has withheld $17.3 million in cash from distribution untiladministrative issues associated with certain Kaiser-Hill employee pension andpost-retirement benefits, as well as further administrative contract closeoutissues, are clarified with the DOE. The Company expects to receive its 50%share of any subsequent distributions of such funds by Kaiser-Hill. As of May 12, 2006, Kaiser-Hill had received$509.9 million of the $510.0 million due from the DOE.

Post-Retirement BenefitPlan Obligation

In accordance with theterms 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 theplan is fully covered by the Company’s self-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.

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No new participants canbe added to the plan. The net present value benefit obligation, as of March 31,2006, was $6.8 million. This amount will continue to decrease as the populationof covered participants declines for the purposes of medical benefits and asdeath benefits are paid out.

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.  In anadversary 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 $6.1 million. Thepresent value pension obligation of $0.3 million will continue to be fundeddirectly by the Company. In addition, in accordance with the DelawareBankruptcy Court ruling, the Company will establish a declining balance escrowaccount to fund expected additional future VEBA administrative costs in theevent the Company decides to terminate its operations at some future date. Theinitial escrow fund amount will be $0.6 million and this amount will be reducedby $25,000 for each year that the Company remains in business. As of March 31,2006, the Company had an accrued liability of $6.8 million relating to thismatter. Upon final establishment of the VEBA, such liability will be adjustedto the net present value.

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 amount is then not sufficient to pay theestimated present value of future benefits obligations, then the Company willbe required to contribute the estimated shortfall amount to the VEBA fund. Itis not possible to predict at this time whether a shortfall in the VEBA fundwould exist after a period of five years and, if so, what the Company’scontribution requirement for a shortfall amount would be in this circumstance.

**I****TEM 2. MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL 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,we have 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 two new business opportunities, KAMS and MS BuildersInsurance Company.

Following the effectiveness of the Plan ofReorganization, we now have only a limited number of activities, assets andliabilities, primarily consisting of the following:

·                  Weown Kaiser-Hill equally with CH2M Hill. Kaiser-Hill has been our major sourceof income. Kaiser-Hill served as the general contractor at the DOE’s RockyFlats 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 theclosure of the site. The level of success experienced by Kaiser-Hill inachieving timely closure of the Rocky Flats site, and the cost of achievingsuch closure, have been and continue to be the primary determinants of ourlong-term financial performance following the completion of the bankruptcyreorganization process.

·                  We have a substantial claim, pending resolution,against the owner of a steel mini-mill that we constructed for Nova Hut in theCzech Republic. The engineering and construction of the mini-mill was completedin 2000 by our subsidiary, Kaiser Netherlands.

·                  We own a captive insurance company that has notbeen issuing new policies since October 1, 2000 and has solely beeninvolved in resolving remaining claims made against previously issued policies.In the fourth quarter of 2004, we received regulatory approval and finalizedthe formation documents of a sponsored captive subsidiary, MS BuildersInsurance Company, to enable our wholly-owned captive insurance company tooffer derivative captive insurance services to third party clients. As of May 12,2006, 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.

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·                  We formed KAMS in April 2004 to takeover the operations of the Analytical Services Division of Kaiser-Hill. KAMSprovides analytical management services such as sample planning, samplemanagement, records management, performance assessment and data management inthe general areas of health and safety, geotechnical, environmental and wastemanagement, and deactivation and decommissioning.

***Outlook***

*Potential**Kaiser-HillDistributions and the Nova Hut Disputes*. As we look forward, by farthe most significant factor in determining the value of our common stock is thecloseout performance of Kaiser-Hill and the completion of the U.S. Government’srelated project audits. Another material uncertainty potentially affecting ourfuture results is the outcome of the disputes we have in arbitration with NovaHut.

On October 13, 2005, Kaiser-Hill declared physical completion of theclean up and closure of the DOE’s Rocky Flats site. On December 8, 2005the DOE accepted the physical completion in accordance with the contract. Theprojected total fee to be earned pursuant to the contract is estimated to be$510.0 million based on Kaiser-Hill’s cost to complete the site closure of$3.44 billion.

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 consolidated statement of operations for the year ended December 31,2005. As a result, upon the receipt of the $80.0 million cash distribution fromKaiser-Hill on March 1, 2006, the Company made a corresponding reductionin its investment in Kaiser-Hill on its balance sheet.

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. Thecloseout phase of the contract is a cost reimbursable phase and is not feebearing 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. On January 11, 2006, Kaiser-Hillreceived payment for all fees except for the retained amount. As a result ofthis payment, 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 had received $505.0 million of the $510.0 million due fromthe DOE. On April 14, 2006, $4.9 million of the remaining $5.0 million wasreleased by the DOE. It can not be determined at this time what amount, if any,of the remaining $0.1 million DOE retention balance will ultimately be releasedand when, if ever, such a release will occur.

Kaiser-Hill hasnot distributed the $4.9 million received from the DOE on April 14, 2006.In addition, Kaiser-Hill has withheld $17.3 million in cash from distributionuntil administrative issues associated with certain Kaiser-Hill employeepension and post-retirement benefits, as well as further administrativecontract closeout issues, are clarified with the DOE. The Company expects toreceive its 50% share of any distributions of such funds by Kaiser-Hill. As of May 12, 2006, Kaiser-Hill had received$509.9 million of the $510.0 million due from the DOE.

*Nova Hut.*As discussed elsewhere, we have pending against Nova Hut anarbitration before the International Chamber of Commerce (“ICC”) with respectto a contract we completed for the engineering and construction of a steelmini-mill in the Czech Republic. Our aggregate claims are for $67.5 million,and Nova Hut has asserted counterclaims of $49.7 million. At this time, theCompany is unable to predict the outcome of the arbitration. The Companyintends to vigorously defend the claims.  At present, we do not expect that the ICC willissue a decision until the second quarter of 2006.

