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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                          Commission file number 1-3605

                     KAISER ALUMINUM & CHEMICAL CORPORATION
             (Exact name of registrant as specified in its charter)

                                    DELAWARE
                            (State of incorporation)

                                   94-0928288
                      (I.R.S. Employer Identification No.)

             5847 SAN FELIPE, SUITE 2500, HOUSTON, TEXAS 77057-3268
               (Address of principal executive offices) (Zip Code)

                                 (713) 267-3777
              (Registrant's telephone number, including area code)

     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  / /

     At October 31, 2002, the registrant had 46,171,365 shares of Common Stock
outstanding.

                  DIFFERENT SUITE NUMBER AT SAME STREET ADDRESS
                                (Former address)
--------------------------------------------------------------------------------

         KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
                             (Debtor-in-Possession)

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           CONSOLIDATED BALANCE SHEETS
                            (In millions of dollars)

                                                                                   September 30,       December 31,
                                                                                            2002               2001
                                                                                ----------------    ---------------
                                     ASSETS                                        (Unaudited)
Current assets:
   Cash and cash equivalents                                                    $          93.9     $        153.3
   Receivables:
      Trade, less allowance for doubtful receivables of $11.3 and $7.0,
        respectively                                                                      117.3              124.1
      Other                                                                                52.7               88.8
   Inventories                                                                            298.9              313.3
   Prepaid expenses and other current assets                                               38.1               86.2
                                                                                ----------------    ---------------
      Total current assets                                                                600.9              765.7

Investments in and advances to unconsolidated affiliates                                   68.7               63.0
Property, plant, and equipment - net                                                    1,160.7            1,215.4
Other assets                                                                              677.9              706.1
                                                                                ----------------    ---------------

      Total                                                                     $       2,508.2     $      2,750.2
                                                                                ================    ===============
                       LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities not subject to compromise - Current liabilities:
   Accounts payable                                                             $         133.8     $        167.4
   Accrued interest                                                                         2.5               35.4
   Accrued salaries, wages, and related expenses                                           58.5               88.9
   Accrued postretirement medical benefit obligation - current portion                     54.0               62.0
   Other accrued liabilities                                                               40.4              222.0
   Payable to affiliates                                                                   33.3               54.2
   Long-term debt - current portion                                                          .9              173.5
                                                                                ----------------    ---------------
      Total current liabilities                                                           323.4              803.4

Long-term liabilities                                                                      95.0              920.0
Accrued postretirement medical benefit obligation                                          -                 642.2
Long-term debt                                                                             42.8              700.8
                                                                                ----------------    ---------------
                                                                                          461.2            3,066.4

Liabilities subject to compromise                                                       2,592.3               -

Minority interests                                                                        119.2              117.8
Commitments and contingencies
Stockholders' equity:
   Preference stock                                                                          .7                 .7
   Common stock                                                                            15.4               15.4
   Additional capital                                                                   2,454.7            2,437.6
   Accumulated deficit                                                                   (843.0)            (645.2)
   Accumulated other comprehensive income (loss)                                         (100.6)             (67.3)
   Less:  Note receivable from parent                                                  (2,191.7)          (2,175.2)
                                                                                ----------------    ---------------
      Total stockholders' equity                                                         (664.5)            (434.0)
                                                                                ----------------    ---------------
        Total                                                                   $       2,508.2     $      2,750.2
                                                                                ================    ===============
   The accompanying notes to interim consolidated financial statements are an
                       integral part of these statements.

                        STATEMENTS OF CONSOLIDATED INCOME
                                   (Unaudited)
                 (In millions of dollars, except share amounts)

                                                                       Quarter Ended           Nine Months Ended
                                                                       September 30,             September 30,
                                                                  -----------------------   ----------------------
                                                                         2002        2001          2002       2001
                                                                  -----------------------   ----------------------

Net sales                                                         $    348.0  $    430.3    $  1,104.9  $ 1,357.4
                                                                  -----------------------   ----------------------

Costs and expenses:
   Cost of products sold                                               338.7       397.3       1,044.4    1,260.6
   Depreciation and amortization                                        22.6        23.1          67.6       66.6
   Selling, administrative, research and development, and general       27.0        24.5          97.5       77.1
   Non-recurring operating charges (benefits), net                      25.3        21.3          34.4     (198.9)
                                                                  -----------------------   ----------------------
        Total costs and expenses                                       413.6       466.2       1,243.9    1,205.4
                                                                  -----------------------   ----------------------

Operating income (loss)                                                (65.6)      (35.9)       (139.0)     152.0

Other income (expense):
   Interest expense (excluding unrecorded contractual interest
      expense of $23.8 and $60.3 in 2002)                               (2.2)      (27.2)        (18.2)     (82.2)
   Reorganization items                                                 (8.5)         -          (24.6)         -
   Gain on sale of interest in QAL                                        -        163.6            -       163.6
   Other - net                                                          (1.4)       16.3           1.1      (28.1)
                                                                  -----------------------   ----------------------

Income (loss) before income taxes and minority interests               (77.7)      116.8        (180.7)     205.3

Provision for income taxes                                              (7.0)      (49.4)        (21.4)     (83.9)

Minority interests                                                       1.4         1.2           4.3        3.0
                                                                  -----------------------   ----------------------

Net income (loss)                                                 $    (83.3) $     68.6    $   (197.8) $   124.4
                                                                  =======================   ======================

   The accompanying notes to interim consolidated financial statements are an
                       integral part of these statements.

               STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY AND
                           COMPREHENSIVE INCOME (LOSS)
                                   (Unaudited)
                            (In millions of dollars)

                  For the Nine Months Ended September 30, 2002

                                                                                     Accumulated        Note
                                                                             Accu-         Other  Receivable
                                      Preference     Common  Additional    mulated Comprehensive        From
                                           Stock      Stock     Capital    Deficit Income (Loss)      Parent     Total
----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001            $      .7  $    15.4  $  2,437.6  $  (645.2) $      (67.3) $ (2,175.2) $ (434.0)
   Net loss                                   -          -          -      (197.8)          -            -     (197.8)
   Unrealized net decrease in value
      of derivative instruments
      arising during the period prior
      to settlement                           -          -          -           -         (12.1)         -      (12.1)
   Less reclassification adjustment
      for net realized gains on
      derivative instruments included
      in net income (including net
      realized gains of $6.3 for the
      quarter ended September 30,
      2002)                                   -          -          -           -         (21.2)         -      (21.2)
                                                                                                             ---------
   Comprehensive income                       -          -          -           -           -            -     (231.1)
   Interest on note receivable from
      parent                                  -          -        16.5          -           -         (16.5)        -
   Contributions for LTIP shares              -          -          .6          -           -            -         .6
                                      ---------- ---------- ----------- ---------- ------------- ----------- ---------

BALANCE, September 30, 2002           $      .7  $    15.4  $  2,454.7  $  (843.0) $     (100.6) $ (2,191.7) $ (664.5)
                                      ========== ========== =========== ========== ============= =========== =========

                  For the Nine Months Ended September 30, 2001

                                                                                     Accumulated        Note
                                                                             Accu-         Other  Receivable
                                      Preference     Common  Additional    mulated Comprehensive        From
                                           Stock      Stock     Capital    Deficit Income (Loss)      Parent     Total
----------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000            $      .7  $    15.4  $  2,300.8  $  (188.1) $       (1.8) $ (2,040.0) $   87.0
   Net income                                 -          -          -       124.4           -            -      124.4
   Cumulative effect of accounting
      change, net of income tax
      provision of $.5                        -          -          -           -           1.8          -        1.8
   Unrealized net gain on derivative
      instruments arising during the
      period, net of income tax
      provision of $16.8 (including
      unrealized net gain of $.3,
      net of tax, for the quarter
      ended September 30, 2001)               -          -          -           -          28.8          -       28.8
   Less reclassification adjustment
      for net realized gains on
      derivative instruments included
      in net income, net of income tax
      provision of $1.0 (including
      realized net gain of $.3,
      net of tax, for the quarter
      ended September 30, 2001)               -          -          -           -          (3.0)         -       (3.0)
                                                                                                             ---------
   Comprehensive income                       -          -          -           -           -            -      152.0
   Interest on note receivable from
      parent                                  -          -       100.9          -           -        (100.9)        -
   Contributions for LTIP shares              -          -         1.1          -           -            -        1.1
   Dividends                                  -          -          -         (.1)          -            -        (.1)
                                      ---------- ---------- ----------- ---------- ------------- ----------- ---------

BALANCE, September 30, 2001           $      .7  $    15.4  $  2,402.8  $   (63.8) $       25.8  $ (2,140.9) $  240.0
                                      ========== ========== =========== ========== ============= =========== =========

   The accompanying notes to interim consolidated financial statements are an
                       integral part of these statements.

