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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q/A

Amendment No. 1



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



For the Quarter Ended September 30, 2001



Commission File Number 0-18858



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KAISER VENTURES INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 94-0594733                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



3633 East Inland
Empire Blvd., Suite 480

Ontario, California 91764

(Address of principal executive offices and zip code)



Registrants telephone number, including area code: (909) 483-8500



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



Indicate by check mark whether registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No ̈



On November 8, 2001, the Company had 6,567,629 shares of Common Stock, $.03 par value, outstanding (including 136,919 shares deemed
outstanding and held in reserve by the Company for issuance to the former general unsecured creditors of Kaiser Steel Corporation pursuant to its Plan of Reorganization).



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KAISER VENTURES INC. AND SUBSIDIARIES



EXPLANATORY NOTE



Pursuant to this Report on Form 10-Q/A, Kaiser Ventures LLC, as the successor to Kaiser Ventures Inc. (the Company), amends Part I of the
Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, as filed by the Company on November 13, 2001 (the Original 10-Q) to reflect the changes described below.



Effective July 1, 2001, the Company changed its method of accounting for
premium costs and claims under a twelve-year insurance policy purchased June 30, 2001, to amortize the premium costs over the term of the underlying prospective insurance policy and record insurance recoveries on known claims liabilities when
recoveries are estimable and claims liabilities are accepted by the insurance carrier. Previously, the Company had capitalized the cost of the policy as prepaid insurance in other assets and reduced the prepaid insurance as claims were paid and
insurance recoveries were collected.



The restatement for the
three and nine months ended September 30, 2001, results in a net decrease in resource operating costs of $1,420,000, which reflects an increase in resource operating costs of $80,000 for amortization of the insurance policy premium and a decrease in
resource operating costs of $1,500,000 for the recording of estimated insurance recoveries. This restatement results in an increase in net income of $1,420,000 and basic earnings per share of $0.22 for the three and nine months ended September 30,
2001. Diluted earnings per share increased by $0.22 and $0.21, respectively, for the three and nine months ended September 30, 2001.



See Note 2 to the Consolidated Financial Statements, Accounting Change and Restatement of Consolidated Financial Statements, for more detail.
Conforming changes reflecting the foregoing are made in Part I  Item 1. FINANCIAL STATEMENTS (and footnotes thereto) and Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.



In addition, the Company made non-substantive edits to the Original 10-Q.



Except for the foregoing, no other information included in the
Original 10-Q is amended in this Form 10-Q/A. All information in this Quarterly Report on Form 10-Q/A is as of September 30, 2001 or November 13, 2001, the date of the filing of the Original 10-Q, as required, and does not reflect, unless otherwise
explicitly noted, any subsequent information or events occurring after such dates, nor does it otherwise purport to modify or update the disclosure contained in the Original 10-Q.



(REMAINDER OF THIS PAGE INTENTIONALLY
LEFT BLANK)



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TABLE OF CONTENTS TO FORM 10-Q/A



|           |  |                            |  |                                                                                       |  |     
|---------- |  | -------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  | PAGE                      
|PART I     |  |                           
|           |  |                           
|           |  | FORWARD-LOOKING STATEMENTS |  | 1                                                                                    
|           |  |                            | 
|           |  | Item 1.                    |  | FINANCIAL STATEMENTS                                                                  |  | 1/15
|           |  |                            | 
|           |  | Item 2.                    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 2   
|           |  |                           
|           |  | FINANCIAL STATEMENTS       |  |                                                                                      
|           |  |                            | 
|           |  |                            |  | CONSOLIDATED BALANCE SHEETS                                                           |  | 16  
|           |  |                            | 
|           |  |                            |  | CONSOLIDATED STATEMENTS OF OPERATIONS                                                 |  | 18  
|           |  |                            | 
|           |  |                            |  | CONSOLIDATED STATEMENTS OF CASH FLOWS                                                 |  | 19  
|           |  |                            | 
|           |  |                            |  | CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY                             |  | 20  
|           |  |                            | 
|           |  |                            |  | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                            |  | 21  
|           | 
|PART II    |  |                           
|           |  |                            | 
|           |  | Item 1.                    |  | LEGAL PROCEEDINGS                                                                     |  | 25  
|           |  |                            | 
|           |  | Item 2.                    |  | CHANGES IN SECURITIES                                                                 |  | 26  
|           |  |                            | 
|           |  | Item 3.                    |  | DEFAULTS UPON SENIOR SECURITIES                                                       |  | 26  
|           |  |                            | 
|           |  | Item 4.                    |  | SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS                                     |  | 26  
|           |  |                            | 
|           |  | Item 5.                    |  | OTHER INFORMATION                                                                     |  | 26  
|           |  |                            | 
|           |  | Item 6.                    |  | EXHIBITS AND REPORTS ON FORM 8-K                                                      |  | 26  
|           | 
|SIGNATURES |  | 27                        



AVAILABILITY OF
PREVIOUS REPORTS AND ADDITIONAL INFORMATION



The Company
will furnish, without charge to each stockholder, upon written request of any such person, a copy of the Companys annual report on Form 10-K for the year ended December 31, 2000, as filed with the Securities and Exchange Commission, including
the financial statement schedules thereto. Those requesting a copy of the 10-K Report that are not currently stockholders of the Company may also obtain a copy directly from the Company. Requests for a copy of the 10-K Report should be directed to
Executive Vice President-Administration, at 3633 East Inland Empire Boulevard, Suite 480, Ontario, California 91764.



For background information and a complete understanding of material developments concerning the Company, readers are encouraged to read this Form
10-Q/A Report in conjunction with the Companys 10-K Report for the period ended December 31, 2000, and the Companys 10-Q Reports for the periods ended March 31, 2001, and June 30, 2001, and our Proxy and Registration Statement mailed on
October 23, 2001, to stockholders of record as of October 8, 2001, since the information contained herein is often an update of the information contained in such reports. The Companys 10-K Report, 10-Q Reports and current Proxy and
Registration Statements are available for free at www.kaiserventures.com and at the SECs website at http://www.sec.com.



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PART I



FORWARD-LOOKING STATEMENTS



Except for the historical statements and discussions contained herein, statements contained in this 10-Q/A Report constitute forward-looking
statements. Any press release, 10-K, Annual Report to Stockholders, 10-Q or 8-K Report of the Company and any amendments thereof or our website, may include forward-looking statements. In addition, other written or oral statements, which
constitute forward-looking statements, have been made and may be made by us in the future. Forward-looking statements include, without limitation, any statements that forecast, indicate, anticipate or imply future results, performance, events or
achievements. When used or incorporated by reference in this 10-Q/A Report or in other written or oral statements, the words anticipate, believe, estimate, expect, project and similar
expressions are intended to identify forward-looking statements. You should not put undue reliance on forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions. We believe that our assumptions are
reasonable. Nonetheless, it is likely that at least some of our assumptions will not come true. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated, expected or projected. For example, actual results could materially differ from those projected as a result of factors such as, but not limited to, general economic conditions in the United States and Southern
California, including the impacts directly or indirectly resulting from the September 11, 2001, terrorist attacks; the impact of federal, state, and local laws and regulations on the Companys activities; the failure of the bankruptcy discharge
granted to us to address claims and litigation that relate to the pre-bankruptcy activities of Kaiser Steel Corporation, including asbestos claims; the failure, in whole or in part, of our business plans to, develop, sell or otherwise deal with any
major asset of the Company; the failure for any reason of CCG Ontario, LLC to honor the terms of its agreements with us in connection with the sale of the Mill Site real estate to CCG Ontario, LLC, including its assumption of liability and
responsibility for certain environmental obligations and duties associated with the Mill Site; the success of any material litigation such as legal challenges to the completed federal land exchange for the proposed Eagle Mountain landfill project;
insurance coverage disputes; the risks and contingencies associated with the planned sale of the Eagle Mountain project to the Los Angeles County Sanitation District; and/or the challenge, reduction or loss of any claimed tax benefits. The risks
included herein are not exhaustive. Other sections of this 10-Q/A Report include additional factors that could adversely impact the Company and its projects. In light of the risks and uncertainties, readers are cautioned not to put undue reliance on
forward-looking statements as a prediction of future actual results. We disclaim any intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise



Item 1. FINANCIAL STATEMENTS



The
Financial Statements are located at the end of Item 2., beginning on Page 15 of this Report and are incorporated herein by this reference.



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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



BUSINESS UPDATE



General



Kaiser Ventures Inc., including its wholly-owned subsidiaries, unless otherwise provided herein (collectively, Kaiser or the Company) has historically operated as an asset development company
based in Southern California. The Company is the reorganized successor to several of the assets of Kaiser Steel Corporation which was an integrated steel manufacturer that filed for bankruptcy in 1987. The Companys current emphasis is on its
remaining principal assets: (i) an 80% interest in Mine Reclamation, LLC (MRC), the developer of the Eagle Mountain Landfill Project (the Landfill Project), with the Landfill Project under contract to be sold to Los Angeles
County Sanitation District No. 2 (the District) for $41 million; (ii) the approximately 9,144 acre idle iron ore mine in the California desert (the Eagle Mountain Site), which includes the associated 1,100 acre town of Eagle
Mountain (Eagle Mountain Townsite) and approximately 4,600 acres of land leased to MRC for the Landfill Project that is being sold to the District; and (iii) a 50% joint venture interest in the West Valley MRF (West Valley
MRF or WVMRF), a transfer station and recycling facility located on land acquired from the Company. In addition, the Company has a substantial cash position as a result of the sale of its interest in Fontana Union Water Company
(FUWC) on March 6, 2001, for $87.5 million. As of December 31, 2000, the Company had approximately $43 million in regular federal net operating loss (NOLs) carryforwards, however, due to the Companys sale of its FUWC
stock in March 2001, it is anticipated that all of the NOLs existing as of December 31, 2000, will be utilized in 2001.



Future Plans and Conversion Proposal



Since 1988, the Company has been developing the assets it received out of the Kaiser Steel Corporation bankruptcy and then selling them at such time as
the Company believes that it can achieve maximum stockholder value for a particular project or asset. During 2000, the Company: (i) sold the balance of all of the Companys real estate at the former Kaiser Steel Corporation mill site near
Fontana, California, except for an approximate five acre parcel; (ii) entered into an agreement to sell the Landfill Project to the District, with the Company and the District working toward a closing on such transaction; (iii) entered into an
agreement for the sale of the Companys interest in FUWC to Cucamonga County Water District (Cucamonga), which transaction was completed in March 6, 2001; and (iv) paid a $2.00 cash distribution to its stockholders.