*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 and June 20, 2005, our Board unanimously approved a 1-for-20reverse split of the Kaiser Common Stock. The Company, in conjunction with itsBoard, is reassessing the issues surrounding a possible reverse split andderegistration of the Company. Proceeding with the reverse split would requirethat we amend the Company’s Certificate of Incorporation, which requiresstockholder approval. If we do proceed, we would intend to submit any suchproposal to our stockholders for decision at the next Annual Meeting ofStockholders. It is anticipated that such a reverse split would reduce thenumber of record holders of Kaiser Common Stock to below 300, which would allowus to terminate our reporting obligations under the Exchange Act and continueoperations as a non-reporting company. In that event, we would file a Form 15with the Securities and Exchange Commission (“Commission”). Upon filing of the Form 15,our reporting obligations under the Exchange Act would be suspended, meaningthat we would no longer be required to file with the Commission certain reportsand forms, including Forms 10-K, 10-Q and 8-K and proxystatements. In such event, thereafter, the Company would provide informationabout its quarterly and annual financial results to its remaining stockholdersby other means, such as through its web site and in press releases.

 

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*CriticalAccounting Policies and Significant Estimates*

Thepreparation of financial statements in conformity with U.S. generally acceptedaccounting principles requires that we make estimates and assumptions affectingthe assets and liabilities (including contingent assets and liabilities)reported at the date of the Consolidated Financial Statements and the incomestatement amounts reported for the periods presented. We base our estimates onhistorical experience and on various other assumptions that we believe to bereasonable under the circumstances. Actual results may differ from theseestimates under different assumptions or conditions.

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

·                  Recoverabilityof accounts receivable, a contract receivable, and investments.

·                  Incometax provision, 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 the equity method of accounting, we recordour proportionate share of the affiliate’s income or losses.

·                  Estimatedfees on the Kaiser-Hill joint venture. Estimating future costs, contractcontingencies and revenues and profits is a process requiring a high degree ofjudgment. In the event of a change in total estimated contract cost or profit,the cumulative effect of such change is recorded in the period the change inestimate occurs. Now that the contract has been declared complete, additionalrevenue recognition and our profitability from the Kaiser-Hill contract may beadversely affected to the extent that estimated cost to complete or incentiveor award fee estimates are revised upon audit from the U. S. Government. TheKaiser-Hill contract contains incentive provisions for increased or decreasedrevenue and profit based on actual performance against established cost targetsand 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 objective criteria.Should total costs of the project be revised based upon the results of U. S.Government audits, previously recognized revenues could be reversed and/orfuture period revenues could be reduced.

·                  Ourliability in connection with a post-employment medical benefit plan for a fixedgroup of retirees. This liability is affected by changes in the discount rate,medical cost trend rates and certain actuarial assumptions. Should actual ratesand results differ from the assumptions used, revisions to the liability wouldbe required resulting in additional income statement charges.

***New Accounting Standards***

In May 2005,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting 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, andreporting of, a change in accounting principle. This statement requiresretrospective application to prior periods’ financial statements of changes inaccounting principle, unless it is impractical to determine period-specificeffects or the cumulative effect of the change. We adopted SFAS No. 154effective January 1, 2006. Management does not expect that adoption ofSFAS No. 154 will have a material impact on our consolidated financialstatements.

**RESULTS OF OPERATIONS**

*Equity IncomeIn Earnings of Affiliate*

Ourcurrent major remaining source of income is a 50% ownership in Kaiser-Hill. Weown Kaiser-Hill equally with CH2M Hill. The financial information containedherein 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 performance fee.The performance fee is determined based on (1) Kaiser-Hill’s cost tocomplete the site closure, which must be within the range of $3.1 billion and$4.9 billion, (2) the schedule of physical completion, which must bebefore 2007 and (3) Kaiser-Hill’s safety performance. On October 13,2005, Kaiser-Hill declared physical completion of the cleanup and closure ofthe DOE’s Rocky Flats site. At the time of declaration of physical completionon October 13, 2005, Kaiser-Hill’s cost estimate to complete the projectremained at $3.44 billion, which resulted in a performance fee payable toKaiser-Hill projected to be $510.0 million, of which $255.0 million hadpreviously 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 paymentfor all remaining fees except the retained amount. On April 14, 2006,Kaiser-Hill received payment of $4.9 million from the $5.0 million withheldamount.

 

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Since Kaiser-Hilldeclared physical completion, many of the performance risks have beeneliminated, but contract risks and uncertainties remain. As a result ofdeclaration of physical completion in October 2005, Kaiser-Hill recognizedall remaining 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-Hillwill reverse these reserves to the extent it is successful in mitigating oreliminating these remaining contract risks and uncertainties.

For the three monthsended March 31, 2006, we reported no income from our 50% ownership inKaiser-Hill because during 2005, Kaiser-Hill recorded all of the contract feeincome, less applicable reserves, due from the DOE. In the future, we may haveadditional income from Kaiser-Hill to report to the extent Kaiser-Hill releasescertain retained reserve amounts, as mentioned above. For the three monthsended March 31, 2005, we recorded our 50% equity in Kaiser-Hill’s income,recognizing income of $4.2 million net of $0.9 million of amortization of theexcess carrying value of our investment in Kaiser-Hill over our ownershippercentage of the underlying Kaiser-Hill equity.

*Closure Contract Billing Provisions*

****From the inception of Kaiser-Hill’scontract with the DOE in February 2000 through March 31, 2006,Kaiser-Hill invoiced the DOE for the performance fee based on the contract provisionsof approximately $510.0 million, and collected an aggregate of $505.0 millionin fees from the DOE****.

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 historically incurred expenses that are notreimbursable by the DOE pursuant to applicable Federal regulations. Accordingly,such expenses, which Kaiser-Hill estimates could total up to 15% to 20% of thetotal award fee, are deducted from the total fee earned and collected byKaiser-Hill prior to any distributions to either of its two owners. FromKaiser-Hill’s inception through March 31, 2006, Kaiser-Hill hasdistributed $187.7 million in cash to each of its two owners. TheCompany may receive further distributions in the future as described below.

On April 14, 2006, Kaiser-Hill received from the DOE an additional$4.9 million of the $5.0 million fee amount which was withheld from the January 2006fee payment for possible contract contingencies. It is not known when, if ever,the remaining DOE retention balance of $0.1 million will be released toKaiser-Hill. By contract, this remaining retention balance amount can not bereleased until final contract closeout. We expect to receive our 50% share ofany distributions made by Kaiser-Hill of released DOE retention amounts.