                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                                   (Unaudited)
                            (In millions of dollars)

                                                                                                    Nine Months Ended
                                                                                                      September 30,
                                                                                                 -----------------------
                                                                                                       2002         2001
                                                                                                 -----------------------
Cash flows from operating activities:
   Net income (loss)                                                                             $  (197.8)   $   124.4
   Adjustments to reconcile net income (loss) to net cash (used) provided by
      operating activities:
      Depreciation and amortization (including deferred financing costs of $2.7 and $4.3)             70.3         70.9
      Non-cash charges for reorganization items, non-recurring operating items and other              37.2          20.7
      Gains - sale of real estate (2002); sale of QAL interest and real estate (2001)                 (4.0)      (169.3)
      Equity in (earnings) loss of unconsolidated affiliates, net of distributions                    (6.7)         5.4
      Minority interests                                                                              (4.3)        (3.0)
      Decrease in trade and other receivables                                                         43.0        135.6
      Decrease in inventories, excluding LIFO adjustments and non-recurring items                      8.3         50.2
      Decrease (increase) in prepaid expenses and other current assets                                42.4         10.1
      Increase (decrease) in accounts payable (associated with operating activities)
        and accrued interest                                                                          31.3        (56.1)
      Decrease (increase) in other accrued liabilities                                               (36.4)        (7.6)
      Decrease in payable to affiliates                                                              (20.3)        (2.0)
      (Decrease) increase in accrued and deferred income taxes                                       (11.2)        41.3
      Net cash impact of changes in long-term assets and liabilities                                  14.5         18.7
      Other                                                                                           (9.2)         6.4
                                                                                                 -----------------------
        Net cash provided by operating activities                                                    (42.9)       245.7
                                                                                                 -----------------------

Cash flows from investing activities:
   Capital expenditures (including $70.6 related to Gramercy facility in 2001)                       (29.2)      (120.1)
   Decrease in accounts payable - Gramercy-related capital expenditures                                  -        (29.9)
   Net proceeds from disposition:  equipment and other (2002);
      QAL interest and real estate (2001)                                                             20.8        170.1
                                                                                                 -----------------------
        Net cash provided by investing activities                                                     (8.4)        20.1
                                                                                                 -----------------------

Cash flows from financing activities:
   Incurrence of financing costs                                                                      (8.1)           -
   Repayments under revolving credit facility, net                                                       -        (30.4)
   Repayments of long-term debt                                                                          -        (41.2)
   Redemption of minority interests' preference stock                                                    -         (5.5)
                                                                                                 -----------------------
        Net cash used by financing activities                                                         (8.1)       (77.1)
                                                                                                 -----------------------

Net (decrease) increase in cash and cash equivalents during the period                               (59.4)       188.7
Cash and cash equivalents at beginning of period                                                     153.3         23.4
                                                                                                 -----------------------
Cash and cash equivalents at end of period                                                       $    93.9    $   212.1
                                                                                                 =======================

Supplemental disclosure of cash flow information:
   Interest paid, net of capitalized interest of $.9 and $3.3                                    $     4.4    $    91.1
   Income taxes paid                                                                                  31.3         41.6

   The accompanying notes to interim consolidated financial statements are an
                       integral part of these statements.

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
         (In millions of dollars, except prices and per share amounts)

1.    REORGANIZATION PROCEEDINGS

General. On February 12, 2002, Kaiser Aluminum & Chemical Corporation (the
"Company"), its parent company, Kaiser Aluminum Corporation ("Kaiser") and 13 of
its wholly owned subsidiaries filed separate voluntary petitions in the United
States Bankruptcy Court for the District of Delaware (the "Court") for
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Code"). On March 15, 2002, two additional wholly owned subsidiaries of the
Company filed petitions. The Company and its 15 subsidiaries that have filed
petitions are collectively referred to herein as the "Debtors" and the Chapter
11 proceedings of these entities are collectively referred to herein as the
"Cases." For purposes of these financial statements, the term "Filing Date"
shall mean, with respect to any particular Debtor, the date on which such Debtor
filed its Case. The wholly owned subsidiaries of the Company included in the
Cases are: Kaiser Bellwood Corporation, Kaiser Aluminium International, Inc.,
Kaiser Aluminum Technical Services, Inc., Kaiser Alumina Australia Corporation
(and its wholly owned subsidiary, Kaiser Finance Corporation) and ten other
entities with limited balances or activities. None of the Company's non-U.S.
affiliates were included in the Cases. The Cases are being jointly administered
by the Court with the Debtors managing their businesses in the ordinary course
as debtors-in-possession, subject to the control and supervision of the Court.

The necessity for filing the Cases was attributable to the liquidity and cash
flow problems of the Company arising in late 2001 and early 2002. The Company
was facing significant near-term debt maturities at a time of unusually weak
aluminum industry business conditions, depressed aluminum prices and a broad
economic slowdown that was further exacerbated by the events of September 11,
2001. In addition, the Company had become increasingly burdened by asbestos
litigation (see Note 8) and growing legacy obligations for retiree medical and
pension costs. The confluence of these factors created the prospect of
continuing operating losses and negative cash flow, resulting in lower credit
ratings and an inability to access the capital markets.

The outstanding principal of, and accrued interest on, all long-term debt of the
Debtors became immediately due and payable as a result of the commencement of
the Cases. However, the vast majority of the claims in existence at the Filing
Date (including claims for principal and accrued interest and substantially all
legal proceedings) are stayed (deferred) during the pendency of the Cases. In
connection with the filing of the Cases, the Court, upon motion by the Debtors,
authorized the Debtors to pay or otherwise honor certain unsecured pre-Filing
Date claims, including employee wages and benefits and customer claims in the
ordinary course of business, subject to certain limitations. In July 2002, the
Court also issued a final order authorizing the Company to fund the cash
requirements of its foreign joint ventures in the ordinary course of business
and to continue using the Company's existing cash management systems. The
Debtors also have the right to assume or reject executory contracts existing
prior to the Filing Date, subject to Court approval and certain other
limitations. In this context, "assumption" means that the Debtors agree to
perform their obligations and cure certain existing defaults under an executory
contract and "rejection" means that the Debtors are relieved from their
obligations to perform further under an executory contract and are subject only
to a claim for damages for the breach thereof. Any claim for damages resulting
from the rejection of an executory contract is treated as a general unsecured
claim in the Cases.

Generally, pre-Filing Date claims, including certain contingent or unliquidated
claims, against the Debtors will fall into two categories: secured and
unsecured. Under the Code, a creditor's claim is treated as secured only to the
extent of the value of the collateral securing such claim, with the balance of
such claim being treated as unsecured. Unsecured and partially secured claims do
not accrue interest after the Filing Date. A fully secured claim, however, does
accrue interest after the Filing Date until the amount due and owing to the
secured creditor, including interest accrued after the Filing Date, is equal to
the value of the collateral securing such claim. The amount and validity of
pre-Filing Date contingent or unliquidated claims, although presently unknown,
ultimately may be established by the Court or by agreement of the parties. As a
result of the Cases, additional pre-Filing Date claims may be asserted, some of
which may be significant.