With the sale of the assets as outlined above, the Companys management
reevaluated the Companys future strategy and business plan, as well as the timing and alternative means of distributing cash to its stockholders. In July 2001, the Companys Board of Directors approved a plan that would convert the
Company into a newly-formed limited liability company pursuant to a merger between the Company and Kaiser Ventures LLC (Kaiser LLC). If the conversion proposal (the Conversion Proposal) is approved by the Companys
stockholders, the Companys stockholders would receive $10.00 in cash plus one Class A membership unit (a Class A Unit) in Kaiser LLC for each share of common stock in the Company. By converting to a limited liability company, the
Company believes it will be able to recognize a significant tax loss from MRC in 2001, distribute $10.00/share in cash to stockholders on a tax advantaged basis, avoid the double taxation generally imposed on future income and deal more
expeditiously with the Companys remaining assets. If



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effected, immediately after the conversion, the holders of the Class A Units (on a fully diluted basis) would be the same as the holders of
the common stock in the Company. The assets and liabilities of Kaiser LLC would be the same as those of the Company, except that the stockholders of the Company would receive $10.00/share in cash, thereby reducing the cash position of Kaiser LLC. On
October 23, 2001, the Company mailed the Proxy and Registration statement to its stockholders of record as of October 8, 2001 for its annual stockholders meeting to be held on November 28, 2001. At that meeting, the Companys stockholders
will consider and vote upon several matters, including the Conversion Proposal. This summary of the Conversion Proposal does not provide all of the important information with respect to the Conversion Proposal. The Proxy and Registration Statement
contain important information about the Conversion Proposal and the Companys stockholders should carefully review the proxy statement and the documents to which it refers before voting with respect to the Conversion Proposal. The proxy
statement and registration statement registering the Class A Units under the Securities Act of 1933, and related exhibits are available for free at the SECs website http://www.sec.gov or at www.kaiserventures.com.



At its July 16thboard meeting, the Companys Board of Directors also approved a stock repurchase program whereby the Company may, from time to time, purchase its stock
in the open market. A committee appointed by the Board may implement this plan in its discretion. As of the date of this report, the Company has made no open market stock purchases.



Investment in Fontana Union Water Company



Effective March 6, 2001, after obtaining stockholder approval, the Company completed the sale of its approximately 53.71% ownership interest in the
capital stock of FUWC, a mutual water company, to Cucamonga for $87.5 million. In addition, the Company received approximately $2.5 million in payments under its take-or-pay lease of its interest in FUWC to Cucamonga. With the sale of the FUWC
interest, the lease with Cucamonga was effectively terminated and the rate dispute litigation between the Company and Cucamonga was settled.



Additionally, in connection with the sale of the Companys ownership interest in FUWC, the Company terminated its $30 million credit facility with
Union Bank, which was secured by FUWC stock and the Cucamonga Lease.



The
Mill Site Property



The only remaining mill site property
owned by the Company is an approximate five acre parcel referred to as the Tar Pits Parcel. CCG Ontario, LLC purchased approximately 588 acres of the mill site property from the Company in August 2000 and, in that transaction, assumed substantially
all of the Companys environmental liabilities associated with the purchased property and certain other environmental liabilities and risks associated with the former Kaiser Steel Corporation mill site, including the Tar Pits Parcel.
Remediation of the Tar Pits Parcel is currently expected to commence in the fourth quarter of this year.



Lake Tamarisk



Lake
Tamarisk is an incorporated community located two miles northwest of Desert Center, California and approximately 8 miles from the Project. The Company, through a wholly owned subsidiary, owns 77 improved lots including one residential structure, and
a 240 acre parcel of unimproved land across the highway from the main entrance to Lake Tamarisk (the Lake Tamarisk). The Company is marketing this property for sale.



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Mining Properties



During the first quarter of 2001 the Company sold approximately 190 acres near Afton Canyon, California known as the Dunn Siding, the Silver Lake Mine
west of Baker, California, which is a small producing iron ore mine, and some mining claims known as the Bessemer and Morris Lode properties. In this sale transaction, the Company received a gross sales price of approximately $2 million, consisting
of approximately $726,000 paid in cash at closing and the balance represented by a secured promissory note from the purchaser payable over five years accruing interest at a rate of 8% per annum.



Waste Management



West Valley Materials Recovery Facility



The Company, through a wholly-owned subsidiary, and Burrtec Waste Industries, Inc., also through a wholly-owned subsidiary,
each own a fifty percent (50%) interest in West Valley MRF, LLC, a limited liability company that owns the West Valley MRF. A materials recovery facility or MRF sorts through source separated municipal solid waste to recover items that
may be sold into commercial markets such as paper, cardboard, glass and aluminum cans. Phase 1 of the West Valley MRF includes a 62,000 square foot building, sorting equipment, and related facilities for waste transfer and recycling services capable
of processing approximately 2,000 tons per day of non-hazardous commercial and municipal solid waste.



Given the level of demand for the services of the West Valley MRF, the Company and Burrtec decided in 2000 to expand the West Valley MRF. Construction of
Phase 2 of the West Valley MRF was completed in the second quarter and it is fully operational. Phase 2 expanded the processing capacity for waste transfer and recycling services of the West Valley MRF from approximately 2,000 tons per day to
approximately 3,500 tons per day. Phase 2 involved constructing an approximately 80,000 square foot addition to the existing facilities, the purchase and installation of certain related equipment, including rolling stock, and the rehabilitation and
relocation of certain existing equipment. The cost of the expansion was approximately $10 million.



Eagle Mountain Landfill Project



Background.In 1988, the Company entered into a 100-year lease agreement (the MRC Lease) with MRC. MRC is seeking to develop the Companys former iron ore mine near Eagle Mountain, California
into a large, regional rail-haul, municipal solid waste landfill. MRC currently has issued and outstanding Class A and Class B units. The Company currently owns 80% of the Class B units and 100% of the Class A units of MRC. In December 1999, the
Landfill Project received its last major permit necessary to construct and operate a rail haul landfill. The Landfill Project is permitted to receive a maximum of 20,000 tons per day of municipal solid waste for up to 88 years.



Sale of Landfill Project. Effective August 9, 2000, MRC, entered into
an agreement for the sale of the Eagle Mountain Landfill Project (the Landfill Project Sale Agreement) with the District. Under this agreement, the Landfill Project (which includes the Companys royalty payments under the MRC Lease)
would be sold for $41 million, with an initial closing currently scheduled to occur in the fourth quarter of 2001. However, payment of the purchase price will be delayed as described in more detail below. The sale of the Landfill Project is subject
to the results of the Districts due diligence and satisfaction of numerous contingencies. The contingencies include, but are not limited to, obtaining the transfer of the Landfill Projects permits to the District and obtaining all
necessary consents to the transaction. The Company agreed to vote its interest in MRC in favor of the sale of the Landfill Project to the District on its current terms.



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Upon closing, $39 million of the total purchase price will be deposited into an escrow account and will be released when
federal litigation challenging the completed federal land exchange is fully resolved, as reported in our previous filings with the SEC. Interest began to accrue on this portion of the purchase price on May 3, 2001, and will be paid out to MRC on a
quarterly basis beginning with a successful outcome of the federal litigation at the Federal District Court level. The remaining $2 million of the purchase price will also be placed into an escrow account upon closing and will be released upon the
later of (1) the release of the $39 million as described above, or (2) the permitting approvals of the Districts Puente Hills landfill for its remaining 10 years of capacity. Receipt of the purchase price, in whole or in part, if at all, is
expected to be delayed for a substantial period of time pending satisfactory resolution of these contingencies. Since the transaction has not closed and due to the risks associated with receipt of the ultimate purchase price, the Company has not
reflected the accrued interest in its financial statements.



The District has undertaken extensive due diligence on the Landfill Project and is waiting to receive several items, including final land and right-of-way surveys. In addition, the parties continue to negotiate the terms of various
ancillary agreements such as joint use agreements for access, utilities, and the Eagle Mountain railroad, are waiting to receive third party consents to the transfer of various assets, and are working on various title issues. With the sale of the
Landfill Project, the Company will continue to own more than 4,000 acres in the Eagle Mountain area, including the Eagle Mountain Townsite. As of the date of this 10-Q Report, the closing date is currently scheduled to occur in the fourth quarter of
2001. However, since closing has been delayed several times, it is likely that the closing will again be delayed for several months. Interest began to accrue on $39 million of the purchase price on May 3, 2001.



The foregoing summary of the Landfill Purchase Agreement is qualified in its
entirety by the Landfill Purchase Agreement filed as an exhibit to the Companys second quarter 2000 10-Q Report and by Exhibit 10.1 to this 10-Q/A Report.



Landfill Project Litigation.Currently, the only pending litigation involving the Landfill Project concerns two lawsuits filed in Federal
District Court located in Riverside County, both of which challenge the completed federal land exchange and requesting its reversal. There were no material developments in the third quarter with respect to this litigation.



Risks.As is discussed in this 10-Q/A Report and in more
detail in the Companys 2000 Form 10-K Report and Proxy and Registration Statement, there are numerous risks associated with MRC and the Landfill Project. There are also numerous risks and contingencies associated with the pending sale of the
Landfill Project to the District. There can be no assurance that the sale to the District will occur or that the current terms of the pending transaction will not be modified as a result of future discussions with the District, which may include the
timing of the receipt of the purchase price. In addition, there are litigation risks associated with the current federal land exchange litigation, including reversal of the completed land exchange which would materially and adversely affect
MRCs ability to complete the sale of the Landfill Project. The foregoing risks are discussed more fully in the Companys 10-K for 2000, its subsequent 10-Q Reports and its Proxy and Registration Statement. The Company urges you to read
these documents to obtain a complete understanding of the risks.



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OPERATING RESULTS



Primary Revenue Sources



Ongoing Operations



The Companys revenues from ongoing operations are generally derived from the development of the Companys long-term projects. Revenues from
water resources represent payments under the lease of the Companys interest in FUWC to Cucamonga. However, the lease with Cucamonga terminated effective March 6, 2001, with the sale of the Companys interest in FUWC to Cucamonga. Income
from equity method investments reflects the Companys share of income related to its investment in the West Valley MRF.