Of the fees received from the DOE, Kaiser-Hill has, in addition to the$4.9 million received on April 14, 2006, withheld $17.3 million in cash fromdistribution to each of its two owners until administrative issues associatedwith certain Kaiser-Hill employee pension and post-retirement benefits, as wellas further administrative contract closeout issues, are clarified with the DOE.We expect to receive our 50% share of any distribution of these withheld fundsfrom Kaiser-Hill.

Kaiser-Hillrecognized a substantial amount of the fee income from the DOE upon thedeclaration of physical completion on October 13, 2005 and, accordingly,the Company’s proportionate share of such income was recorded in Equity Incomein Earnings of Affiliate in its consolidated statement of operations for theyear ended December 31, 2005. As a result, upon the receipt of the $80.0million distribution from Kaiser-Hill on March 1, 2006, the Company made acorresponding reduction in its investment in Kaiser-Hill on its balance sheet.

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 thecontract is a cost reimbursable phase and is not fee bearing nor does thecloseout phase impact fees earned. Effective December 31, 2005,Kaiser-Hill terminated its remaining employees. Staff necessary to completecloseout activities is expected to be subcontracted or provided by CH2M Hill.

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For the threemonths ended March 31, 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-Hilldetermines that certain recorded reserves, as mentioned above, are no longernecessary. For the three months ended March 31, 2005, we recorded our 50%equity in Kaiser-Hill’s income, recognizing income of $4.2 million net of $0.9million of amortization of the excess carrying value of our investment inKaiser-Hill over our ownership percentage of the underlying Kaiser-Hill equity.As part of our adoption of fresh-start reporting as of December 31, 2000,we increased the carrying value of our investment in Kaiser-Hill by $21.1million, and we were amortizing that difference over an estimated life of theKaiser-Hill investment of approximately 6 years. At March 31, 2005, $6.1million of the difference remained unamortized. Upon Kaiser-Hill’s declarationof physical completion on October 13, 2005, we wrote off at September 30,2005, the then remaining $5.3 million unamortized balance.

*Administrative Expenses*

Administrative expensesfor the three months ended March 31, 2006 were $1.4 million, an increaseof $0.2 million compared to the three months ended March 31, 2005, whichis due primarily to an increase in legal fees in connection with thenegotiating and claims resolution activities in Delaware Bankruptcy Courtassociated with the Company’s attempt to resolve the post-retirement benefitplan obligations claim.

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 monthperiods ended March 31, 2006 and 2005, the expenses related to this planwere $0.3 million and $0.2 million, respectively.

* Interest Income*

Interest income for the threemonths ended March 31, 2006 was $0.2 million, which represents a nominalchange compared to the three months ended March 31, 2005.

*Interest Expense*

As a result of the adoption of Statement of FinancialAccounting Standards No. 150, “Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity” (“SFAS No. 150”),effective July 1, 2003, and the classification of the Series 1 Redeemable Cumulative PreferredStock (“New Preferred”) as a liability, preferred stock dividends arereflected as interest expense. We incurred no interest expense for the three months ended March 31, 2006 comparedto interest expense for the three month period ended March 31, 2005 of$0.5 million. The decrease in interest expense is due to redemption of alloutstanding preferred stock in the fourth quarter of 2005.

*Income Tax Expense*

We recorded an income tax benefit of $0.8****million on operating loss from continuing operations of$1.3 million during the three months ended March 31, 2006. Our effectiveincome tax rate of 59% for the three months ended March 31, 2006,primarily reflects the non-taxability of certain income for federal income taxpurposes. For the three months ended March 31, 2005, we recorded an incometax expense of $1.3 million on operating income from continuing operations of$3.0 million. Our effective tax rate of 44% for the three months ended March 31,2005 reflects the non-deductibility of certain expenditures for federal incometax purposes.

**LIQUIDITY AND CAPITAL RESOURCES**

*Operating Activities*

We used $29.0 million of cash during the three monthsended March 31, 2006 compared to $2.9 million for the three months ended March 31,2005. The $26.1 million increase in the use of cash for the three months ended March 31,2006, compared to the three months ended March 31, 2005, was primarily dueto an increase in income tax payments made in 2006 compared to 2005.

16

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*InvestingActivities*

We received $80.0 million indistributions from Kaiser-Hill during the three months ended March 31,2006 compared to $10.5 million for the three months ended March 31, 2005. Theincrease of Kaiser-Hill cash distributions is a result of the DOE’s acceptanceof physical completion in accordance with the Rocky Flats Contract and thereceipt by Kaiser-Hill of all project fees except for the DOE retention amountof $5.0 million.

*Financing Activities*

During the three months ended March 31, 2006, therewere no financing activities to report. For the three months ended March 31,2005, we transferred $32,000 into restricted cash to use for future settlementof Class 4 claims.

*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) currentexpectations for operating activities and results, (ii) expectedKaiser-Hill distributions, (iii) our current available cash position, (iv) recenttrends and projections in liquidity and capital needs, (v) currentexpectations of total allowed claims upon the completion of the bankruptcyproceedings, and (vi) estimate of amounts necessary to satisfy ourobligation to provide future benefits to a fixed group of retirees, managementbelieves we have sufficient liquidity to cover our future operating needs andincome tax requirements. With theretirement of the remaining outstanding New Preferred on November 17,2005, we no longer have future interest payment requirements on preferredstock.

*Other Matters*

We have various obligations andliabilities from our continuing operations, including general overhead expensesin connection with maintaining, operating and winding down the various entities.Additionally, we believe contingent liabilities may exist in the areasdescribed in Note 6 to the Consolidated Financial Statements.

**ITEM 3.  QUANTITATIVE AND QUALITATIVE INFORMATION ABOUTMARKET RISK**

We do not believe that we have significant exposures tomarket risk because we do not presently have any debt. The interest rate riskassociated with our obligation to fund a capped retiree medical obligation isnot sensitive to interest rate risk other than with respect to thedetermination of the present value of our remaining obligation thereunder. A10% increase or decrease in the average annual prime rate would result in adecrease in the carrying value of the plan obligation but would not change theactual cost of the plan.