On October 29, 2002, the Court set January 31, 2003 as the last date by which
holders of pre-Filing Date claims against the Debtors (other than
asbestos-related personal injury claims and certain hearing loss claims) must
file their claims. Any holder of a claim that is required to file a claim by
such date and does not do so may be barred from asserting such claim against any
of the Debtors and, accordingly, may not be able to participate in any
distribution in any of the Cases on account of such claim. Because the January
31, 2003 bar date has not yet occurred, no provision has been included in the
accompanying financial statements for claims that may be filed. The January 31,
2003 bar date does not apply to asbestos-related personal injury claims, for
which the Debtors reserve the right to establish a separate bar date at a later
time. A separate bar date of June 30, 2003 has been set for certain hearing loss
claims.

The Company's objective in the Cases is to achieve the highest possible
recoveries for all creditors and stockholders and to continue the operation of
their businesses. However, there can be no assurance that the Debtors will be
able to attain these objectives or to achieve a successful reorganization.
Further, there can be no assurance that the liabilities of the Debtors will not
be found in the Cases to exceed the fair value of their assets. This could
result in claims being paid at less than 100% of their face value and the equity
of the Company's stockholders being diluted or cancelled.

Under the Code, the rights of and ultimate payments to pre-Filing Date creditors
and stockholders may be substantially altered. At this time, it is not possible
to predict the outcome of the Cases, in general, or the effect of the Cases on
the businesses of the Debtors or on the interests of creditors and stockholders.

Two creditors' committees, one representing the unsecured creditors and the
other representing the asbestos claimants, have been appointed in the Cases and,
in accordance with the provisions of the Code, will have the right to be heard
on all matters that come before the Court. The Debtors expect that the appointed
committees, together with a legal representative of potential future asbestos
claimants to be appointed by the Court, will play important roles in the Cases
and the negotiation of the terms of any plan or plans of reorganization. The
Debtors are required to bear certain of the committees' costs and expenses,
including those of their counsel and other advisors.

The Debtors anticipate that substantially all liabilities of the Debtors as of
the Filing Date will be resolved under one or more plans of reorganization to be
proposed and voted on in the Cases in accordance with the provisions of the
Code. Although the Debtors intend to file and seek confirmation of such a plan
or plans, there can be no assurance as to when the Debtors will file such a plan
or plans, or that such plan or plans will be confirmed by the Court and
consummated.

As provided by the Code, the Debtors had the exclusive right to propose a plan
of reorganization for 120 days following the Filing Date. The Court has
subsequently approved an extension of the exclusivity period through December
12, 2002. The Company intends to ask the Court for a further extension of the
exclusivity period to April 30, 2003. Extensions of this nature are believed to
be routine in complex cases such as the Debtors' Cases. However, no assurance
can be given that such extension, or any future extension requests, will be
granted by the Court. If the Debtors fail to file a plan of reorganization
during the exclusivity period, or if such plan is not accepted by the requisite
numbers of creditors and equity holders entitled to vote on the plan, other
parties in interest in the Cases may be permitted to propose their own plan(s)
of reorganization for the Debtors.

Financial Statement Presentation. The accompanying consolidated financial
statements have been prepared in accordance with Statement of Position 90-7
("SOP 90-7"), Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code, and on a going concern basis, which contemplates the
realization of assets and the liquidation of liabilities in the ordinary course
of business. However, as a result of the Cases, such realization of assets and
liquidation of liabilities are subject to a significant number of uncertainties.

Financial Information. Condensed consolidating financial statements of the
Debtors and non-Debtors are set forth below:

                     CONDENSED CONSOLIDATING BALANCE SHEETS
                               SEPTEMBER 30, 2002

                                                                                           Consolidation/
                                                                                             Elimination
                                                           Debtors         Non-Debtors         Entries        Consolidated
                                                      ----------------   ---------------  ----------------   --------------

Current assets                                        $         433.6    $        167.3   $          -       $       600.9
Investments in subsidiaries and affiliates                    1,402.1              33.4          (1,366.8)            68.7
Intercompany receivables (payables)                            (977.0)            977.0              -                 -
Property and equipment, net                                     765.9             394.8              -             1,160.7
Deferred income taxes                                           (65.5)             65.5              -                 -
Other assets                                                    668.3               9.6              -               677.9
                                                      ----------------   ---------------  ----------------   --------------
                                                      $       2,227.4    $      1,647.6   $      (1,366.8)   $     2,508.2
                                                      ================   ===============  ================   ==============

Liabilities not subject to compromise -
      Current liabilities                             $         225.9    $        109.3   $         (11.8)   $       323.4
      Other long-term liabilities                                52.9              42.1              -                95.0
      Long-term debt                                             20.8              22.0              -                42.8
Liabilities subject to compromise                             2,592.3              -                 -             2,592.3
Minority interests                                               -                100.4              18.8            119.2
Stockholders' equity                                           (664.5)          1,373.8          (1,373.8)          (664.5)
                                                      ----------------   ---------------  ----------------   --------------
                                                      $       2,227.4    $      1,647.6   $      (1,366.8)   $     2,508.2
                                                      ================   ===============  ================   ==============

               CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002

                                                                                           Consolidation/
                                                                                             Elimination
                                                           Debtors         Non-Debtors         Entries        Consolidated
                                                      ----------------   ---------------  ----------------   --------------

Net sales                                             $         309.5    $        125.5   $         (87.0)   $       348.0
Costs and expenses                                              377.9             122.7             (87.0)           413.6
                                                      ----------------   ---------------  ----------------   --------------
Operating income (loss)                                         (68.4)              2.8              -               (65.6)
Interest expense                                                 (2.0)              (.2)             -                (2.2)
Reorganization items                                             (8.5)             -                 -                (8.5)
Other income (expense), net                                       (.9)              (.5)             -                (1.4)
Provision for income tax                                         (2.3)             (4.7)             -                (7.0)
Minority interests                                               -                  1.4              -                 1.4
Equity in income of subsidiaries                                 (1.2)             -                  1.2              -
                                                      ----------------   ---------------  ----------------   --------------
Net income (loss)                                     $         (83.3)   $         (1.2)  $           1.2    $       (83.3)
                                                      ================   ===============  ================   ==============

               CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

                                                                                           Consolidation/
                                                                                             Elimination
                                                           Debtors         Non-Debtors         Entries        Consolidated
                                                      ----------------   ---------------  ----------------   --------------

Net sales                                             $         996.2    $        387.1   $        (278.4)   $     1,104.9
Costs and expenses                                            1,143.4             378.9            (278.4)         1,243.9
                                                      ----------------   ---------------  ----------------   --------------
Operating income (loss)                                        (147.2)              8.2              -              (139.0)
Interest expense                                                (17.2)             (1.0)             -               (18.2)
Reorganization items                                            (24.6)             -                 -               (24.6)
Other income (expense), net                                       2.1              (1.0)             -                 1.1
Provision for income tax                                         (6.0)            (15.4)             -               (21.4)
Minority interests                                               -                  4.3              -                 4.3
Equity in income of subsidiaries                                 (4.9)             -                  4.9              -
                                                      ----------------   ---------------  ----------------   --------------
Net income (loss)                                     $        (197.8)   $         (4.9)  $           4.9    $      (197.8)
                                                      ================   ===============  ================   ==============

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

                                                                                           Consolidation/
                                                                                             Elimination
                                                           Debtors         Non-Debtors         Entries        Consolidated
                                                      ----------------   ---------------  ----------------   --------------

Net cash provided (used) by:
      Operating activities                            $         (67.2)   $         24.3   $          -       $       (42.9)
      Investing activities                                       15.1             (23.5)             -                (8.4)
      Financing activities                                       (8.1)             -                 -                (8.1)
                                                      ----------------   ---------------  ----------------   --------------
Net (decrease) increase in cash and cash equivalents
      during the period                                         (60.2)               .8              -               (59.4)
Cash and cash equivalents at beginning of period                151.6               1.7              -               153.3
                                                      ----------------   ---------------  ----------------   --------------
Cash and cash equivalents at end of period            $          91.4    $          2.5   $          -       $        93.9
                                                      ================   ===============  ================   ==============