Interim Activities (net)



Revenues from interim activities are generated from various sources. Significant components of interim activities include water and waste water treatment
revenues, rentals under short-term tenant lease arrangements, royalty revenues from the sale of slag to outside contractors, royalty revenues from the sale of recyclable revert materials and other miscellaneous short-term activities at the Mill
Site; housing rental income, aggregate and rock sales and lease payments for the minimum security prison at the Eagle Mountain Townsite; royalty revenues from iron ore shipments from the Companys iron ore mine in California (the Silver
Lake Mine) rentals under short-term tenant lease arrangements, royalty revenues from the sale of slag to outside contractors, royalty revenues from the sale of recyclable revert materials and other miscellaneous short-term activities.
Slag is a natural byproduct of making steel from iron ore and is the rock-like waste that remains after the melting of the iron ores and the metals are separated from the ore. Due to the interim nature of these activities, the Company is
presenting these revenues net of their related expenses. No revenues and expenses associated with the Mill Site Property and only $39,000 of net revenues associated with the Silver Lake Mine were recorded during 2001 due to the closing of the sales
of these properties in 2000 and 2001, respectively.



Summary of Revenue
Sources



Due to the developmental nature of certain
Company projects and the Companys recognition of revenues from bankruptcy-related and other non-recurring items, historical period-to-period comparisons of total revenues may not be meaningful for developing an overall understanding of the
Company. Therefore, the Company believes it is important to evaluate the trends in the components of its revenues as well as the recent developments regarding its long-term ongoing and interim revenue sources. See Part I, Item 1.
BUSINESS for a discussion of recent material events affecting the Companys revenue sources.



Results of Operations



Analysis
of Results for the Quarters Ended September 30, 2001 and 2000



An analysis of the significant components of the Companys resource revenues for the quarters ended September 30, 2001 and 2000 follows:



|                                                             |  |      |         |   |      |   |           |              |  |       |   
|------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | --------- | ------------ |  | ----- | --
|                                                             |  | 2001 |         |   | 2000 |   |           | % Inc. (Dec) | 
|Ongoing Operations                                           |  |      |         |   |      |   |           |              |  |       |   
|Water Resource                                               |  | $    |        |   |      | $ | 1,154,000 |              |  | (100  | )%
|Deferred gain on Mill Site land sales                        |  |      | 27,000  |   |      |   | 1,000     |              |  | 2,600 | % 
|Income from equity method investment in West Valley MRF, LLC |  |      | 233,000 |   |      |   | 390,000   |              |  | (40   | )%
|                                                             |  |      |         |   |      |   |           |              |  |       |   
|Total ongoing operations                                     |  |      | 260,000 |   |      |   | 1,545,000 |              |  | (83   | )%
|                                                             |  |      |         |   |      |   |           |              |  |       |   
|Interim Activities (net)                                     |  |      |         |   |      |   |           |              |  |       |   
|Lease, service and other                                     |  |      | (83,000 | ) |      |   | (19,000   | )            |  | (337  | )%
|                                                             |  |      |         |   |      |   |           |              |  |       |   
|Total resource revenues                                      |  | $    | 177,000 |   |      | $ | 1,526,000 |              |  | (88   | )%
|                                                             |  |      |         |   |      |   |           |              |  |       |   



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Resource Revenues. Total resource revenues for the second quarter of 2001 were $177,000 compared to $1,526,000 for
2000. Revenues from ongoing operations decreased by 83% for the quarter to $260,000 from $1,545,000 in 2000, while the loss from interim activities (net of related expenses) increased 337% to $83,000 from $19,000 in 2000.



Ongoing Operations. Water lease revenues under the Companys
102-year take-or-pay lease with Cucamonga were $0 during the second quarter of 2001 compared to $1,154,000 for 2000. The absence of water lease revenues during for the third quarter reflects the sale of the Companys FUWC stock, which closed
March 6, 2001.



The Company recognized deferred gain of $27,000
from the sales of certain Mill Site properties that closed in 1997 and 1999.



Income from equity method investments decreased by $157,000 to $233,000 due to lower equity income from the WVMRF during the third quarter of 2001 compared to the same period 2000. This decrease in equity income in
the WVMRF is primarily due to higher operating and maintenance expenses incurred during and subsequent to the expansion of the facility ($254,000) and a 36% decrease in net revenues from the sale of recyclable products ($77,000) due to lower
commodity prices, being partially offset by a 20% increase in processing fee revenue due to a 10% increase transfer and recycling volume ($188,000).



Interim Activities (net). Interim activities net of expenses for the third quarter of 2001 were a net expense of $83,000 compared to a net expense
of $19,000 for the same period in 2000. The 337% increase in net interim expense in 2001 is primarily attributable to lower net operating revenue at the California Mines which were sold in early February 2001 ($62,000) being partially offset by
lower expenses associated with the termination of interim activities at the Mill Site Property due to its sale in August 2000 ($10,000).



Resource Operating Costs. Resource operating costs are those costs directly related to the resource revenue (in this case commission expense on
Cucamonga water lease revenue and environmental insurance costs and recoveries relating to the Companys historical operations). Total resource operating costs for the third quarter of 2001 decreased to ($1,420,000) from $63,000 in 2000. This
decrease was due to the gain from insurance coverage ($1,500,000) and the reduction in water resource expense due to the sale of the Companys FUWC stock on March 6, 2001 ($63,000); being partially offset by the amortization expense associated
with the Companys environmental insurance policy ($80,000). The gain from insurance coverage is the result of an insurance policy providing coverage for a previously recorded estimated environmental remediation liability of $1,500,000.



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Corporate General and Administrative Expenses.Corporate general and administrative expenses for the third quarter of
2001 decreased 23% to $905,000 from $1,180,000 for 2000. The decrease is due to the reversal of stock option repricing expense due to a decline in the market price of the Company stock ($420,000) being partially offset by higher legal, accounting
and professional expenses primarily relating to the proposed corporate restructuring ($104,000) and stock based compensation expense due to the exercise of nonqualified stock options ($41,000).



Net Interest Income. Net interest income for the third quarter of 2001
was $964,000 compared to $166,000 in 2000. The change was due primarily to: (a) an increase in interest income ($760,000) relating to the Companys higher cash and investment balances, most of which relates to proceeds from the Companys
sale of its FUWC stock, and a decrease in interest expense ($38,000) associated with the Companys $30,000,000 revolving-to-term credit facility with Union Bank which was terminated prior to the Companys sale of its FUWC stock.



Pre-Tax Income and Income Tax Provision. The Company
recorded income before income tax provision of $1,656,000 for the third quarter of 2001, versus $449,000 recorded in 2000. An income tax benefit of $513,000 was recorded in the third quarter of 2001 compared to an income tax provision of $180,000
for 2000. The third quarter 2001 income tax benefit was recorded to bring the Companys year-to-date income tax provision in line with the projected annual effective rate.



Net Income.For the third quarter of 2001, the Company reported a net income of $2,169,000, or $0.33 per share,
versus $269,000, or $.04 per share, reported for 2000.



Results of
Operations



Analysis of Results for the Nine Months Ended September
30, 2001 and 2000



An analysis of the significant
components of the Companys resource revenues for the nine months ended September 30, 2001 and 2000 follows:



|                                                             |  |      |            |   |      |   |           |              |  |       |   
|------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | --------- | ------------ |  | ----- | --
|                                                             |  | 2001 |            |   | 2000 |   |           | % Inc. (Dec) | 
|Ongoing Operations                                           |  |      |            |   |      |   |           |              |  |       |   
|Gain on Sale of FUWC Stock                                   |  | $    | 65,171,000 |   |      | $ |          |              |  | 100   | % 
|Water Resource                                               |  |      | 295,000    |   |      |   | 3,464,000 |              |  | (91   | )%
|Gain on sale of California Mines                             |  |      | 1,756,000  |   |      |   |          |              |  | 100   | % 
|Deferred gain on Mill Site land sales                        |  |      | 80,000     |   |      |   | 1,000     |              |  | 7,900 | % 
|Income from equity method investment in West Valley MRF, LLC |  |      | 707,000    |   |      |   | 1,198,000 |              |  | (41   | )%
|                                                             |  |      |            |   |      |   |           |              |  |       |   
|Total ongoing operations                                     |  |      | 68,009,000 |   |      |   | 4,663,000 |              |  | 1,358 | % 
|                                                             |  |      |            |   |      |   |           |              |  |       |   
|Interim Activities (net)                                     |  |      |            |   |      |   |           |              |  |       |   
|Lease, service and other                                     |  |      | (188,000   | ) |      |   | (135,000  | )            |  | (39   | %)
|                                                             |  |      |            |   |      |   |           |              |  |       |   
|Total resource revenues                                      |  | $    | 67,821,000 |   |      | $ | 4,528,000 |              |  | 1,398 | % 
|                                                             |  |      |            |   |      |   |           |              |  |       |   



Resource
Revenues. Total resource revenues for the first nine months of 2001 were $67,821,000, compared to $4,528,000 for 2000. Revenues from ongoing operations increased 14 fold for the nine months to $68,009,000 from $4,663,000 in 2000, while the loss
from interim activities (net of related expenses) increased 39% to $188,000 from $135,000 in 2000.



Ongoing Operations. During the first nine months of 2001, the Company sold its investment in FUWC to Cucamonga (to whom the shares were leased
under a 102 year lease) for $87.5 million, resulting in a gain of $65.2 million. Included in the net gain of $65.2 million was the payment of $1.0 million



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to management pursuant to the Companys Long-Term Transaction Incentive Program. Water lease revenues under the Companys 102-year
take-or-pay lease with Cucamonga were $295,000 during the first nine months of 2001 compared to $3,464,000 for 2000. The 91% decrease in water lease revenues during the first nine months of 2001 reflects the sale of the Companys FUWC stock,
which closed March 6, 2001.



During the first nine months of
2001, the Company also sold its California Mine properties for $2.0 million, resulting in a gain of $1,756,000. Finally, the Company recognized deferred gain of $80,000 from the sales of certain Mill Site properties that closed in 1997 and 1999.