**ITEM 4. CONTROLS AND PROCEDURES**

As of March 31, 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). Based on that evaluation, theCompany’s management, including the Chief Executive Officer and Chief FinancialOfficer, concluded that the Company’s disclosure controls and procedures wereeffective as of March 31, 2006. There were no significant changes in theCompany’s internal control over financial reporting (as defined in Rule 13a-15(f) or15d-15(f) ) that occurred during the period covered by this report thathave materially affected, or that are reasonably likely to materially affect,our internal control over financial reporting.

**PART II -OTHER INFORMATION**

**ITEM 1. LEGALPROCEEDINGS**

See Item 3, “Legal Proceedings” in the Annual Report on Form 10-Kfor the year ended December 31, 2005. For a discussion of materialdevelopments with respect to such legal proceedings during the quarter ended March 31,2006, see Note 6 of the Notes to Consolidated Financial Statements included in Part Ihereof.

17

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**Item 1A.Risk Factors**

**RISKFACTORS RELATING TO KAISER HOLDINGS AND FORWARD-LOOKING STATEMENTS**

This Quarterly Report on Form 10-Qcontains, and our other periodic filings with the Securities and ExchangeCommission and written or oral statementsmade by our officers and directors to the press, potential investors,securities analysts and others, may contain forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934. These forward-looking statements arenot historical facts, but rather are predictions, and generally can beidentified by use of statements that include terms such as “believe,” “expect,”“anticipate,” “estimate,” “intend,” “plan” or “foresee” or other words orphrases of similar import. Similarly, statements that describe or contain information related to matters such asour intent, belief, or expectation with respect to financial performance,claims resolution, cash availability, stock redemption plans, contract awardsand 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-looking statements.In light of these risks and uncertainties, including those described below, theforward-looking events might or might not occur. We undertake no obligation topublicly update any forward-looking statement, whether as a result of newinformation, future events or otherwise.

**Ourremaining primary source of funding is distributions from Kaiser-Hill andpossible recovery of our claim against Nova Hut, which are subject touncertainties that may adversely impact the potential value of our common stock**.

*There arerisks associated with the resolution of administrative issues surroundingcertain Kaiser-Hill employee pension and post-retirement benefits, along withadditional administrative contract closeout issues, that may affect the timingand award of future cash distributions from Kaiser-Hill to the Company.*

On October 13,2005, Kaiser-Hill declared physical completion of the cleanup and closure ofthe DOE’s Rocky Flats site. As a result, on January 11, 2006, Kaiser-Hillreceived payment from the DOE for all remaining performance fees, less aretained amount equaling $5.0 million, which was retained by the DOE forpossible contract contingencies. On April 14, 2006, the DOE released $4.9million of the $5.0 million retention amount to Kaiser-Hill. Kaiser-Hill hasfurther withheld $17.3 million in cash from the DOE final distribution, pendingresolution with the DOE of administrative issues associated with certainKaiser-Hill employee pension and post-retirement benefits, as well as furtheradministrative contract closeout issues, including those associated with theKaiser-Hill cost reconciliation process. It is possible that there will bedisputes between the DOE and Kaiser-Hill as to how these issues should beaddressed and dealt with. Such disputes could delay or reduce futuredistributions of cash from Kaiser-Hill to the Company and could cause adecrease in the value of our common stock.

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

As the contract between Kaiser-Hill and the DOE contains costreimbursement provisions, the costs invoiced by Kaiser-Hill for reimbursementby the DOE are subject to audit by the U.S. Government. Government audits ofcosts invoiced by Kaiser-Hill are ongoing. Although Kaiser-Hill has historicallyprovided its estimates of disallowed costs, uncertainties exist with regard tothe government audit of Kaiser-Hill. To the extent that costs are disallowedand cash refunds are made to the DOE, future cash distributions fromKaiser-Hill to the Company would be reduced and could cause a decreasein the value of our common stock.

*We cannot predict the outcome or timing of adecision and a potential award from the International Chamber of Commerce.*

The Company has pending an arbitration award decisionfrom the International Chamber of Commerce concerning a turnkey engineering andconstruction services contract for construction of a steel mini-mill in theCzech Republic for Nova Hut. In this proceeding, the Company has submitted aclaim for $67.5 million dollars and Nova Hut has submitted a counterclaim for$49.7 million. At present, we do not expect a decision to be issued by theInternational Chamber of Commerce until the second quarter of 2006 and there isno way of predicting what the decision will be. Should an award decision bemade that is not favorable to the Company, such a decision may have an adverseimpact on the value of the Company’s common stock. In the case of a favorabledecision, the Company will still have to pursue collection of the award. It isnot possible to predict whether any award that is favorable to the Company (ifany) would be collectible or how long collection efforts, even if successful,would take.

18

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**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 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 business opportunities we have begun to explore,such as the establishment of KAMS and our completion of the process to enableMS Builders Insurance Company to offer derivative captive insurance services,are in very early stages, may take a long time to develop, and may never beprofitable or successful at all. Our efforts to develop business operations,separate from Kaiser-Hill involve start-up activities with risks specific toactivities of this type, which may adversely impact our cash flow and operatingresults. A decrease in our cash flows and operating results could resultin a decrease in the value of our common stock.

*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 of the benefits derived from the plan arefully covered by the Company’s self-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.  In anadversary 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 $6.1 million. Thepresent value pension obligation of $0.3 million will continue to be fundeddirectly by the Company. In addition, in accordance with the DelawareBankruptcy Court ruling, the Company will establish a declining balance escrowaccount to fund expected additional future VEBA administrative costs in theevent the Company decides to terminate its operations at some future date. Theinitial escrow fund amount will be $0.6 million and this amount will be reducedby $25,000 for each year that the Company remains in business.

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 amount is then not sufficient to pay theestimated present value benefits obligation, then the Company will be requiredto contribute the estimated shortfall amount to the VEBA fund. It is notpossible to predict at this time whether a shortfall in the VEBA fund wouldexist after a period of five years and, if so, what the Company’s contributionrequirement for a shortfall amount would be in this circumstance. A requirementto fund a significant shortfall in the VEBA fund could result in a decrease inthe value of 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 activitiesand projects. These factors could limit the nature of the business activitiesin which we can engage, which may adversely impact our cash flow and operatingresults and result in a decrease in the 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 cash needs exceed our current estimates, wemay not be able to obtain additional capital to meet those needs on favorableterms, or at all. In particular, due to the reorganization history of OldKaiser and current financial markets, additional capital may not be availableto us. An inability to gain access to additional capital could also limit ourability to undertake new activities. Ultimately, an inability to meet ourexisting obligations or to undertake new activities could adversely impact ourcash flow and operating results. A decrease in our cash flows andoperating results could result in a decrease in the value of our common stock.