Classification of Liabilities as "Liabilities Not Subject to Compromise" Versus
"Liabilities Subject to Compromise." Liabilities not subject to compromise
include: (1) liabilities incurred after the Filing Date of the Cases; (2)
pre-Filing Date liabilities that the Debtors expect to pay in full, including
priority tax and employee claims and certain environmental liabilities, even
though certain of these amounts may not be paid until a plan of reorganization
is approved; and (3) pre-Filing Date liabilities that have been approved for
payment by the Court and that the Debtors expect to pay (in advance of a plan of
reorganization) over the next twelve month period in the ordinary course of
business, including certain employee related items (salaries, vacation and
medical benefits), claims subject to a currently existing collective bargaining
agreement, and post-retirement medical and other costs associated with retirees.
During October 2002, the Company announced that it intended to meet with the
Pension Benefit Guaranty Corporation ("PBGC") and its labor unions to discuss
alternative solutions to pension plan funding issues that would help facilitate
the Company's emergence from the Cases (see Note 11). As a result, pension
amounts that were previously expected to be funded within the next twelve months
and which were, therefore, previously classified as liabilities not subject to
compromise in the consolidated balance sheet as of June 30, 2002, are now
classified as liabilities subject to compromise in the accompanying consolidated
balance sheet as of September 30, 2002.

Liabilities subject to compromise refer to all other pre-Filing Date liabilities
of the Debtors. The amounts of the various categories of liabilities that are
subject to compromise are set forth below. These amounts represent the Company's
estimates of known or probable pre-Filing Date claims that are likely to be
resolved in connection with the Cases. Such claims remain subject to future
adjustments. There can be no assurance that the liabilities of the Debtors will
not be found in the Cases to exceed the fair value of their assets. This could
result in claims being paid at less than 100% of their face value and the equity
of the Company's stockholders being diluted or cancelled.

The amounts subject to compromise at September 30, 2002 consisted of the
following items:

Items, absent the Cases, that would have been considered current at September 30, 2002:
   Accounts payable                                                                    $      54.1
   Accrued interest                                                                           44.0
   Accrued salaries, wages and related expenses(2)                                            48.0
   Other accrued liabilities (including asbestos liability of $130.0 - Note 8)               175.0
Items,absent the Cases, that would have been considered long-term at September
      30, 2002:
   Accrued post-retirement medical obligation                                                649.4
   Long-term liabilities(1)                                                                  791.6
   Debt (Note 5)                                                                             830.2
                                                                                       ------------
                                                                                       $   2,592.3
                                                                                       ============

(1)   Long-term liabilities include pension liabilities of $196.2, environmental
      liabilities of $21.7 (Note 8) and asbestos liabilities of $480.1 (Note 8).
(2)   Accrued salaries, wages and related expenses represents estimated minimum
      pension contributions for the twelve months ending September 30, 2003. See
      above and Note 11.

The classification of liabilities "not subject to compromise" versus liabilities
"subject to compromise" is based on currently available information and
analysis. As the Cases proceed and additional information and analysis is
completed or, as the Court rules on relevant matters, the classification of
amounts between these two categories may change. The amount of any such changes
could be significant.

Reorganization Items. Reorganization items under the Cases are expense or income
items that are incurred or realized by the Company because it is in
reorganization. These items include, but are not limited to, professional fees
and similar types of expenses incurred directly related to the Cases, loss
accruals or gains or losses resulting from activities of the reorganization
process, and interest earned on cash accumulated by the Debtors because they are
not paying their pre-petition liabilities. For the quarter and nine-month
periods ended September 30, 2002, reorganization items were as follows:

                                                                              Quarter           Nine Months
                                                                           --------------      --------------
Professional fees                                                          $         8.9       $        19.8
Accelerated amortization of certain deferred financing costs                         -                   4.5
Interest income                                                                      (.5)               (1.6)
Other                                                                                 .1                 1.9
                                                                           --------------      --------------
                                                                           $         8.5       $        24.6
                                                                           ==============      ==============

As required by SOP 90-7, in the first quarter of 2002, the Company recorded the
Debtors' pre-petition debt that is subject to compromise at the allowed amount,
as defined by SOP 90-7. Accordingly, the Company accelerated the amortization of
debt-related premium, discount and costs attributable to this debt and recorded
a net expense of approximately $4.5 in Reorganization items during the first
quarter of 2002.

2.    GENERAL

This Quarterly Report on Form 10-Q should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Going Concern. The interim consolidated financial statements of the Company have
been prepared on a "going concern" basis which contemplates the realization of
assets and the liquidation of liabilities in the ordinary course of business;
however, as a result of the commencement of the Cases, such realization of
assets and liquidation of liabilities are subject to a significant number of
uncertainties. Specifically, the interim consolidated financial statements do
not present: (a) the realizable value of assets on a liquidation basis or the
availability of such assets to satisfy liabilities, (b) the amount which will
ultimately be paid to settle liabilities and contingencies which may be allowed
in the Cases, or (c) the effect of any changes which may occur in connection
with the Debtors' capitalizations or operations of the Debtors as a result of a
plan of reorganization. Because of the ongoing nature of the Cases, the
discussions and consolidated financial statements contained herein are subject
to material uncertainties.

Principles of Consolidation. The Company is the principal operating subsidiary
of Kaiser. Kaiser is a subsidiary of MAXXAM Inc. ("MAXXAM"). MAXXAM and one of
its wholly owned subsidiaries together own approximately 62% of Kaiser's common
stock, with the remaining approximately 38% publicly held.

The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and the rules and regulations of the
Securities and Exchange Commission. Accordingly, these financial statements do
not include all of the disclosures required by GAAP for complete financial
statements. In the opinion of management, the unaudited interim consolidated
financial statements furnished herein include all adjustments, all of which are
of a normal recurring nature unless otherwise noted, necessary for a fair
statement of the results for the interim periods presented.

The preparation of financial statements in accordance with GAAP requires the use
of estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities known to exist as
of the date the financial statements are published, and the reported amounts of
revenues and expenses during the reporting period. Uncertainties with respect to
such estimates and assumptions are inherent in the preparation of the Company's
consolidated financial statements; accordingly, it is possible that the actual
results could differ from these estimates and assumptions, which could have a
material effect on the reported amounts of the Company's consolidated financial
position and results of operations.

Operating results for the quarter and nine-month periods ended September 30,
2002, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2002.

Derivative Financial Instruments. Hedging transactions using derivative
financial instruments are primarily designed to mitigate the Company's exposure
to changes in prices for certain of the products which the Company sells and
consumes and, to a lesser extent, to mitigate the Company's exposure to change
in foreign currency exchange rates. The Company does not utilize derivative
financial instruments for trading or other speculative purposes. The Company's
derivative activities are initiated within guidelines established by management
and approved by the Company's board of directors. Hedging transactions are
executed centrally on behalf of all of the Company's business segments to
minimize transaction costs, monitor consolidated net exposure and allow for
increased responsiveness to changes in market factors.

See Note 2 of Notes to Consolidated Financial Statements in the Company's Form
10-K for the year ended December 31, 2001 and Note 9 for additional information
regarding derivative financial instruments.

3.    INVENTORIES

The classification of inventories is as follows:

                                                                                September 30,   December  31,
                                                                                     2002            2001
                                                                                --------------  --------------
Finished fabricated aluminum products                                           $        31.7   $        30.4
Primary aluminum and work in process                                                     73.6           108.3
Bauxite and alumina                                                                      92.8            77.7
Operating supplies and repair and maintenance parts                                     100.8            96.9
                                                                                --------------  --------------
      Total                                                                     $       298.9   $       313.3
                                                                                ==============  ==============

Substantially all product inventories are stated at last-in, first-out (LIFO)
cost, not in excess of market. Replacement cost is not in excess of LIFO cost.