Income from equity method investments decreased by $491,000 to
$707,000 due to lower equity income from the WVMRF during the first nine months of 2001 compared to the same period 2000. This decrease in equity income in the WVMRF is mainly due to higher operating and maintenance expenses incurred during and
subsequent to the expansion of the facility ($532,000) and a 39% decrease in net revenues from the sale of recyclable products ($265,000) due to lower commodity prices, being partially offset by a 11% increase processing fee revenue due to a 14%
increase from transfer and recycling volume ($285,000).



Interim Activities (net). Interim activities net of expenses for the first nine months of 2001 were a net expense of $188,000 compared to a net expense of $135,000 for the same period in 2000. The 39% increase in net interim expense
in 2001 is primarily attributable to lower net operating revenue at the California Mines which were sold in early February ($162,000) being partially offset by lower expenses associated with the termination of interim activities at the Mill Site
Property due to its sale in August 2000 ($88,000), and lower net interim expense at Eagle Mountain ($22,000).



Resource Operating Costs. Resource operating costs are those costs directly related to the resource revenue (in this case commission expense on
Cucamonga water lease revenue and environmental insurance costs and recoveries relating to the Companys historical operations). Total resource operating costs for the first nine months of 2001 decreased to ($1,378,000) from $298,000 in 2000.
This decrease was due to the gain from insurance coverage ($1,500,000) and the reduction in water resource expense due to the sale of the Companys FUWC stock on March 6, 2001 ($256,000) being partially offset by the amortization expense
associated with the Companys environmental insurance policy ($80,000). The gain from insurance coverage is the result of an insurance policy providing coverage for a previously recorded estimated environmental remediation liability of
$1,500,000.



Corporate General and Administrative Expenses.Corporate general and administrative expenses for the first nine months of 2001 increased 55% to $4,341,000 from $2,808,000 for 2000. The increase is primarily due to non-cash variable stock option accounting ($852,000), higher legal, accounting
and professional expenses primarily relating to the proposed corporate restructuring ($447,000) and the exercise of nonqualified stock options ($237,000).



Net Interest Income. Net interest income for the first nine months of 2001 was $2,362,000 compared to $322,000 in 2000. The change was due
primarily to: (a) an increase in interest income ($1,951,000) relating to the Companys higher cash and investment balances, most of which relates to proceeds from the Companys sale of its FUWC stock, and a decrease in interest expense
($88,000) associated with the Companys $30,000,000 revolving-to-term credit facility with Union Bank which was terminated prior to the Companys sale of its FUWC stock.



Pre-Tax Income and Income Tax Provision. The Company recorded income before income tax provision of $67,220,000 for
the first nine months of 2001, versus $1,744,000 recorded in 2000. An income tax provision of $16,973,000 was recorded in the first nine months of 2001 compared to $698,000 for 2000.



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Net Income.For the first nine months of 2001, the Company reported a net income of $50,247,000, or $7.67 per share,
versus $1,046,000, or $.16 per share, reported for 2000.



FINANCIAL POSITION



Cash, Cash Equivalents and Short-Term Investments. The Company defines cash equivalents as highly liquid debt instruments with original maturities of 90 days or less. Cash and cash equivalents increased $75,242,000 to $85,339,000 at
September 30, 2001 from $10,097,000 at December 31, 2000. Included in cash and cash equivalents is $1,946,000 and $3,247,000 held solely for the benefit of MRC at September 30, 2001 and December 31, 2000, respectively. The increase in cash and cash
equivalents is primarily due to: (a) the sale of the Companys FUWC Stock ($81,783,000); (b) the sale of the California Mines for $2.0 million, of which $726,000 was cash received at closing; (c) the issuance of common stock relating to the
exercise of stock options of $274,000; and (d) cash distributions from the WVMRF ($750,000). These increases were partially offset by the: (a) purchase of a comprehensive environmental insurance policy ($3,800,000); (b) capital expenditures
($862,000); and (c) environmental remediation expenditures ($126,000).



Working Capital. During the first nine months of 2001, current assets increased $62.7 million to $86.1 million, while current liabilities decreased $279,000 to $3.8 million. The increase in current assets resulted primarily from the
$75.2 million increase in cash and cash equivalents and a $10.7 million decline in current deferred tax assets, both relating primarily to the Companys sale of its FUWC stock. The decrease in current liabilities resulted from the payment of
prior accruals ($953,000) being partially offset by the recording of an income tax liability ($542,000) and an increase in accounts payable ($132,000). Included in current liabilities as of September 30, 2001 is $175,000 in accounts payable and
accrued liabilities relating to MRC. As a result, working capital increased during the first nine months of 2001 by $63.0 million to $82.3 million at September 30, 2001.



Land and Improvements. Land and improvements decreased $240,000 during the first nine months of 2001 due to the sale
of the Companys California Mine properties in February.



Investments. There was a $43,000 decrease in the Companys investment in the WVMRF during the first nine months of 2001 due to the receipt of $750,000 in cash distributions being mostly offset by the Companys recording of
its equity share of income of $707,000 during the period. The $16,612,000 decrease in the Companys investment in FUWC is due to the sale of that investment during the first quarter of 2001. The Companys investment in the Eagle Mountain
Landfill increased $914,000 during the first nine months of 2001 due to continuing landfill development activities.



Other Assets. The increase in other assets ($3,749,000) is primarily related to the Companys purchase of a environmental insurance policy
($3.8 million), the recording of an insurance receivable ($1.5 million) resulting from an insurance company accepting coverage on a claim and an increase in notes receivable due to the sale of the California Mine Property ($859,000 long term
portion). These increases were partially offset by the Companys utilization of its long-term deferred tax assets ($2.2 million), relating to the Companys sale of its FUWC stock, an increase in accumulated depreciation as of September 30,
2001 ($194,000) and commencement of amortization of the environmental insurance policy ($80,000).



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Environmental Remediation Liabilities:. As of September 30, 2001, the Company estimates, based upon current
information, that its future environmental liabilities related to certain matters not assumed by CCG Ontario, LLC, a subsidiary of Catellus Development Corporation, a New York Stock Exchange company, in its purchase of the Mill Site Property (August
2000), including a certain groundwater matter as well as potential matters at Eagle Mountain and at other historical locations and other possible third party claims, would be approximately $2.5 million. In the event a claim for damages is filed
against the Company that relates to the remaining $2.5 million reserve, management believes that the claim may be covered by insurance depending upon the nature and timing of the claim.



The Company purchased, effective June 30, 2001, a 12-year $50 million insurance policy, which is expected to cover
substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical operations of the Company, including a claim against the Company estimated at $1.5 million, which was made during the third quarter of
2001.



Long-term Liabilities. The decrease in other
long-term liabilities ($798,000) is primarily due to: the reduction of $1,990,000 in long-term environmental remediation liabilities, offset by $1,500,000 which was reclassified from environmental remediation liabilities into litigation accruals to
coincide with filing of a third-party claim, which was accepted by the insurance carrier, and corresponding recording of an insurance receivable; decreases in accrued liabilities ($228,000); and the recognition of deferred gains on real estate sales
($80,000).



Minority Interest. As of September 30, 2001,
the Company has recorded $5,280,000 of minority interest relating to the approximately 19% ownership interest in MRC the Company does not own.



Contingent Liabilities. The Company has contingent liabilities more fully described in the notes to the financial statements.



BUSINESS OUTLOOK



The statements contained in this Business Outlook, as well as in the Business
Update, are based upon current operations and expectations. In addition to the forward-looking statements and information contained elsewhere in this 10-Q/A Report, these statements are forward-looking and, therefore, actual results may differ
materially. See the Companys disclosure regarding forward-looking statements in the section entitled Forward-Looking Statements above.



Ongoing Operations.As noted above, the Companys revenues from ongoing operations have, in the past, been generally derived from the
development of the Companys major long-term projects and investments. The development of a number of these projects and investments, such as the 102-year take-or-pay lease with Cucamonga, and the 50% equity ownership of the West Valley MRF,
are essentially complete and the Company has been recognizing significant revenues and income from these investments. However, the revenues from ongoing operations will be significantly reduced in 2001 as a result of the Company completing the sale
of its ownership interest in Fontana Union to Cucamonga. In addition, the Company continues to evaluate its remaining assets and investments in light of how to best provide maximum value to its stockholders.



In regard to the West Valley MRF, the most significant factor affecting the
Companys future equity income from the West Valley MRF is the expansion of the facilitys capacity from 2,000 to 3,500 tons per day. The facility is operational and its expansion, which cost approximately $11 million, is substantially
complete. The expansion enlarges the processing facility by an additional



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80,000 square feet and provides for additional materials recovery sorting capacity. The ultimate success of this expansion will continue to
depend on the ability of the West Valley MRF to attract new customers and waste volumes from the closure of local landfills such as the Spadra Landfill, which closed in April 2000, and on the future construction of any competing facilities.



As part of our strategy, we intend to evaluate any potential
offers to purchase our interest in the West Valley MRF in light of our primary objective of maximizing value for our stockholders. The West Valley MRF currently generates sufficient cash flow to fund its cost of operations and does not require
additional investment by the Company to operate. Furthermore, the West Valley MRF should generate sufficient cash distributions to the Company to cover foreseeable general and administrative costs if the Conversion Proposal is approved.



Pending Sale of Eagle Mountain Landfill Project. In August 2000,
MRC entered into an agreement to sell the landfill project located at the Eagle Mountain Site to the District. Under that agreement, MRC will receive $41 million for the landfill project if the conditions to closing are satisfied and the sale
transaction closes. The cash will be held in escrow pending the resolution of certain additional contingencies, which are not expected to occur for several years. The closing of this sale is subject to, among other things, the results of the
Districts due diligence, obtaining the transfer of the landfill projects permits to the District, obtaining all necessary consents to the transaction and resolution of various titled and joint use matters. The parties have agreed several
times to extend the initial closing date of the sale transaction pending receipt of land surveys, resolution of title matters, resolution of joint use agreements, resolution of certain title issues, receipt of third-party approvals or consents and
other matters. Although the contractual expiration date is currently during the fourth quarter of 2001, the date has already been extended a number of times. The conditions to closing are not expected to be met by the current expiration date, and
the parties will have to decide whether to extend the period one or more additional times.