19

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*We mayhave to draw down existing cash balances to fund current 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. This draw down in cash balances could result in adecrease in the value of our common stock.

**ITEM 4. SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

At the 2005 Annual Meeting of Shareholders held on March 2,2006, the only matter up for a vote was the election of directors.

1.             Electionfor Directors

The following individuals were elected to a one-yearterm expiring at the 2006 Annual Meeting of Shareholders, and the total numberof votes cast for and withheld for each were as follows:

|                              | ** ** | **For**   | ** ** | **Withheld(*)** | ** ** | **Total** | ** ** |
|------------------------------|------------|-----------|------------|-----------------|------------|-----------|------------|
| Jon B. Bennett               |       | 1,595,355 |       | 11,961          |       | 1,607,316 |       |
| Douglas W. McMinn            |       | 1,538,264 |       | 69,052          |       | 1,607,316 |       |
| Mark S. Tennenbaum           |       | 1,595,354 |       | 11,962          |       | 1,607,316 |       |
| Frank  E. Williams, Jr. |       | 1,595,345 |       | 11,971          |       | 1,607,316 |       |

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(*)            “Votes Withheld” means that the shareholdermarked the box on his/her proxy card labeled “withheld.”  This is equivalent to a “No” for all fournominees. This vote total includes situations in  which the shareholder wrote in the name ofthe director or directors he/she did not want to vote for.

**ITEM 6. EXHIBITS**

**Exhibits**
| 2      |   | Second Amended Plan of Reorganization (Incorporated  by reference to Exhibit 2 to Current Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 3.1    |   | Certificate of Incorporation of Kaiser Group  Holdings, Inc. (Incorporated by reference to Exhibit 3(i) to Current Report  on Form 8-K (Registrant No. 1-12248) filed with the Commission on December  14, 2000)                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 3.2    |   | By-laws of Kaiser Group Holdings, Inc. (Incorporated  by reference to Exhibit 3(ii) to Current Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 4      |   | Form of Put Agreement relating to preferred stock of  Kaiser Group Holdings, Inc. (Incorporated by reference to Exhibit 4 to  Current Report on Form 8-K (Registrant No. 1-12248) filed with the Commission  on December 14, 2000)                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.1   |   | Kaiser Group International, Inc. Employee Stock  Ownership Plan (as amended and restated as of January 1, 1996) (Incorporated  by reference to Exhibit No. 10(b) to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on April 17, 2000)                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.2   |   | Amendment No. 1 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, effective January 1, 1998 (Incorporated by  reference to Exhibit No. 10(b)(1) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.3   |   | Amendment No. 2 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, effective January 1, 1996 (Incorporated by  reference to Exhibit No. 10(b)(2) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.4   |   | Amendment No. 3 to Kaiser Group International, Inc.  Employee Stock Ownership Plan, dated April 19, 1999 (Incorporated by  reference to Exhibit No. 10(b) (3) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.5   |   | Amendment No. 4 to Kaiser Group International, Inc.  Employee Stock Ownership Plan dated June 25, 1999 (Incorporated by reference  to Exhibit No. 10(b)(4) to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on April 17, 2000)                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.6   |   | Trust Agreement with Vanguard Fiduciary Trust  Company, dated as of August 31, 1995, in connection with the ICF Kaiser  International, Inc. Employee Stock Ownership Plan (Incorporated by reference  to Exhibit No. 10(c) to Registration Statement on Form S-1 (Registrant No.  33-64655) filed with the Commission on November 30, 1995) |
|   |   |                                                                                                                                                                                                                                                                                                                                        |

20

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| 10.7   |   | ICF Kaiser International, Inc. Retirement Plan (as  amended and restated as of March 1, 1993, and further amended with respect to  name change only as of June 26, 1993) (Incorporated by reference to Exhibit  No. 10(d) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on October 15, 1993) |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.8   |   | Amendment No. 1 to ICF Kaiser International, Inc.  Retirement Plan, dated April 24, 1995 (Incorporated by reference to Exhibit  No. 10(d)(1) to Annual Report on Form 10-K (Registrant No. 1- 12248) filed  with the Commission on May 23, 1995)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.9   |   | Amendment No. 2 to ICF Kaiser International, Inc.  Retirement Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(d)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996)         |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.10  |   | Amendment No. 3 to ICF Kaiser International, Inc.  Retirement Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(d)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.11  |   | Amendment No. 4 to ICF Kaiser International, Inc.  Retirement Plan, dated April 19, 1999 (Incorporated by reference to Exhibit  No. 10(d)(4) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.12  |   | Amendment No. 5 to ICF Kaiser International, Inc.  Retirement Plan, dated June 25, 1999 (Incorporated by reference to Exhibit  No. 10(d)(5) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.13  |   | Amendment No. 6 to ICF Kaiser International, Inc.  Retirement Plan, dated August 30, 1999 (Incorporated by reference to Exhibit  No. 10(d)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.14  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Retirement Plan, dated April 13, 2000 (Incorporated by reference to Exhibit  10(d)(7) on Form 8-K (Registrant No. 1-12248) filed with the Commission on  May 2, 2000)                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.15  |   | Amendment No. 8 to ICF Kaiser International, Inc.  Retirement Plan, dated June 8, 2000 (Incorporated by reference to Exhibit  10(d)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on September 6, 2000)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.16  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Retirement Plan, dated June 19, 2003 (Incorporated by reference to Exhibit  10(c)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on August 14, 2003)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.17  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Retirement Plan, dated March 17, 2004 (Incorporated by reference to Exhibit  10(c)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on May 24, 2004)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |

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| 10.18  |   | Trust Agreement with Vanguard Fiduciary Trust  Company, dated as of August 31, 1995, in connection with the ICF Kaiser  International, Inc. Retirement Plan (Incorporated by reference to Exhibit No.  10(e) to Registration Statement on Form S-1 (Registrant No. 33-64655) filed  with the Commission on November 30, 1995)           |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.19  |   | ICF Kaiser International, Inc. Section 401(k) Plan  (as amended and restated as of March 1, 1993, and further amended with  respect to name change only as of June 26, 1993) (Incorporated by reference  to Exhibit No. 10(f) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on October 15, 1993) |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.20  |   | Amendment No. 1 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 24, 1995 (Incorporated by reference to  Exhibit No. 10(p)(1) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on May 23, 1995)                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.21  |   | Amendment No. 2 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(p)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996)         |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.22  |   | Amendment No. 3 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(q)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.23  |   | Amendment No. 4 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 8, 1999 (Incorporated by reference to  Exhibit No. 10(k)(4) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on April 17, 2000)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.24  |   | Amendment No. 5 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated June 25, 1999 (Incorporated by reference to  Exhibit No. 10(k)(5) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on April 17, 2000)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.25  |   | Amendment No. 6 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 13, 2000 (Incorporated by reference to  Exhibit 10(k)(6) on Form 8-K (Registrant No. 1-12248) filed with the  Commission on May 2, 2000)                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.26  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 1, 2001 (Incorporated by reference to  Exhibit No. 10(m)(7) to Annual Report on Form 10-K (Registrant No. 1-2248)  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 to  Exhibit 10(e)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.28  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated June 19, 2003 (Incorporated by reference to  Exhibit 10(e)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |

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| 10.29  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated March 17, 2004 (Incorporated by reference to  Exhibit 10(e)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on May 24, 2004)                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.30  |   | Amendment No. 11 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated November 11, 2004 (Incorporated by reference to  Exhibit 10(e)(11) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on November 15, 2004)                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.31  |   | Amendment No. 12 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 12, 2005 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-2248) filed  with the Commission on March 28, 2006)                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.32  |   | Amendment No. 13 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 30, 2005 (Incorporated by reference to  Exhibit 10.32 to Annual Report on Form 10-K (Registrant No. 1-2248) filed with  the Commission on March 28, 2006)                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.33  |   | Amendment No. 14 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 18, 2006 (Incorporated by reference to  Exhibit 10.33 to Annual Report on Form 10-K (Registrant No. 1-2248) filed  with the Commission on March 28, 2006)                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.34  |   | Amendment No. 1 to Kaiser Analytical Management  Services, Inc. Section 401(k) Plan, dated February 15, 2006 (Incorporated by  reference to Exhibit 10.34 to Annual Report on Form 10-K (Registrant No.  1-2248) filed with the Commission on March 28, 2006)                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.35  |   | Trust Agreement with Vanguard Fiduciary Trust  Company, dated as of March 1, 1989, in connection with the ICF Kaiser  International, Inc. Section 401(k) Plan (Incorporated by reference to Exhibit  No. 28(b) to Registration Statement on Form S-8 (Registrant No. 33-51460)  filed with the Commission on August 31, 1992)               |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.36  |   | Contract between Kaiser-Hill Company, LLC and the  U.S. Department of Energy dated January 24, 2000 (Incorporated by reference  to Exhibit No. 10(o) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on April 17, 2000)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.37  |   | Modification M116 to Contract between Kaiser-Hill  Company, LLC and the U.S. Department of Energy, effective March 24, 2004  (Incorporated by reference to Exhibit 10(g)(1) to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on March 30, 2004)                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.38  |   | Assignment of Membership Interest in Hunters Branch  Leasing, LLC by and between Kaiser Holdings Unlimited, Inc. (Assignor) and  Nutley Partners, LC (Assignee), dated January 1, 2001 (Incorporated by  reference to Exhibit No. 10(i) to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on April 2, 2001) |
|   |   |                                                                                                                                                                                                                                                                                                                                        |

23

----

 
| 10.39  |   | Subcontract between The S.M. Stoller Corporation and  Kaiser Group Holdings, Inc., dated June 30, 2004 (Incorporated by reference  to Exhibit No. 10(i) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on August 13, 2004)                                                    |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                |
| 10.40  |   | Kaiser Group Holdings, Inc. 2002 Equity Compensation  Plan, as amended (Incorporated by reference to Exhibit No. 10 to Registration  Statement on Form S-8 (Registration No. 333-107912) filed with the Commission  on August 13, 2003)                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                |
| 10.41  |   | Amended and Restated Employment Agreement with John  T. Grigsby, Jr., President and Chief Executive Officer, effective as of  December 18, 2000 (Incorporated by reference to Exhibit No. 10(m) to  Registration Statement on Form S-4 (Registrant No. 333-100640) filed with the  Commission on October 18, 2002)* |
|   |   |                                                                                                                                                                                                                                                                                                                |
| 10.42  |   | Transition Agreement between Kaiser Group Holdings,  Inc. and John T. Grigsby, Jr. effective as of August 31, 2004 (Incorporated  by reference to Exhibit 99 to Current Report on Form 8-K (Registration No.  1-12248) filed with the Commission on September 1, 2004)*                                             |
|   |   |                                                                                                                                                                                                                                                                                                                |
| 10.43  |   | Separation Agreement between Kaiser Group Holdings,  Inc. and Marian P. Hamlett effective February 8, 2006 (Incorporated by  reference to Exhibit 10.1 to Current Report on Form 8-K (Registration No.  1-2248) filed with the Commission on February 9, 2006.*                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                |
| 10.44  |   | Summary of 2006 Annual Executive Officer  Compensation (Incorporated by reference to Exhibit 10.44 to Annual Report on  Form 10-K (Registrant No. 1-2248) filed with the Commission on March 28,  2006)*                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                |
| 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 **                                                                                                                                                                                                                                    |

----

*                    Designatesmanagement or compensatory plans or arrangements.