Inventories at September 30, 2002, have been reduced by (a) a third quarter 2002
LIFO inventory charge of $3.0 (included in cost of products sold) as reductions
in inventory volumes were in inventory layers with higher costs than current
market prices , (b) a third quarter 2002 net charge of $1.5 (in non-recurring
operating charges (benefits), net - see Note 12) to write-down certain alumina
inventories at the Company's Northwest smelters to their net realizable values
based on the Company's intent to sell such inventories because they did not have
any economic near-term use, and (c) a LIFO inventory charge of $1.6 (included in
non-recurring operating charges (benefits), net in the second quarter of 2002 -
see Note 12) which resulted from the exit of the lid and tab stock and brazing
sheet product lines at the Company's Trentwood facility. See Note 5 of Notes to
Consolidated Financial Statements in the Company's Form 10-K for the year ended
December 31, 2001 for additional information regarding the product lines exit.

4.    PACIFIC NORTHWEST OPERATING LEVEL

Future Power Supply and its Impact on Future Operating Rate. During October
2000, the Company signed a new power contract with the Bonneville Power
Administration ("BPA") under which the BPA, starting October 1, 2001, was to
provide the Company's operations in the State of Washington with approximately
290 megawatts of power through September 2006. The contract provided the Company
with sufficient power to fully operate the Company's Trentwood facility (which
requires up to approximately 40 megawatts), as well as approximately 40% of the
combined capacity of the Company's Mead and Tacoma aluminum smelting operations,
which have been curtailed since the last half of 2000.

Rates under the BPA contract during the period October 2001 through September
2002 were approximately 46% higher than power costs under the prior contract and
such rates were subject to changes in future periods. As such, the Company could
not predict what rates would be charged in future periods. The contract also
included a take-or-pay requirement and clauses under which the Company's power
allocation could be curtailed, or its costs increased, in certain instances.
Under the contract, the Company could only remarket its power allocation to
reduce or eliminate take-or-pay obligations. The Company was not entitled to
receive any profits from any such remarketing efforts. During October 2001, the
Company and the BPA reached an agreement whereby: (a) the Company would not be
obligated to pay for potential take-or-pay obligations in the first year of the
contract; and (b) the Company retained its rights to restart its smelter
operations at any time. In return for the foregoing, the Company granted the BPA
certain limited power interruption rights in the first year of the contract if
the Company operated its Northwest smelters. Under the BPA contract, the Company
could have been liable for take-or-pay costs under the BPA contract beginning in
October 2002 and such amounts could have been significant. The Company estimated
that, based on recent market prices for electricity, the monthly take-or-pay
obligation beginning October 2002 would have been in the range of up to $1.0 to
$2.0. The actual amount of any such obligation would be dependent upon the then
prevailing prices of electricity during the contract period.

As a part of the reorganization process, the Company concluded that it was in
its best interest to reject the BPA contract as permitted by the Code. As such,
with the authorization of the Court, the Company rejected the BPA contract on
September 30, 2002. The contract rejection gives rise to a pre-petition claim by
the BPA that is expected to be settled in the overall context of the Debtors'
plan of reorganization. Accordingly, any payments that may be required as a
result of the rejection of the BPA contract are expected to only be made upon
the Company's emergence from the Cases. The amount of the BPA's claim in respect
of the contract rejection has not been determined and, as such, no provision has
been made for the claim in the accompanying financial statements. The amount of
the BPA claim will be determined either through a negotiated settlement,
litigation or a computation of prevailing power prices over the contract period.
The Company has entered into a short-term contract (pending the completion of a
longer term arrangement) with an alternate supplier to provide the power
necessary to operate its Trentwood facility.

The restart of a portion of the Company's Northwest smelters' capacity would
require the purchase of additional power from available sources. For the Company
to make such a decision, it would have to be able to purchase such power at a
reasonable price in relation to current and expected market conditions for a
sufficient term to justify its restart costs, which could be significant
depending on the number of lines restarted and the length of time between the
shutdown and restart. Given recent primary aluminum prices and the forward price
of power in the Northwest, it is unlikely that the Company would operate more
than a portion of its Northwest smelter capacity in the near future. If the
Company were to restart all or a portion of its Northwest smelting capacity, it
would take between three to six months to reach the full operating rate for such
operations, depending upon the number of lines restarted. Even after achieving
the full operating rate, operating only a portion of the Northwest capacity
would result in production/cost inefficiencies such that operating results
would, at best, be breakeven to modestly negative at long-term primary aluminum
prices. However, operating at such a reduced rate could, depending on prevailing
economics, result in improved cash flows as opposed to remaining curtailed and
incurring the Company's fixed and continuing labor and other costs. This is
because the Company is contractually liable for certain severance, supplemental
unemployment benefits and early retirement benefits for laid-off workers under
the Company's contract with the United Steelworkers of America ("USWA") during
periods of curtailment. All such contractual compensation costs have been
accrued for all USWA workers in excess of those expected to be required to run
the Northwest smelters at an operating rate of up to 40%. These costs were
triggered periodically through September 2002. Costs associated with the USWA
workers that the Company estimates would be required to operate the smelters at
an operating rate of up to 40% ($3.3 of which was reflected in the third quarter
of 2001) have been accrued through early 2003, as the Company does not currently
expect to restart the Northwest smelters prior to that date. If such workers are
not recalled prior to the end of the first quarter of 2003, the Company could
become liable for additional early retirement costs. Such costs could be
significant and could adversely impact the Company's operating results and, over
the long-term, its liquidity. The present value of such costs, which would
likely be paid over an extended period of time, could be in the $60.0 to $65.0
range.

The Company continues to evaluate its options for minimizing the near-term
negative cash flow at its Mead and Tacoma facilities. The Company is also
exploring how to optimize the use and/or value of the facilities (which had a
carrying value of approximately $143.0 at September 30, 2002) in connection with
the development of a plan of reorganization. The Company is conducting a study
of the long-term competitive position of the Mead and Tacoma facilities and
potential options for these facilities. A preliminary draft report from this
study is expected to be completed during November 2002. Once the Company has
received the preliminary results of the study, it plans to analyze the findings
and expects to meet with the USWA and other parties prior to making its
determination as to any appropriate action(s). It is possible that the outcome
of this study and the Company's ongoing work on developing a plan of
reorganization could impact the Company's view of the recoverability of the
carrying value of the facilities. During October 2002, the Company obtained a
waiver to the financial covenants of its post-petition credit agreement to
exclude the impact of up to $230.0 of possible charges that could result from a
change in its assessment regarding the recoverability of the Washington smelters
(including the $60.0 to $65.0 of possible early retirement charges discussed
above). See Note 5 for additional information concerning the post-petition
credit agreement.

Power Sales. In response to the unprecedented high market prices for power in
the Pacific Northwest, the Company (first partially and then fully) curtailed
the primary aluminum production at the Tacoma and Mead, Washington smelters
during the last half of 2000, all of 2001 and the first nine months of 2002. As
a result of the curtailments, as permitted under the prior BPA contract, the
Company, in a series of transactions, sold the power that it had under contract
through September 30, 2001 (the end of the prior contract period). In connection
with such power sales during the first nine months of 2001, the Company recorded
a net pre-tax gain of approximately $6.5 during the quarter ended September 30,
2001 and net pre-tax gains of approximately $229.2 during the nine months ended
September 30, 2001. Gross proceeds from the power sales were offset by
employee-related expenses and other fixed commitments. The net results from the
sales were reflected as Non-recurring operating charges (benefits), net (see
Note 12).