If the sale transaction closes, upon closing, $39 million of the total purchase price will be deposited into an escrow account and will be released when the outstanding federal litigation related to MRCs federal
land exchange with BLM is fully and satisfactorily resolved. Although the $39 million has not yet been deposited into escrow, interest on this $39 million began accruing at the beginning of May 2001. Accrued interest on this portion of the purchase
price, for up to a two year period, will be paid out to MRC on a quarterly basis beginning with a successful outcome of the federal litigation. If the transaction closes, upon closing, the remaining $2 million of the purchase price will also be
placed into an escrow account and will be released upon the later of (i) the release of the $39 million as described above, or (2) the permitting approval of the Districts Puente Hills landfill for its remaining 10 years of capacity.



The District has been undertaking significant due diligence on
the landfill project and has the right to terminate the sale agreement if it is not satisfied with the results of its due diligence. Additionally, the parties are negotiating various ancillary agreements and a decision in an unrelated case related
to a federal land exchange to which BLM was a party could potentially have a material adverse impact on the landfill project and its pending sale. For additional information see Part I, Item 1. BUSINESSWaste Management - Eagle Mountain
Landfill Project - Landfill Project Litigation.



Mill
Site Property. The only remaining Mill Site Property owned by the Company is an approximate five acre parcel referred to as the Tar Pits Parcel. CCG is obligated to remediate the environmental contamination of this parcel pursuant to the terms
of CCGs purchase of approximately 588 acres of the Mill Site Property from the Company in August 2000. As described elsewhere in this Quarterly Report on Form 10-Q/A, in that purchase CCG assumed substantially all of the Companys



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environmental liabilities associated with the purchased property as well as certain other environmental liabilities and risks associated
with the Mill Site Property, including the remediation of the Tar Pits Parcel.



Sale of Miscellaneous Properties. In February 2001, the Companys completed its sale of its Silver Lake Mine property, several other mining claims and properties and a 190 acre parcel near Afton Canyon,
California. The gross sales price was $2 million with $726,000 received as a down payment and the balance represented by buyers secured promissory note. The note is payable over five years and accrues interest at the rate of 8% per annum.



Corporate Overhead.As the Company divests its
remaining assets, the Company intends to further reduce its corporate staffing and overhead to reflect the reduced requirements of its remaining operations and projects.



Capital Resources. After taking into account the cash distribution in connection with the Conversion Proposal, the
Company expects that its current cash balances and short-term investments together with cash provided from operating activities and reserves set aside from the Companys sale of its investment in Fontana Union will be sufficient to satisfy the
Companys operating cash requirements for more than one year.



Improved Cash Flow from Use of Net Operating Loss Tax Carryforwards. Due to the Companys status as successor to Kaiser Steel for tax purposes and its use of Kaiser Steel-related NOLs, income taxes actually paid by the Company
are substantially less than the income tax provision reported in its financial statements. The tax benefit associated with the utilization of NOLs, if any, has historically been reflected as an increase to stockholders equity rather than as an
increase to net income. The Company expects that its use of these NOLs will substantially reduce the cash paid for income taxes until these NOLs are fully utilized. The total NOLs as of December 31, 2000 are estimated to be approximately $43 million
for federal purposes and $1 million for state purposes. These federal NOLs expire in varying amounts over a period from year 2006 to 2013. In addition, if the sale of the landfill project to the District closes in 2001, the Company expects that sale
to generate a taxable loss in the range of $15-$20 million. This loss could be used to offset the gain recognized from the Companys sale of its Fontana Union stock and would reduce the Companys 2001 income taxes by approximately
$4.5-$6.0 million. If the Conversion Proposal is approved and the merger is consummated during 2001, the Company expects to generate a tax loss estimated at $42-$47 million for 2001. This loss would be used to offset the gain Kaiser Inc. recognized
in 2001 from the sale of the Fontana Union stock and would reduce the income taxes paid by Kaiser Inc. in 2001 by approximately $10.5-$12.0 million.



If the Company does not utilize all of its NOLs in 2001, then if 50% or more of the stock of the Company changes ownership within a three-year period, the
future annual use of NOLs may be limited. If this should occur, the annual limitation would be calculated as the product of: (i) the highest long-term tax-exempt rate for a designated period prior to the ownership change; and (ii) the market value
of the Company at such time.



Cash Maximization Strategy



The Company has been developing the assets it received out of the Kaiser
Steel bankruptcy and then selling them at such time as the Company believes that it can optimize stockholder value for a particular project or asset. During 2000, Kaiser: (i) sold the balance of all of the Companys real estate at the former
Kaiser Steel Corporation mill site near Fontana, California, except for an



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approximate five acre parcel; (ii) entered into an agreement to sell the landfill project to the District, with MRC and the District working
toward a closing on such transaction; (iii) entered into an agreement for the Companys interest in Fontana Union to Cucamonga which transaction was completed in March 2001; and (iv) paid a $2.00 cash distribution to its stockholders. In
continuing this strategy, our current plans include:



| |  | To complete the sale of the Landfill Project to the District and to resolve favorably the related outstanding federal land exchange litigation. Although the closing is currently
scheduled to occur in the fourth quarter of 2001, this sale is subject to the satisfaction of numerous conditions, and, as a result, we cannot be sure when or if this sale will ultimately close. Also, due to the status of the Districts due
diligence and negotiations regarding joint use matters, we currently anticipate that the closing date will be delayed for several months. If the sale transaction is completed, we do not expect to receive any substantial cash from the sale until the
related litigation matters are resolved, which may be several years. See Eagle Mountain Landfill Project Sale of Landfill Project;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | To reduce the risk to the Company from outstanding environmental and other similar types of liabilities;
| | - | --------------------------------------------------------------------------------------------------------



| |  | To continue to hold its 50% interest in West Valley MRF, which pays cash distributions to the Company, until we believe we can maximize stockholder value through a sale or other
alternative transaction;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | To sell miscellaneous assets such as surplus property and mineral interests in Southern California; and
| | - | -------------------------------------------------------------------------------------------------------



| |  | To further reduce the Companys general and administrative expenses.
| | - | --------------------------------------------------------------------



Conversion Proposal. The Company has been evaluating its future strategy and business plan, as well as the timing and alternative means of making
its excess cash available to stockholders. In July 2001, the Companys Board of Directors approved a plan that would convert the Company into a newly-formed limited liability company pursuant to a merger between the Company and Kaiser LLC. If
the Conversion Proposal is approved by the Companys stockholders, the Companys stockholders would receive $10.00 in cash plus one Class A Unit for each share of common stock in the Company. By converting to a limited liability company,
the Company believes it will be able to recognize a tax loss from MRC in 2001, distribute significant cash to stockholders on a tax advantaged basis, avoid the double taxation generally imposed on corporate income and to deal more expeditiously with
the Companys remaining assets. Immediately after the completion of the conversion, the holders of the Class A Units (on a fully diluted basis) would be the same as the holders of the common stock in the Company. The assets and liabilities of
Kaiser LLC would be the same as those of the Company, except that the stockholders of the Company would receive $10.00 in cash, thereby reducing the cash position of Kaiser LLC. It is currently anticipated that the stockholders meeting to
consider the approval of the Conversion Proposal will be held November 28, 2001.



In addition, the Companys Board of Directors approved a plan whereby the Company may repurchase, from time to time, Company stock in the open market. A committee appointed by the Board was formed to implement
this plan in its discretion. The Company has not, as of the date of the Original 10-Q Report, purchased any of its stock in the open market.



Insurance. In furtherance of one of the goals of the Cash Maximization Strategy, the Company purchased an insurance policy effective June 30, 2001,
that is designed to provide broad commercial general liability, pollution legal liability, and contractual indemnity coverage for the Companys



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ongoing and historical operations. The policy has a twelve (12) year term and limits of $50,000,000, in the aggregate, for defense and
indemnity, with no deductible or self-insured retention. With respect to the Company the policy is designed to provide coverage for future claims in excess of the Companys existing and historic insurance policies; however, to the extent that
these other insurance policies are not responsive to a claim, the newly-purchased policy will provide first dollar coverage for a claim resulting from property damage, personal injury, bodily injury, cleanup costs or violations of environmental
laws. The policy also provides for a broad defense of claims that may be brought against the Company. The policy is specifically intended to supplement the Companys previously existing coverage for its known and/or potential liabilities
arising from pollution conditions or asbestos-related claims. The policy also provides contractual indemnity coverage for scheduled indemnity obligations of the Company arising from, e.g., prior corporate transactions and real estate sales. The
aggregate cost for this policy was approximately $5.8 million, of which KSC Recovery paid $2.0 million and the Company paid the balance of approximately $3.8 million.



FINANCIAL STATEMENTS



(REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)



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CONSOLIDATED BALANCE SHEETS

as of



|                                                                                 |  |                    |             |                  |   |           
|-------------------------------------------------------------------------------- |  | ------------------ | ----------- | ---------------- | - | ----------
|                                                                                 |  | September 30,2001  |             | December 31,2000
|                                                                                 |  | (Unaudited)        |             |                 
|                                                                                 |  | (Restated Note 2) |             |                 
|ASSETS                                                                           |  |                    |             |                  |   |           
|                                                                                 |  |                   
|Current Assets                                                                   |  |                    |             |                  |   |           
|Cash and cash equivalents                                                        |  | $                  | 85,339,000  |                  | $ | 10,097,000
|Accounts receivable and other, net of allowance for doubtful accounts of $83,000 |  |                    | 467,000     |                  |   | 2,497,000 
|Deferred tax assets                                                              |  |                    |            |                  |   | 10,699,000
|Note receivable                                                                  |  |                    | 323,000     |                  |   | 107,000   
|                                                                                 |  |                    |             |                  |   |           
|                                                                                 |  |                    | 86,129,000  |                  |   | 23,400,000
|                                                                                 |  |                    |             |                  |   |           
|Eagle Mountain Landfill Investment                                               |  |                    | 25,068,000  |                  |   | 24,154,000
|                                                                                 |  |                    |             |                  |   |           
|Investment in West Valley MRF                                                    |  |                    | 3,617,000   |                  |   | 3,660,000 
|                                                                                 |  |                    |             |                  |   |           
|Land and improvements                                                            |  |                    | 2,503,000   |                  |   | 2,743,000 
|                                                                                 |  |                    |             |                  |   |           
|Investment in Fontana Union Water Company                                        |  |                    |            |                  |   | 16,612,000
|                                                                                 |  |                    |             |                  |   |           
|Other Assets                                                                     |  |                    |             |                  |   |           
|Note receivable                                                                  |  |                    | 1,448,000   |                  |   | 589,000   
|Deferred tax assets                                                              |  |                    |            |                  |   | 2,161,000 
|Insurance receivable                                                             |  |                    | 1,500,000   |                  |   |          
|Unamortized environmental insurance premium                                      |  |                    | 3,720,000   |                  |   |          
|Buildings and equipment (net)                                                    |  |                    | 1,300,000   |                  |   | 1,463,000 
|Other assets                                                                     |  |                    |            |                  |   | 6,000     
|                                                                                 |  |                    |             |                  |   |           
|                                                                                 |  |                    | 7,968,000   |                  |   | 4,219,000 
|                                                                                 |  |                    |             |                  |   |           
|Total Assets                                                                     |  | $                  | 125,285,000 |                  | $ | 74,788,000
|                                                                                 |  |                    |             |                  |   |           



The accompanying notes are an integral
part of the consolidated financial statements.