**             Filedherewith.

24

----

**SIGNATURES**

Pursuant to the requirements of the Securities ExchangeAct of 1934, the registrant has duly caused this report on Form 10-Qto be signed on its behalf by the undersigned thereunto duly authorized.
| ** **              | **KAISER GROUP HOLDINGS, INC.**                |
|-------------------------|------------------------------------------------|
|                    | (Registrant)                                   |
| Date: May 12, 2006 |                                           |
|                    |                                           |
|                    |                                           |
|                    | /s/ Nicholas Burakow                           |
|                    | Nicholas Burakow, Ph.D.,                       |
|                    | Executive Vice President and Chief Financial   |
|                    | Officer (Duly authorized officer and principal |
|                    | financial officer)                             |

25

----

**EXHIBIT INDEX**
| Exhibit   No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                             |
|---------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2             |       | Second Amended Plan of  Reorganization (Incorporated by reference to Exhibit 2 to Current  Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                     |
| ** **    | ** ** | ** **                                                                                                                                                                                                                                                                                                                                  |
| 3.1           |       | Certificate of Incorporation of Kaiser Group  Holdings, Inc. (Incorporated by reference to Exhibit 3(i) to Current Report  on Form 8-K (Registrant No. 1-12248) filed with the Commission on December  14, 2000)                                                                                                                            |
|          |       |                                                                                                                                                                                                                                                                                                                                        |
| 3.2           |       | By-laws of Kaiser Group Holdings, Inc. (Incorporated  by reference to Exhibit 3(ii) to Current Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                 |
| ** **    | ** ** | ** **                                                                                                                                                                                                                                                                                                                                  |
| 4             |       | Form of Put Agreement relating  to preferred stock of Kaiser Group Holdings, Inc. (Incorporated by reference  to Exhibit 4 to Current Report on Form 8-K (Registrant No. 1-12248) filed  with the Commission on December 14, 2000)                                                                                                          |
|          |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.1          |       | Kaiser Group International,  Inc. Employee Stock Ownership Plan (as amended and restated as of January 1,  1996) (Incorporated by reference to Exhibit No. 10(b) to Annual Report on  Form 10-K (Registrant No. 1-12248) filed with the Commission on April 17,  2000)                                                                      |
|          |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.2          |       | Amendment No. 1 to Kaiser  Group International, Inc. Employee Stock Ownership Plan, effective January 1,  1998 (Incorporated by reference to Exhibit No. 10(b)(1) to Annual Report on  Form 10-K (Registrant No. 1-12248) filed with the Commission on April 17,  2000)                                                                     |
|          |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.3          |       | Amendment No. 2 to  Kaiser Group International, Inc. Employee Stock Ownership Plan, effective  January 1, 1996 (Incorporated by  reference to Exhibit No. 10(b)(2) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                     |
|          |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.4          |       | Amendment No. 3 to Kaiser  Group International, Inc. Employee Stock Ownership Plan, dated April 19, 1999  (Incorporated by reference to Exhibit No. 10(b) (3) to Annual Report on Form  10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)                                                                          |
|          |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.5          |       | Amendment No. 4 to Kaiser  Group International, Inc. Employee Stock Ownership Plan dated June 25, 1999  (Incorporated by reference to Exhibit No. 10(b)(4) to Annual Report on Form  10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)                                                                             |
|          |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.6          |       | Trust Agreement with Vanguard  Fiduciary Trust Company, dated as of August 31, 1995, in connection with the  ICF Kaiser International, Inc. Employee Stock Ownership Plan (Incorporated by  reference to Exhibit No. 10(c) to Registration Statement on Form S-1  (Registrant No. 33-64655) filed with the Commission on November 30, 1995) |
|          |       |                                                                                                                                                                                                                                                                                                                                        |

26

----

 
| 10.7   |   | ICF Kaiser International, Inc. Retirement Plan (as  amended and restated as of March 1, 1993, and further amended with respect to  name change only as of June 26, 1993) (Incorporated by reference to Exhibit  No. 10(d) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on October 15, 1993) |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.8   |   | Amendment No. 1 to ICF Kaiser International, Inc.  Retirement Plan, dated April 24, 1995 (Incorporated by reference to Exhibit  No. 10(d)(1) to Annual Report on Form 10-K (Registrant No. 1- 12248) filed  with the Commission on May 23, 1995)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.9   |   | Amendment No. 2 to ICF  Kaiser International, Inc. Retirement Plan, dated December 15, 1995 (Incorporated by reference to Exhibit No.  10(d)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the  transition period from March 1, 1995 to December 31, 1995 filed with the  Commission on March 29, 1996)         |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.10  |   | Amendment No. 3 to ICF Kaiser International, Inc.  Retirement Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(d)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.11  |   | Amendment No. 4 to ICF  Kaiser International, Inc. Retirement Plan, dated April 19, 1999 (Incorporated by reference to Exhibit No. 10(d)(4)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.12  |   | Amendment No. 5 to ICF  Kaiser International, Inc. Retirement Plan, dated June 25, 1999 (Incorporated by reference to Exhibit No. 10(d)(5)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.13  |   | Amendment No. 6 to ICF  Kaiser International, Inc. Retirement Plan, dated August 30, 1999 (Incorporated by reference to Exhibit No.  10(d)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with  the Commission on April 17, 2000)                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.14  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Retirement Plan, dated April 13, 2000 (Incorporated by reference to Exhibit  10(d)(7) on Form 8-K (Registrant No. 1-12248) filed with the Commission on  May 2, 2000)                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.15  |   | Amendment No. 8 to ICF Kaiser International, Inc.  Retirement Plan, dated June 8, 2000 (Incorporated by reference to Exhibit  10(d)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on September 6, 2000)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.16  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Retirement Plan, dated June 19, 2003 (Incorporated by reference to Exhibit  10(c)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on August 14, 2003)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |
| 10.17  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Retirement Plan, dated March 17, 2004 (Incorporated by reference to Exhibit  10(c)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on May 24, 2004)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                |