5.    DEBT

Debt consists of the following:

                                                                                   September 30,     December 31,
                                                                                       2002              2001
--------------------------------------------------------------------------------  ---------------  ----------------
Secured:
      Post-Petition Credit Agreement                                              $         -                N/A
      Credit Agreement                                                                     N/A     $          -
      Alpart CARIFA Loans - (fixed and variable rates) due 2007, 2008                       22.0              22.0
      7.6% Solid Waste Disposal Revenue Bonds due 2027                                      19.0              19.0
      Other non-Debtor borrowings (fixed rate)                                               2.7               2.7
Unsecured (reflected as Liabilities Subject to Compromise):
      9 7/8% Senior Notes due 2002                                                         172.8             172.8
      10 7/8% Senior Notes due 2006                                                        225.0             225.4
      12 3/4% Senior Subordinated Notes due 2003                                           400.0             400.0
      Other borrowings (fixed and variable rates)                                           32.4              32.4
                                                                                  ---------------  ----------------

Total                                                                                      873.9             874.3

Less - Current portion                                                                        .9             173.5
        Pre-Filing Date claims included in liabilities subject to
            compromise (Note 1)                                                            830.2              -
                                                                                  ---------------  ----------------
Long-term debt                                                                    $         42.8   $         700.8
                                                                                  ===============  ================

DIP Facility. On February 12, 2002, the Company and Kaiser entered into a
post-petition credit agreement with a group of lenders for debtor-in-possession
financing (the "DIP Facility"). The Court signed a final order approving the DIP
Facility in March 2002. The DIP Facility provides for a secured, revolving line
of credit through the earlier of February 12, 2004, the effective date of a plan
of reorganization or voluntary termination by the Company. Under the DIP
Facility, the Company is able to borrow amounts by means of revolving credit
advances and to have issued for its benefit letters of credit (up to $125.0) in
an aggregate amount equal to the lesser of $300.0 or a borrowing base relating
to eligible accounts receivable, eligible inventory and eligible fixed assets
reduced by certain reserves, as defined in the DIP Facility agreement. The DIP
Facility is guaranteed by the Company, the Debtor subsidiaries and two wholly
owned non-Debtor subsidiaries, Kaiser Jamaica Corporation and Alpart Jamaica
Inc. Interest on any outstanding balances will bear a spread over either a base
rate or LIBOR, at the Company's option. The DIP Facility requires the Company to
comply with certain financial covenants and places restrictions on the Company's
ability to, among other things, incur debt and liens, make investments, pay
dividends, undertake transactions with affiliates, make capital expenditures,
and enter into unrelated lines of business. As of September 30, 2002, $176.6 was
available to the Company under the DIP Facility (of which $87.7 could be used
for additional letters of credit) and no borrowings were outstanding under the
revolving credit facility.

During October 2002, the Company obtained a waiver to the financial covenants of
the DIP Facility that excludes up to $230.0 of possible charges that could
result from a change in its assessment of recoverability regarding the
Washington smelters (see Note 4). The waiver covers all reporting periods
through December 31, 2002. The Company and the lenders to the DIP Facility have
agreed to the terms of an amendment that will permanently exclude the $230.0 of
charges from the financial covenant computations. The amendment will also (a)
allow for the sale of certain non-core and non-operating properties, subject to
certain possible reductions in the fixed asset component of the borrowing base,
(b) clarify the Company's ability to make investments in or to provide certain
guarantees in respect of certain debt obligations of Queensland Alumina Limited
("QAL"), in which the Company owns a 20% interest (see Note 8), (c) adjust a
financial compliance test under the DIP Facility to reflect more recent market
trends, (d) exclude certain non-cash, restructuring and benefit-related charges
reflected in year-to-date results and certain possible additional charges (see
Note 4) from the calculation of one of the financial covenants and (e) to
clarify that the adverse ruling received in respect of certain unfair labor
practices ("ULPs" - see Note 8) does not represent a material adverse effect on
the DIP Facility as long as such ruling is subject to appeal and no amounts are
paid during the term of the DIP Facility. The amendment is expected to be filed
with the Court during November 2002 and, while no assurances can be given, is
expected to be approved at the regularly scheduled December 19, 2002 Court
hearing.

Credit Agreement. Prior to the February 12, 2002 Filing Date, the Company and
Kaiser had a credit agreement, as amended (the "Credit Agreement"), which
provided a secured, revolving line of credit. The Credit Agreement terminated on
the Filing Date and was replaced by the DIP Facility discussed above. As of the
Filing Date, outstanding letters of credit were approximately $43.3 (which were
replaced by letters of credit under the DIP Facility) and there were no
borrowings outstanding under the Credit Agreement.

6.    INCOME TAXES

The income tax provisions for the quarter and nine-month periods ended September
30, 2002 of $7.0 and $21.4, respectively, relate primarily to foreign income
taxes. For the quarter and nine-month periods ended September 30, 2002, as a
result of the Cases, the Company did not recognize income tax benefits for the
losses incurred from its domestic operations or any U.S. tax benefits for
foreign income taxes. Instead, the increases in federal and state deferred tax
assets as a result of the losses were offset by equal increases in the valuation
allowances. See Note 9 of Notes to Consolidated Financial Statements in the
Company's Form 10-K for the year ended December 31, 2001 for additional
information regarding the Deferred Tax Assets and Valuation Allowances.

7.    INCIDENT AT GRAMERCY FACILITY

General. In July 1999, the Company's Gramercy, Louisiana alumina refinery was
extensively damaged by an explosion in the digestion area of the plant. A number
of employees were injured in the incident, several of them severely. As a result
of the incident, alumina production at the facility was completely curtailed.
Construction on the damaged part of the facility began during the first quarter
of 2000. Initial production at the plant commenced during the middle of December
2000. However, construction was not substantially completed until the third
quarter of 2001. During the first nine months of 2001, the plant operated at
approximately 68% of its newly-rated estimated annual capacity of 1,250,000
tons. During the fourth quarter of 2001, the plant operated at approximately 90%
of its newly-rated capacity. Since the end of February 2002, the plant has,
except for normal operating variations, generally operated at approximately 100%
of its newly-rated capacity. The facility is now focusing its efforts on
achieving its full operating efficiency. During the quarter and nine-month
periods ended September 30, 2001, abnormal Gramercy-related start-up costs
totaled approximately $13.9 and $54.9, respectively. These incremental costs for
the nine month period ended September 30, 2001 were offset by approximately
$15.2 of additional insurance benefit (recorded as a reduction of Bauxite and
alumina business unit's cost of products sold) during the second quarter of
2001. The abnormal costs in 2001 resulted from operating the plant in an interim
mode pending completion of construction at well less than the expected
production rate or full efficiency. During 2002, because the plant was operating
at near full capacity, the amount of start-up costs was substantially reduced as
compared to prior periods. Such costs were approximately $3.0 during the first
quarter of 2002 and were substantially eliminated during the second and third
quarters of 2002.

Contingencies. The Gramercy incident resulted in a significant number of
individual and class action lawsuits being filed against the Company and others
alleging, among other things, property damage, business interruption losses by
other businesses and personal injury. After these matters were consolidated, the
individual claims against the Company were settled for amounts which, after the
application of insurance, were not material to the Company. Further, an
agreement has been reached with the class plaintiffs for an amount which, after
the application of insurance, is not material to the Company. While the class
settlement remains subject to court approval and while certain plaintiffs may
opt out of the settlement, the Company does not currently believe that this
presents any material risk to the Company. Finally, the Company faces new claims
from certain parties to the litigation regarding the interpretation of and
alleged claims concerning certain settlement and other agreements made during
the course of the litigation. The aggregate amount of damages threatened in
these claims could, in certain circumstances, be substantial. However, the
Company does not currently believe these claims will result in any material
liability to the Company.

The Company currently believes that any amount from unsettled workers'
compensation claims from the Gramercy incident in excess of the coverage
limitations will not have a material effect on the Company's consolidated
financial position or liquidity. However, while unlikely, it is possible that as
additional facts become available, additional charges may be required and such
charges could be material to the period in which they are recorded.

See Note 3 of Notes to Consolidated Financial Statements in the Company's Form
10-K for the year ended December 31, 2001 for additional information regarding
the Gramercy incident.