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CONSOLIDATED BALANCE SHEETS

as of



|                                                                                                                                  |  |                     |             |                   |   |           
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ----------- | ----------------- | - | ----------
|                                                                                                                                  |  | September 30, 2001  |             | December 31, 2000
|                                                                                                                                  |  | (Unaudited)         |             |                  
|                                                                                                                                  |  | (Restated  Note 2) |             |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                              |  |                     |             |                   |   |           
|                                                                                                                                  |  |                    
|Current Liabilities                                                                                                               |  |                     |             |                   |   |           
|Accounts payable                                                                                                                  |  | $                   | 434,000     |                   | $ | 302,000   
|Income taxes payable                                                                                                              |  |                     | 542,000     |                   |   |          
|Accrued liabilities                                                                                                               |  |                     | 2,871,000   |                   |   | 3,824,000 
|                                                                                                                                  |  |                     |             |                   |   |           
|                                                                                                                                  |  |                     | 3,847,000   |                   |   | 4,126,000 
|                                                                                                                                  |  |                     |             |                   |   |           
|Long-term Liabilities                                                                                                             |  |                     |             |                   |   |           
|Deferred gain on sale of real estate                                                                                              |  |                     | 616,000     |                   |   | 696,000   
|Accrued liabilities                                                                                                               |  |                     | 494,000     |                   |   | 722,000   
|Litigation accrual                                                                                                                |  |                     | 1,500,000   |                   |   |          
|Environmental remediation                                                                                                         |  |                     | 2,500,000   |                   |   | 4,490,000 
|                                                                                                                                  |  |                     |             |                   |   |           
|                                                                                                                                  |  |                     | 5,110,000   |                   |   | 5,908,000 
|                                                                                                                                  |  |                     |             |                   |   |           
|Total Liabilities                                                                                                                 |  |                     | 8,957,000   |                   |   | 10,034,000
|                                                                                                                                  |  |                     |             |                   |   |           
|Minority Interest                                                                                                                 |  |                     | 5,280,000   |                   |   | 5,280,000 
|                                                                                                                                  |  |                     |             |                   |   |           
|Commitments and Contingencies                                                                                                     |  |                     |             |                   |   |           
|                                                                                                                                  |  |                    
|Stockholders Equity                                                                                                              |  |                     |             |                   |   |           
|Common stock, par value $.03 per share, authorized 13,333,333 shares; issued and outstanding 6,567,629 and 6,522,700
respectively |  |                     | 197,000     |                   |   | 195,000   
|Capital in excess of par value                                                                                                    |  |                     | 53,001,000  |                   |   | 51,676,000
|Retained earnings                                                                                                                 |  |                     | 57,850,000  |                   |   | 7,603,000 
|                                                                                                                                  |  |                     |             |                   |   |           
|Total Stockholders Equity                                                                                                        |  |                     | 111,048,000 |                   |   | 59,474,000
|                                                                                                                                  |  |                     |             |                   |   |           
|Total Liabilities and Stockholders Equity                                                                                        |  | $                   | 125,285,000 |                   | $ | 74,788,000
|                                                                                                                                  |  |                     |             |                   |   |           



The accompanying notes are an integral
part of the consolidated financial statements.



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KAISER VENTURES INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

for the Three and Nine Months Ended September 30

(Unaudited)



|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|--------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ----------------------------- | - | --------- | ------------------ |  | - | ---------- | - |  | - | --------- | -
|                                                                                                    |  | Three Months EndedSeptember 30 |            |   | Nine Months EndedSeptember 30 |  
|                                                                                                    |  | 2001                           |            |   | 2000                          |   |           | 2001               |  |   | 2000       |  
|                                                                                                    |  | (Restated Note 2)             |            |   |                               |   |           | (Restated Note 2) |  |   |            |  
|Resource Revenues                                                                                   |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|                                                                                                    |  |                                |            |  
|Ongoing operations                                                                                  |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Gain on sale of FUWC                                                                                |  | $                              |           |   |                               | $ |          |                    |  | $ | 65,171,000 |   |  | $ |          |  
|Water resource                                                                                      |  |                                |           |   |                               |   | 1,154,000 |                    |  |   | 295,000    |   |  |   | 3,464,000 |  
|Gain on sale of California mines                                                                    |  |                                |           |   |                               |   |          |                    |  |   | 1,756,000  |   |  |   |          |  
|Deferred gain on Mill Site land sales                                                               |  |                                | 27,000     |   |                               |   | 1,000     |                    |  |   | 80,000     |   |  |   | 1,000     |  
|Income from equity method investment in the West Valley MRF, LLC                                    |  |                                | 233,000    |   |                               |   | 390,000   |                    |  |   | 707,000    |   |  |   | 1,198,000 |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Total ongoing operations                                                                            |  |                                | 260,000    |   |                               |   | 1,545,000 |                    |  |   | 68,009,000 |   |  |   | 4,663,000 |  
|                                                                                                    |  |                                |            |  
|Interim Activities Net Loss                                                                         |  |                                | (83,000    | ) |                               |   | (19,000   | )                  |  |   | (188,000   | ) |  |   | (135,000  | )
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Total resource revenues                                                                             |  |                                | 177,000    |   |                               |   | 1,526,000 |                    |  |   | 67,821,000 |   |  |   | 4,528,000 |  
|                                                                                                    |  |                                |            |  
|Resource Operating Costs                                                                            |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Gain from insurance coverage                                                                        |  |                                | (1,500,000 | ) |                               |   |          |                    |  |   | (1,500,000 | ) |  |   |          |  
|Environmental insurance premium amortization                                                        |  |                                | 80,000     |   |                               |   |          |                    |  |   | 80,000     |   |  |   |          |  
|Water resource expense                                                                              |  |                                |           |   |                               |   | 63,000    |                    |  |   | 42,000     |   |  |   | 298,000   |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Total resource operating costs                                                                      |  |                                | (1,420,000 | ) |                               |   | 63,000    |                    |  |   | (1,378,000 | ) |  |   | 298,000   |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Income from Resources                                                                               |  |                                | 1,597,000  |   |                               |   | 1,463,000 |                    |  |   | 69,199,000 |   |  |   | 4,230,000 |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Corporate General and Administrative Expenses                                                       |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Corporate overhead expenses, excluding stock based compensation and stock option repricing expenses |  |                                | 1,284,000  |   |                               |   | 1,180,000 |                    |  |   | 3,252,000  |   |  |   | 2,808,000 |  
|Stock based compensation expense                                                                    |  |                                | 41,000     |   |                               |   |          |                    |  |   | 237,000    |   |  |   |          |  
|Stock option repricing expense                                                                      |  |                                | (420,000   | ) |                               |   |          |                    |  |   | 852,000    |   |  |   |          |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|                                                                                                    |  |                                | 905,000    |   |                               |   | 1,180,000 |                    |  |   | 4,341,000  |   |  |   | 2,808,000 |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Income from Operations                                                                              |  |                                | 692,000    |   |                               |   | 283,000   |                    |  |   | 64,858,000 |   |  |   | 1,422,000 |  
|                                                                                                    |  |                                |            |  
|Net interest income                                                                                 |  |                                | (964,000   | ) |                               |   | (166,000  | )                  |  |   | (2,362,000 | ) |  |   | (322,000  | )
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Income before Income Tax Provision (Benefit)                                                        |  |                                | 1,656,000  |   |                               |   | 449,000   |                    |  |   | 67,220,000 |   |  |   | 1,744,000 |  
|                                                                                                    |  |                                |            |  
|Income tax provision (benefit)                                                                      |  |                                | (513,000   | ) |                               |   | 180,000   |                    |  |   | 16,973,000 |   |  |   | 698,000   |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Net Income                                                                                          |  | $                              | 2,169,000  |   |                               | $ | 269,000   |                    |  | $ | 50,247,000 |   |  | $ | 1,046,000 |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Basic Earnings Per Share                                                                            |  | $                              | .33        |   |                               | $ | .04       |                    |  | $ | 7.67       |   |  | $ | .16       |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Diluted Earnings Per Share                                                                          |  | $                              | .33        |   |                               | $ | .04       |                    |  | $ | 7.58       |   |  | $ | .16       |  
|                                                                                                    |  |                                |            |   |                               |   |           |                    |  |   |            |   |  |   |           |  
|Basic Weighted Average Number of Shares Outstanding                                                 |  |                                | 6,567,000  |   |                               |   | 6,405,000 |                    |  |   | 6,552,000  |   |  |   | 6,377,000 |  
|                                                                                                    |  |                                |            |  
|Diluted Weighted Average Number of Shares Outstanding                                               |  |                                | 6,612,000  |   |                               |   | 6,724,000 |                    |  |   | 6,627,000  |   |  |   | 6,725,000 |  



The accompanying notes are an integral
part of the consolidated financial statements.