27

----

 
| 10.18  |   | Trust Agreement with Vanguard  Fiduciary Trust Company, dated as of August 31, 1995, in connection with the  ICF Kaiser International, Inc. Retirement Plan (Incorporated by reference to  Exhibit No. 10(e) to Registration Statement on Form S-1 (Registrant No.  33-64655) filed with the Commission on November 30, 1995)           |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.19  |   | ICF Kaiser International, Inc. Section 401(k) Plan  (as amended and restated as of March 1, 1993, and further amended with  respect to name change only as of June 26, 1993) (Incorporated by reference  to Exhibit No. 10(f) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on October 15, 1993) |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.20  |   | Amendment No. 1 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(p)(1)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on May 23, 1995)                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.21  |   | Amendment No. 2 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(p)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996)         |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.22  |   | Amendment No. 3 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated December 13, 1996 (Incorporated by reference to Exhibit No.  10(q)(3) to Registration Statement on Form S-1 (Registrant No. 333-19519)  filed with the Commission on January 10, 1997)                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.23  |   | Amendment No. 4 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated April 8, 1999 (Incorporated by reference to Exhibit No. 10(k)(4)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.24  |   | Amendment No. 5 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated June 25, 1999 (Incorporated by reference to Exhibit No. 10(k)(5)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.25  |   | Amendment No. 6 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 13, 2000 (Incorporated by reference to  Exhibit 10(k)(6) on Form 8-K (Registrant No. 1-12248) filed with the  Commission on May 2, 2000)                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.26  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 1, 2001 (Incorporated by reference to  Exhibit No. 10(m)(7) to Annual Report on Form 10-K (Registrant No. 1-2248)  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 to  Exhibit 10(e)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| 10.28  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated June 19, 2003 (Incorporated by reference to  Exhibit 10(e)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |

28

----

 
| 10.29  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated March 17, 2004 (Incorporated by reference to  Exhibit 10(e)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on May 24, 2004)                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.30  |   | Amendment No. 11 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated November 11, 2004 (Incorporated by reference to  Exhibit 10(e)(11) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on November 15, 2004)                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.31  |   | Amendment No. 12 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 12, 2005 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-2248) filed  with the Commission on March 28, 2006)                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.32  |   | Amendment No. 13 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 30, 2005 (Incorporated by reference to  Exhibit 10.32 to Annual Report on Form 10-K (Registrant No. 1-2248) filed  with the Commission on March 28, 2006)                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.33  |   | Amendment No. 14 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 18, 2006 (Incorporated by reference to  Exhibit 10.33 to Annual Report on Form 10-K (Registrant No. 1-2248) filed  with the Commission on March 28, 2006)                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.34  |   | Amendment No. 1 to Kaiser Analytical Management  Services, Inc. Section 401(k) Plan, dated February 15, 2006 (Incorporated by  reference to Exhibit 10.34 to Annual Report on Form 10-K (Registrant No.  1-2248) filed with the Commission on March 28, 2006)                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.35  |   | Trust Agreement with Vanguard  Fiduciary Trust Company, dated as of March 1, 1989, in connection with the  ICF Kaiser International, Inc. Section 401(k) Plan (Incorporated by reference  to Exhibit No. 28(b) to Registration Statement on Form S-8 (Registrant No.  33-51460) filed with the Commission on August 31, 1992)               |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.36  |   | Contract between Kaiser-Hill  Company, LLC and the U.S. Department of Energy dated January 24, 2000  (Incorporated by reference to Exhibit No. 10(o) to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on April 17, 2000)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.37  |   | Modification M116 to Contract between Kaiser-Hill Company, LLC and the U.S. Department of  Energy, effective March 24, 2004 (Incorporated by reference to Exhibit  10(g)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with  the Commission on March 30, 2004)                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.38  |   | Assignment of Membership Interest in Hunters Branch  Leasing, LLC by and between Kaiser Holdings Unlimited, Inc. (Assignor) and Nutley Partners, LC (Assignee),  dated January 1, 2001 (Incorporated by reference to Exhibit No. 10(i)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 2, 2001) |
|   |   |                                                                                                                                                                                                                                                                                                                                        |

29

----

 
| 10.39      |       | Subcontract between The S.M.  Stoller Corporation and Kaiser Group Holdings, Inc., dated June 30, 2004 (Incorporated  by reference to Exhibit No. 10(i) to Quarterly Report on Form 10-Q  (Registrant No. 1-12248) filed with the Commission on August 13, 2004)                                                    |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                                                |
| 10.40      |       | Kaiser Group Holdings, Inc. 2002 Equity Compensation  Plan, as amended (Incorporated by reference to Exhibit No. 10 to Registration  Statement on Form S-8 (Registration No. 333-107912) filed with the Commission  on August 13, 2003)                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                |
| 10.41      |       | Amended and Restated Employment Agreement with John  T. Grigsby, Jr., President and Chief Executive Officer, effective as of  December 18, 2000 (Incorporated by reference to Exhibit No. 10(m) to  Registration Statement on Form S-4 (Registrant No. 333-100640) filed with the  Commission on October 18, 2002)* |
|       |       |                                                                                                                                                                                                                                                                                                                |
| 10.42      |       | Transition Agreement between Kaiser Group Holdings,  Inc. and John T. Grigsby, Jr. effective as of August 31, 2004 (Incorporated  by reference to Exhibit 99 to Current Report on Form 8-K (Registration No.  1-12248) filed with the Commission on September 1, 2004)*                                             |
|       |       |                                                                                                                                                                                                                                                                                                                |
| 10.43      |       | Separation Agreement between Kaiser Group Holdings,  Inc. and Marian P. Hamlett effective February 8, 2006 (Incorporated by  reference to Exhibit 10.1 to Current Report on Form 8-K (Registration No.  1-2248) filed with the Commission on February 9, 2006.*                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                |
| 10.44      |       | Summary of 2006 Annual Executive Officer Compensation  (Incorporated by reference to Exhibit 10.44 to Annual Report on Form 10-K  (Registrant No. 1-2248) filed with the Commission on March 28, 2006)*                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                |
| 31.1       |       | Certification of Chief  Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities  Exchange Act of 1934, as amended **                                                                                                                                                                          |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                          |
| 31.2       |       | Certification of Chief  Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities  Exchange Act of 1934, as amended **                                                                                                                                                                          |
|       |       |                                                                                                                                                                                                                                                                                                                |
| 32.1       |       | Certification of Chief  Executive Officer, pursuant to 18 U.S.C. Section 1350 **                                                                                                                                                                                                                                    |
|       |       |                                                                                                                                                                                                                                                                                                                |
| 32.2       |       | Certification of Chief  Financial Officer, pursuant to 18 U.S.C. Section 1350 **                                                                                                                                                                                                                                    |

----

*                    Designates management or compensatory plans orarrangements.

**             Filed herewith.

30

----