8.    COMMITMENTS AND CONTINGENCIES

Impact of Reorganization Proceedings. During the pendency of the Cases,
substantially all pending litigation, except certain environmental claims and
litigation, against the Debtors is stayed. Generally, and as explained more
fully in Note 1, claims arising from actions or omissions prior to the Filing
Date will be settled in connection with the plan of reorganization.

Commitments. The Company has a variety of financial commitments, including
purchase agreements, tolling arrangements, forward foreign exchange and forward
sales contracts (see Note 9), letters of credit, and guarantees. Such purchase
agreements and tolling arrangements include long-term agreements for the
purchase and tolling of bauxite into alumina in Australia by QAL. These
obligations are scheduled to expire in 2008, subject to certain extension
rights. Under the agreements, the Company is unconditionally obligated to pay
its proportionate share of debt service, operating costs, and certain other
costs of QAL. The Company's share of the aggregate minimum amount of required
future principal payments in respect of QAL's debt at December 31, 2001, was
$79.4 which matures as follows: $30.4 in 2002, $32.0 in 2003 and $17.0 in 2006.
During July 2002, the Company made payments of approximately $29.5 to QAL to
fund the Company's share of QAL's scheduled debt maturities. The Company's share
of payments, including operating costs and certain other expenses under the
agreements, has ranged between $92.0 - $103.0 per year over the past three
years. The Company also has agreements to supply alumina to and to purchase
aluminum from the Company's 49%-owned affiliate Anglesey Aluminium Limited.

Minimum rental commitments under operating leases at December 31, 2001, are as
follows: years ending December 31, 2002 - $35.9; 2003 - $32.0; 2004 - $29.2;
2005 - $28.2; 2006 - $27.9; thereafter - $44.6. Pursuant to the Code, the
Debtors may elect to reject or assume unexpired pre-petition leases. At this
time, no decisions have been made as to which significant leases will be
accepted or rejected (see Note 1). Rental expenses were $41.0, $42.5 and $41.4,
for the years ended December 31, 2001, 2000 and 1999, respectively.

The Company has a long-term liability, net of estimated subleases income
(included in Long-term liabilities), with respect to an office building in which
the Company has not maintained offices for a number of years, but for which it
is responsible for lease payments as master tenant through 2008 under a
sale-and-leaseback agreement. The future minimum rentals receivable under
subleases was $104.5 at December 31, 2001.

Environmental Contingencies. The Company is subject to a number of environmental
laws, to fines or penalties assessed for alleged breaches of the environmental
laws, and to claims and litigation based upon such laws. The Company currently
is subject to a number of claims under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
Reauthorization Act of 1986 ("CERCLA"), and, along with certain other entities,
has been named as a potentially responsible party for remedial costs at certain
third party sites listed on the National Priorities List under CERCLA.

Based on the Company's evaluation of these and other environmental matters, the
Company has established environmental accruals, primarily related to potential
solid waste disposal and soil and groundwater remediation matters. During the
quarter and nine-month periods ended September 30, 2001, the Company's ongoing
assessment process resulted in the Company recording charges of $1.0 and $9.0,
respectively, to increase its environmental accrual (included in Other income
(expense) - see Note 12). Additionally, the Company's environmental accruals
were increased during the nine-month period ended September 30, 2001 by
approximately $6.0 in connection with the purchase of certain property. At
September 30, 2002, the balance of such accruals was $59.7 (of which $21.7 were
included in Liabilities subject to compromise - see Note 1). As of December 31,
2001, the accruals were primarily included in Long-term liabilities. These
environmental accruals represent the Company's estimate of costs reasonably
expected to be incurred based on presently enacted laws and regulations,
currently available facts, existing technology, and the Company's assessment of
the likely remediation action to be taken. The Company expects that these
remediation actions will be taken over the next several years and estimates that
annual expenditures to be charged to these environmental accruals will be
approximately $1.3 to $12.2 for the years 2002 through 2006 and an aggregate of
approximately $24.8 thereafter.

As additional facts are developed and definitive remediation plans and necessary
regulatory approvals for implementation of remediation are established or
alternative technologies are developed, changes in these and other factors may
result in actual costs exceeding the current environmental accruals. The Company
believes that it is reasonably possible that costs associated with these
environmental matters may exceed current accruals by amounts that could range,
in the aggregate, up to an estimated $28.0. As the resolution of these matters
is subject to further regulatory review and approval, no specific assurance can
be given as to when the factors upon which a substantial portion of this
estimate is based can be expected to be resolved. However, the Company is
currently working to resolve certain of these matters.

The Company believes that it has insurance coverage available to recover certain
incurred and future environmental costs and is pursuing claims in this regard.
However, no amounts have been accrued in the financial statements with respect
to such potential recoveries.

While uncertainties are inherent in the final outcome of these environmental
matters, and it is presently impossible to determine the actual costs that
ultimately may be incurred, management currently believes that the resolution of
such uncertainties should not have a material adverse effect on the Company's
consolidated financial position, results of operations, or liquidity.

Asbestos Contingencies. The Company has been one of many defendants in a number
of lawsuits, some of which involve claims of multiple persons, in which the
plaintiffs allege that certain of their injuries were caused by, among other
things, exposure to asbestos during, and as a result of, their employment or
association with the Company or exposure to products containing asbestos
produced or sold by the Company. The lawsuits generally relate to products the
Company has not sold for more than 20 years.

The following table presents the changes in the number of such claims pending
for the nine months ended September 30, 2002 (through the Filing Date) and the
year ended December 31, 2001.

                                                                            January 1, 2002       Year Ended
                                                                                through          December  31,
                                                                           February 12, 2002         2001
------------------------------------------------------------------------  -------------------  -----------------
Number of claims at beginning of period                                              112,800            110,800
Claims received                                                                        5,300             34,000
Claims settled or dismissed                                                           (6,100)           (32,000)
                                                                          -------------------  -----------------

Number of claims at end of period                                                    112,000            112,800
                                                                          ===================  =================

Due to the Cases, holders of asbestos claims are stayed from continuing to
prosecute pending litigation and from commencing new lawsuits against the
Debtors. However, during the pendency of the Cases, the Company expects
additional asbestos claims will be filed as part of the claims process. A
separate creditors' committee representing the interests of the asbestos
claimants has been appointed. The Debtors' obligations with respect to present
and future asbestos claims will be resolved pursuant to a plan of
reorganization.

The Company maintains a liability for estimated asbestos-related costs for
claims filed to date and an estimate of claims to be filed over a 10 year period
(i.e., through 2012). At September 30, 2002, the balance of such accrual was
$610.1, all of which was included in Liabilities subject to compromise (see Note
1). As of December 31, 2001, this accrual of $621.3 was included in Other
accrued liabilities ($130.0) and Long-term liabilities ($491.3). The Company's
estimate is based on the Company's view, at each balance sheet date, of the
current and anticipated number of asbestos-related claims, the timing and
amounts of asbestos-related payments, the status of ongoing litigation and
settlement initiatives, and the advice of Wharton Levin Ehrmantraut & Klein,
P.A., with respect to the current state of the law related to asbestos claims.
However, there are inherent uncertainties involved in estimating
asbestos-related costs and the Company's actual costs could exceed the Company's
estimates due to changes in facts and circumstances after the date of each
estimate. Further, while the Company does not presently believe there is a
reasonable basis for estimating asbestos-related costs beyond 2012 and,
accordingly, no accrual has been recorded for any costs which may be incurred
beyond 2012, the Company expects that the plan of reorganization process may
require an estimation of the Company's entire asbestos-related liability, which
may go beyond 2012, and that such costs could be substantial.