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KAISER VENTURES INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

for the Nine Months Ended September 30

(Unaudited)



|                                                               |  |                     |             |   |      |   |            |  
|-------------------------------------------------------------- |  | ------------------- | ----------- | - | ---- | - | ---------- | -
|                                                               |  | 2001                |             |   | 2000 |  
|                                                               |  | (Restated  Note 2) |             |   |      |  
|Cash Flows from Operating Activities                           |  |                     |             |   |      |   |            |  
|Net income                                                     |  | $                   | 50,247,000  |   |      | $ | 1,046,000  |  
|(Income) from equity method investments                        |  |                     | (707,000    | ) |      |   | (1,198,000 | )
|Gain on sale of FUWC Stock                                     |  |                     | (65,171,000 | ) |      |   |           |  
|Gain on sale of California Mines                               |  |                     | (1,756,000  | ) |      |   |           |  
|Gain from insurance coverage                                   |  |                     | (1,500,000  | ) |      |   |           |  
|Deferred tax expense                                           |  |                     | 12,860,000  |   |      |   |           |  
|Stock based compensation expense                               |  |                     | 201,000     |   |      |   |           |  
|Stock option repricing                                         |  |                     | 852,000     |   |      |   |           |  
|Depreciation and amortization                                  |  |                     | 274,000     |   |      |   | 333,000    |  
|Allowance for doubtful accounts                                |  |                     |            |   |      |   | (7,000     | )
|Mill Site deferred gain realized                               |  |                     | (80,000     | ) |      |   | (1,000     | )
|Changes in assets:                                             |  |                     |             |   |      |   |            |  
|Receivables and other                                          |  |                     | 1,930,000   |   |      |   | 120,000    |  
|Changes in liabilities:                                        |  |                     |             |   |      |   |            |  
|Current liabilities                                            |  |                     | (1,262,000  | ) |      |   | (972,000   | )
|Income taxes payable                                           |  |                     | 542,000     |   |      |   | (3,275,000 | )
|Long-term accrued liabilities                                  |  |                     | (128,000    | ) |      |   | (207,000   | )
|                                                               |  |                     |             |   |      |   |            |  
|Net cash flows from operating activities                       |  |                     | (3,698,000  | ) |      |   | (4,161,000 | )
|                                                               |  |                     |             |   |      |   |            |  
|Cash Flows from Investing Activities                           |  |                     |             |   |      |   |            |  
|Proceeds from the sale of FUWC Stock                           |  |                     | 81,783,000  |   |      |   |           |  
|Proceeds from the sale of the California Mines                 |  |                     | 726,000     |   |      |   |           |  
|Proceeds from the sale of Mill Site Property                   |  |                     |            |   |      |   | 16,057,000 |  
|Distribution from West Valley MRF                              |  |                     | 750,000     |   |      |   | 750,000    |  
|Minority interest and other liabilities                        |  |                     |            |   |      |   | 558,000    |  
|Note receivable collections                                    |  |                     | 195,000     |   |      |   | 84,000     |  
|Investment in Fontana Union Water Company                      |  |                     |            |   |      |   | (654,000   | )
|Environmental insurance                                        |  |                     | (3,800,000  | ) |      |   |           |  
|Capital expenditures                                           |  |                     | (862,000    | ) |      |   | (2,677,000 | )
|Environmental remediation expenditures                         |  |                     | (126,000    | ) |      |   | (616,000   | )
|                                                               |  |                     |             |   |      |   |            |  
|Net cash flows from investing activities                       |  |                     | 78,666,000  |   |      |   | 13,502,000 |  
|                                                               |  |                     |             |   |      |   |            |  
|Cash Flows from Financing Activities                           |  |                     |             |   |      |   |            |  
|Issuance of common stock                                       |  |                     | 274,000     |   |      |   | 843,000    |  
|Shareholder payment contingent upon Mill Site real estate sale |  |                     |            |   |      |   | (3,824,000 | )
|                                                               |  |                     |             |   |      |   |            |  
|Net cash flows from financing activities                       |  |                     | 274,000     |   |      |   | (2,981,000 | )
|                                                               |  |                     |             |   |      |   |            |  
|Net Changes in Cash and Cash Equivalents                       |  |                     | 75,242,000  |   |      |   | 6,360,000  |  
|                                                               |  |                    
|Cash and Cash Equivalents at Beginning of Year                 |  |                     | 10,097,000  |   |      |   | 14,686,000 |  
|                                                               |  |                     |             |   |      |   |            |  
|Cash and Cash Equivalents at End of Quarter                    |  | $                   | 85,339,000  |   |      | $ | 21,046,000 |  
|                                                               |  |                     |             |   |      |   |            |  



The accompanying notes are an integral
part of the consolidated financial statements.



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KAISER VENTURES INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

for the Nine Months Ended September 30, 2001

(Unaudited)



|                                                  |  |              |  |                               |         |                  |   |            |  |   |            |  |   |            
|------------------------------------------------- |  | ------------ |  | ----------------------------- | ------- | ---------------- | - | ---------- |  | - | ---------- |  | - | -----------
|                                                  |  | Common Stock |  | Capital InExcess of Par Value |         | RetainedEarnings |   | Total     
|                                                  |  | Shares       |  | Amount                        |         |                  |  
|Balance at December 31, 2000                      |  | 6,522,700    |  | $                             | 195,000 |                  | $ | 51,676,000 |  | $ | 7,603,000  |  | $ | 59,474,000 
|Issuance of shares of common stock                |  | 44,929       |  |                               | 2,000   |                  |   | 473,000    |  |   |           |  |   | 475,000    
|Repricing of stock options                        |  |             |  |                               |        |                  |   | 852,000    |  |   |           |  |   | 852,000    
|Net income (Restated - Note 2)                    |  |             |  |                               |        |                  |   |           |  |   | 50,247,000 |  |   | 50,247,000 
|                                                  |  |              |  |                               |         |                  |   |            |  |   |            |  |   |            
|Balance at September 30, 2001 (Restated - Note 2) |  | 6,567,629    |  | $                             | 197,000 |                  | $ | 53,001,000 |  | $ | 57,850,000 |  | $ | 111,048,000
|                                                  |  |              |  |                               |         |                  |   |            |  |   |            |  |   |            



The accompanying notes are an integral
part of the consolidated financial statements.



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KAISER VENTURES INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



Note 1. BASIS OF PRESENTATION



The unaudited, consolidated financial statements of Kaiser Ventures, Inc. and Subsidiaries (the Company) as of September 30, 2001 and for the
three and nine month periods ended September 30, 2001 and 2000, as well as related notes, should be read in conjunction with the audited consolidated financial statements and related notes as of and for the year ended December 31, 2000. In the
opinion of management, the accompanying unaudited financial statements contain all adjustments necessary (all of which are normal and/or recurring in nature) to present fairly the Companys financial position at September 30, 2001, and results
of operations and cash flows for the three and nine month periods ended September 30, 2001 and 2000.



The consolidated financial statements for the three and nine months ended September 30, 2001 are restated as further described in Note 2.



Eagle Mountain Landfill Investment



The Eagle Mountain Landfill Investment includes the deferred cost of permitting and developing the landfill project, $18.9 million as of September 30,
2001 and $18.4 million as of December 31, 2000, plus the $5.8 million of recorded land costs as of both September 30, 2001 and December 31, 2000, associated with the project.



Although the District agreed that interest on $39 million of the purchase price of Eagle Mountain began to accrue on May 3,
2001, the Company will not, due to the numerous uncertainties involved with the sale, record any accrued interest until the uncertainties involved are adequately resolved.



Reclassification



Certain amounts in the prior year have been reclassified to conform to the current year financial statement presentation.



Note 2. ACCOUNTING CHANGE AND RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS



Effective July 1, 2001, the Company changed its method of
accounting for premium costs and claims under a twelve-year insurance policy purchased June 30, 2001, to amortize the premium costs over the term of the underlying prospective insurance policy and record insurance recoveries on known claims
liabilities when recoveries are estimable and claims liabilities are accepted by the insurance carrier. Previously, the Company had capitalized the cost of the policy as prepaid insurance in other assets and reduced the prepaid insurance as claims
were paid and insurance recoveries were collected.



The
restatement for the three and nine months ended September 30, 2001, results in a net decrease in resource operating costs of $1,420,000, which reflects an increase in resource operating costs of $80,000 for amortization of the insurance policy
premium and a decrease in resource operating costs



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KAISER VENTURES INC. AND SUBSIDIARIES



of $1,500,000 for the recording of estimated insurance recoveries. This restatement results in an increase in net income of $1,420,000 and
basic earnings per share of $0.22 for the three and nine months ended September 30, 2001. Diluted earnings per share increased by $0.22 and $0.21, respectively, for the three and nine months ended September 30, 2001. A comparison of restated and
originally reported amounts in the consolidated financial statements of operations for the three and nine months ended September 30, 2001 are as follows:



|                                              |  |                                |          |   |                                |   |            |                       |  |   |             |   |  |   |            |  
|--------------------------------------------- |  | ------------------------------ | -------- | - | ------------------------------ | - | ---------- | --------------------- |  | - | ----------- | - |  | - | ---------- | -
|                                              |  | Three Months EndedSeptember 30 |          |   | Nine Months Ended September 30 |  
|                                              |  | 2001                           |          |   | 2001                           |   |            | 2001                  |  |   | 2001        |  
|                                              |  | Aspreviouslyreported           |          |   | As restated                    |   |            | As previouslyreported |  |   | As restated |  
|Total resource revenues                       |  | $                              | 177,000  |   |                                | $ | 177,000    |                       |  | $ | 67,821,000  |   |  | $ | 67,821,000 |  
|Total resource operating costs                |  |                                |         |   |                                |   | (1,420,000 | )                     |  |   | 42,000      |   |  |   | (1,378,000 | )
|                                              |  |                                |          |   |                                |   |            |                       |  |   |             |   |  |   |            |  
|Income from Resources                         |  |                                | 177,000  |   |                                |   | 1,597,000  |                       |  |   | 67,779,000  |   |  |   | 69,199,000 |  
|Corporate General and Administrative Expenses |  |                                | 905,000  |   |                                |   | 905,000    |                       |  |   | 4,341,000   |   |  |   | 4,341,000  |  
|                                              |  |                                |          |   |                                |   |            |                       |  |   |             |   |  |   |            |  
|Income (loss) from Operations                 |  |                                | (728,000 | ) |                                |   | 692,000    |                       |  |   | 63,438,000  |   |  |   | 64,858,000 |  
|Net interest income                           |  |                                | (964,000 | ) |                                |   | (964,000   | )                     |  |   | (2,362,000  | ) |  |   | (2,362,000 | )
|                                              |  |                                |          |   |                                |   |            |                       |  |   |             |   |  |   |            |  
|Income before Income Tax Provision (Benefit)  |  |                                | 236,000  |   |                                |   | 1,656,000  |                       |  |   | 65,800,000  |   |  |   | 67,220,000 |  
|Income tax provision (benefit)                |  |                                | (513,000 | ) |                                |   | (513,000   | )                     |  |   | 16,973,000  |   |  |   | 16,973,000 |  
|                                              |  |                                |          |   |                                |   |            |                       |  |   |             |   |  |   |            |  
|Net Income                                    |  | $                              | 749,000  |   |                                | $ | 2,169,000  |                       |  | $ | 48,827,000  |   |  | $ | 50,247,000 |  
|                                              |  |                                |          |   |                                |   |            |                       |  |   |             |   |  |   |            |  
|Basic Earnings Per Share                      |  | $                              | .11      |   |                                | $ | .33        |                       |  | $ | 7.45        |   |  | $ | 7.67       |  
|                                              |  |                                |          |   |                                |   |            |                       |  |   |             |   |  |   |            |  
|Diluted Earnings Per Share                    |  | $                              | .11      |   |                                | $ | .33        |                       |  | $ | 7.37        |   |  | $ | 7.58       |  
|                                              |  |                                |          |   |                                |   |            |                       |  |   |             |   |  |   |            |  



Note 3. SALE OF FONTANA UNION WATER
COMPANY STOCK



Effective March 6, 2001, the Company
completed the sale of its approximately 53.71% ownership interest in the capital stock of Fontana Union Water Company (FUWC) a mutual water company, to Cucamonga for $87.5 million. Included in the net gain of $65.2 million was the
payment of $1.0 million to management pursuant to the Companys Long-Term Transaction Incentive Program. In addition, the Company received approximately $2.5 million in payments under the lease of FUWC shares to Cucamonga. Stockholder approval
for the sale was obtained. With the sale of the FUWC interest, the lease with Cucamonga was effectively terminated and the rate dispute litigation between the Company and Cucamonga was settled.



In connection with the sale of the Companys ownership interest in
Fontana Union, the Company terminated its $30 million credit facility with Union Bank that was secured by Fontana Union stock and the Cucamonga Lease.



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Note 4. ENVIRONMENTAL INSURANCE AND ENVIRONMENTAL REMEDIATION LIABILITES



One of the goals in the cash maximization strategy approved by the
Companys Board of Directors in September 2000 was to reduce the liabilities associated with existing and potential future environmental and other similar types of claims. In furtherance of such goal, the Company purchased an insurance policy
effective June 30, 2001 that is designed to provide broad prospective commercial general liability, pollution legal liability, and contractual indemnity coverage for the Companys ongoing and historical operations. The policy has a twelve (12)
year term and limits of $50,000,000 in the aggregate for defense and indemnity, with no deductible or self-insured retention. The policy is designed to provide coverage for future claims in excess of the Companys existing and historic
insurance policies; however, to the extent that these other insurance policies are not responsive to a claim, the newly-purchased policy will provide first dollar coverage for a claim resulting from property damage, personal injury, bodily injury,
cleanup costs or violations of environmental laws. The policy also provides for a broad defense of claims that may be brought against the Company. The policy is specifically intended to provide additional coverage for the Companys potential
liabilities arising from pollution conditions or known and/or potential asbestos-related claims. The policy also provides contractual indemnity coverage for scheduled indemnity obligations of the Company arising from, e.g., prior corporate
transactions and real estate sales. The aggregate cost for this policy was approximately $5.8 million, of which, based upon discussions among the respective members of the Boards of Directors, KSC Recovery paid $2 million and the Company paid the
balance of approximately $3.8 million. The portion of the policy paid by KSC Recovery was expected to cover known and/or potential asbestos claims; while the portion of the policy paid by the Company was expected to cover future potential claims
arising from the Companys historical operations.



The
Company expects this policy will cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical operations of the Company. As a result of the insurance company accepting liability for a claim
against the Company related to the historical operations conducted at the Mill Site, the Company has reclassified $1.5 million previously reported in its environmental remediation liabilities to a litigation accrual as of September 30, 2001.



The Companys $3.8 million premium for the prospective
insurance policy is capitalized as a long-term asset and is being amortized on a straight-line basis over the twelve (12) year term of the policy; approximately $80,000 per quarter or $320,000 per year. To the extent a pre-existing liability has not
been recorded, claims made for environmental matters are recorded as a litigation accrual in the Companys consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such
loss can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably
estimated. Generally, unless previously accrued, the liability and the receivable relating to claims covered by this policy should occur in the same accounting period, thereby having no adverse or beneficial impact on the Companys operating
results for that accounting period.



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Note 5. INCOME TAXES



The Companys income tax provisions were calculated in accordance with FAS 109 and, as such, reflect both current amounts due and changes in the
Companys current and long-term deferred tax assets and liabilities. On this basis, the income tax provisions for the nine months ended September 30, 2001 and 2000 were as follows:



|                         |  |      |            |      |   |        
|------------------------ |  | ---- | ---------- | ---- | - | -------
|                         |  | 2001 |            | 2000
|Current taxes due        |  | $    | 4,113,000  |      | $ | 480,000
|Change in deferred taxes |  |      | 12,860,000 |      |   | 218,000
|                         |  |      |            |      |   |        
|Income tax expense       |  | $    | 16,973,000 |      | $ | 698,000
|                         |  |      |            |      |   |        



The change in deferred
income taxes of $12,860,000 in 2001 represents the utilization of all the deferred tax assets recorded as of December 31, 2000.



The following is a reconciliation of the income taxes payable as of September 30, 2001 and 2000:



|                                  |  |      |           |   |      |   |          
|--------------------------------- |  | ---- | --------- | - | ---- | - | ---------
|                                  |  | 2001 |           |   | 2000
|Balance at prior year end         |  | $    | (221,000  | ) |      | $ | 3,501,000
|Current taxes due                 |  |      | 4,113,000 |   |      |   | 480,000  
|Payments made in current year     |  |      | 3,350,000 |   |      |   | 3,755,000
|                                  |  |      |           |   |      |   |          
|Income tax payable at quarter end |  | $    | 542,000   |   |      | $ | 226,000  
|                                  |  |      |           |   |      |   |          



Note 6. SUPPLEMENTAL CASH FLOW
INFORMATION



In the first quarter of 2001, the Company
sold its California Mine Property for $2 million, $726,000 cash at closing and approximately a $1.3 million note receivable secured by the real estate.



During the nine months ended September 30, 2001 the Company had 54,333 stock options exercised on a net basis. These transactions resulted in the Company
receiving 36,704 shares of its own common stock as payment for the purchase price of the options and for the payment of income taxes.



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Note 7. COMMITMENTS AND CONTINGENCIES



Environmental Contingencies. As discussed in Note 4, effective June 30, 2001, the Company purchased, a 12-year $50 million insurance policy, which
is expected to cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical operations of the Company. To the extent a pre-existing liability has not been recorded, claims made for
environmental matters are recorded as a litigation accrual in the Companys consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss can be reasonably estimated.
Claims accepted by the insurance company pursuant to coverage under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably estimated.



At the inception of the insurance contract the Company estimated, based upon
current information and discussions with environmental consultants, that its future environmental liabilities related to certain matters not assumed by CCG Ontario, LLC in its purchase of the mill site property, including a certain groundwater
matter as well as potential matters at Eagle Mountain and at other historical locations, would be approximately $4.0 million. These liabilities reflected managements estimate of potential future environmental claims, remediation and related
costs but did not represent known claims at the inception of the policy. In August 2001, the California Regional Water Quality Control Board, on behalf of the City of Ontario, asserted an environmental claim against the Company relating to the
historical operations conducted at the Mill Site. The Company tendered the claim to its insurance carrier and the insurance carrier accepted the claim. As a result, at September 30, 2001, the Company recorded an insurance receivable in an amount
equal to its pre-existing estimated environmental liability of $1.5 million and reclassified the obligation as a litigation accrual. In the event a future claim for damages is filed against the Company that relates to the remaining $2.5 million
environmental reserve, management believes that the claim may be covered by insurance depending upon the nature and timing of the claim.



Note 8. SUBSEQUENT EVENT



Settlement of City of Ontario. In February 2004, the Company executed a final settlement agreement with the City of Ontario with regard to allegations of
impacts to municipal wells owned by the City of Ontario. In the first quarter of 2004, the full settlement price was paid by insurance and, accordingly, the existing insurance receivable and litigation accrual recorded in the Companys
consolidated financial statements were reduced in the first quarter of 2004.



PART II



Item 1. LEGAL PROCEEDINGS



As
discussed in the Companys Form 10-K Report for 2000, the Companys First and Second Quarter 10-Q Reports and in the Proxy and Registration Statement, the Company is engaged in certain claims and litigation. There were no material
developments in any legal proceeding during the third quarter.



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Item 2. CHANGES IN SECURITIES



Not applicable.



Item 3. DEFAULTS UPON SENIOR SECURITIES



Not applicable.



Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS



Not applicable.



Item 5. OTHER INFORMATION



None.



Item 6. EXHIBITS AND REPORTS ON FORM 8-K



| | A. | Exhibits
| | -- | --------



Exhibit 31.1 - Certificate of Richard E. Stoddard, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) filed with this Report.



Exhibit 31.2 - Certificate of James F. Verhey, Chief
Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) filed with this Report.



Exhibit 32.1  Certificate of Richard E. Stoddard, Chief Executive Officer, pursuant to Section 1350, filed with this Report.



Exhibit 32.2 - Certificate of James F. Verhey, Chief Financial Officer, pursuant to Section 1350, filed with this
Report.



| | B. | Reports on Form 8-K.
| | -- | --------------------



On October 23, 2001, the Company filed an 8-K Report with the Securities and Exchange Commission regarding the mailing of the Companys proxy and
registration statement to stockholders of record as of October 8, 2001, for the Companys November 28, 2001 annual stockholders meeting at which, among other things, the Companys conversion proposal will be considered and voted
upon.



(REMAINDER OF
THIS PAGE INTENTIONALLY LEFT BLANK)



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SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this amended Report to be signed on its behalf by the undersigned thereunto duly authorized.



|                        |  |                                    
|----------------------- |  | -----------------------------------
|                        |  | KAISER VENTURES LLC as successor to
|                        |  | KAISER VENTURES INC.               
|                        | 
|Dated: December 2, 2004 |  | /s/ James F. Verhey                
|                        |  | James F. Verhey                    
|                        |  | Principal Financial Officer        



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