The Company believes that it has insurance coverage available to recover a
substantial portion of its asbestos-related costs. Although the Company has
settled asbestos-related coverage matters with certain of its insurance
carriers, other carriers have not yet agreed to settlements and disputes with
certain carriers exist. The timing and amount of future recoveries from these
and other insurance carriers will depend on the pendency of the Cases and on the
resolution of any disputes regarding coverage under the applicable insurance
policies. The Company believes that substantial recoveries from the insurance
carriers are probable and additional amounts may be recoverable in the future if
additional claims are added. The Company reached this conclusion after
considering its prior insurance-related recoveries in respect of
asbestos-related claims, existing insurance policies, and the advice of Heller
Ehrman White & McAuliffe LLP with respect to applicable insurance coverage
law relating to the terms and conditions of those policies. During 2000, the
Company filed suit against a group of its insurers, after negotiations with
certain of the insurers regarding an agreement covering both reimbursement
amounts and the timing of reimbursement payments were unsuccessful. During
October 2001, the court ruled favorably on a number of issues, and during
February 2002, an intermediate appellate court also ruled favorably on an issue
involving coverage. The rulings did not result in any changes to the Company's
estimates of its current or future asbestos-related insurance recoveries. Other
courts may hear additional issues from time to time. Moreover, the Company
amended its lawsuit during the second quarter of 2002 to add additional insurers
who have responsibility to respond for asbestos-related costs. Given the
expected significance of probable future asbestos-related payments, the receipt
of timely and appropriate payments from such insurers is critical to a
successful plan of reorganization and the Company's long-term liquidity.

The following tables present historical information regarding the Company's
asbestos-related balances and cash flows:

                                                                                 September 30,      December  31,
                                                                                      2002              2001
----------------------------------------------------------------------------    ----------------  -----------------
Liability (current portion of $130.0 in 2001)                                   $         610.1   $          621.3
Receivable (included in Other assets)(1)                                                  489.7              501.2
                                                                                ----------------  -----------------

                                                                                $         120.4   $          120.1
                                                                                ================  =================

(1)   The asbestos-related receivable was determined on the same basis as the
      asbestos-related cost accrual. However, no assurances can be given that
      the Company will be able to project similar recovery percentages for
      future asbestos-related claims in excess of those accrued or that the
      amounts related to future asbestos-related claims will not exceed the
      Company's aggregate insurance coverage. As of September 30, 2002 and
      December 31, 2001, $30.4 and $33.0, respectively, of the receivable
      amounts relate to costs paid. The remaining receivable amounts relate to
      costs that are expected to be paid by the Company in the future.

                                                          Nine Months Ended          Inception
                                                          September 30, 2002          To Date
                                                         --------------------   -------------------
Payments made, including related legal costs             $              17.1    $            355.7
Insurance recoveries                                                    17.6                 239.2
                                                         --------------------   -------------------
                                                         $               (.5)   $            116.5
                                                         ====================   ===================

During the pendency of the Cases, all asbestos litigation is stayed. As a
result, the Company does not expect to make any asbestos payments in the near
term. Despite the Cases, the Company continues to pursue insurance collections
in respect of asbestos-related amounts paid prior to the Filing Date.

Management continues to monitor claims activity, the status of lawsuits
(including settlement initiatives), legislative developments, and costs incurred
in order to ascertain whether an adjustment to the existing accruals should be
made to the extent that historical experience may differ significantly from the
Company's underlying assumptions. This process resulted in the Company recording
charges of $53.3 (included in Other income (expense) - see Note 12) in the
nine-month period ended September 30, 2001, for asbestos claims, net of expected
insurance recoveries, based on recent cost and other trends experienced by the
Company and other companies. Additional asbestos-related claims are likely to be
filed against the Company as a part of the Chapter 11 process. Management cannot
reasonably predict the ultimate number of such claims or the amount of the
associated liability. However, it is likely that such amounts could exceed,
perhaps significantly, the liability amounts reflected in the Company's
consolidated financial statements, which (as previously stated) is only
reflective of an estimate of claims over a ten-year period. The Company's
obligations in respect of the currently pending and future asbestos-related
claims will ultimately be determined (and resolved) as a part of the overall
Chapter 11 proceedings. It is anticipated that resolution of these matters will
be a lengthy process. Management will continue to periodically reassess its
asbestos-related liabilities and estimated insurance recoveries as the Cases
proceed. However, absent unanticipated developments such as asbestos-related
legislation, material developments in other asbestos-related proceedings or in
the Company's Chapter 11 proceedings, it is not anticipated that the Company
will have sufficient information to reevaluate its asbestos-related obligations
and estimated insurance recoveries until much later in the Cases. Any
adjustments ultimately deemed to be required as a result of the reevaluation of
the Company's asbestos-related liabilities or estimated insurance recoveries
could have a material impact on the Company's future financial statements.

Labor Matters. In connection with the USWA strike and subsequent lock-out by the
Company, which was settled in September 2000, certain ULP allegations were filed
with the NLRB by the USWA. As previously disclosed, the Company responded to all
such allegations and believes that the allegations are without merit. Twenty-two
of twenty-four allegations of ULPs previously brought against the Company by the
USWA were dismissed. A trial before an administrative law judge for the two
remaining allegations concluded in September 2001. In May 2002, the
administrative law judge ruled against the Company in respect of the two
remaining ULP allegations and recommended that the NLRB award back wages, plus
interest, less any earnings of the workers during the period of the lockout. The
administrative law judge's ruling did not contain any specific amount of
proposed award and is not self-executing. The USWA has publicly stated that any
such amount could be in the $200.0 range. The NLRB had previously notified the
Court that, if the USWA ultimately were to prevail, the value of the claim could
be in excess of $100.0. Depending on the ultimate amount of any interest due and
amount of offsetting employee earnings and other factors, if the USWA ultimately
were to prevail it is possible that the amount of the award could exceed $100.0.
It is also possible that the Company may ultimately prevail on appeal and that
no loss will occur.

The Company continues to believe that the allegations are without merit and will
vigorously defend its position. The Company has appealed the ruling of the
administrative law judge to the full NLRB. Any outcome from the NLRB appeal
would be subject to additional appeals in a United States Circuit Court of
Appeals by the general counsel of the NLRB, the USWA or the Company. This
process could take several years. Because the Company believes that it may
prevail in the appeals process, the Company has not recognized a charge in
response to the adverse ruling. However, it is possible that, if the Company's
appeal(s) are not ultimately successful, a charge in respect of this matter may
be required in one or more future periods and the amount of such charge(s) could
be significant.

This matter is not currently stayed by the Cases. However, as previously stated,
seeing this matter to its ultimate outcome could take several years. Further,
any amounts ultimately determined by a court to be payable in this matter will
be dealt with in the overall context of the Debtors' plan of reorganization and
will be subject to compromise. Accordingly, any payments that may ultimately be
required in respect of this matter would only be paid upon or after the
Company's emergence from the Cases.

Dispute with MAXXAM. In March 2002, MAXXAM filed a declaratory action with the
Court asking the Court to find that it has no further obligations to the Debtors
under certain tax allocation agreements. See Note 9 of Notes to Consolidated
Financial Statements in the Company's Form 10-K for the year ended December 31,
2001 for additional information regarding the tax allocation agreements. MAXXAM
asserts that the agreements are personal contracts and financial accommodations
which cannot be assumed under the Code. At September 30, 2002, the Company had a
receivable from MAXXAM of $35.0 (included in Other assets) outstanding under the
tax allocation agreement in respect of various tax contingencies in an equal
amount (reflected in Long-term liabilities). The Company believes that MAXXAM's
position is without merit and that MAXXAM will be required to satisfy its
obligations under the tax allocation agreements.

Other Contingencies. The Company is involved in various other claims, lawsuits,
and other proceedings relating to a wide variety of matters related to past or
present operations. While uncertainties are inherent in the final outcome of
such matters, and it is presently impossible to determine the actual costs that
ultimately may be incurred, management currently believes that the resolution of
such uncertainties and the incurrence of such costs should not have a material
adverse effect on the Company's consolidated financial position, results of
operations, or liquidity.

9.    DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

In conducting its business, the Company uses various instruments, including
forward contracts and options, to manage the risks arising from fluctuations in
aluminum prices, energy prices and exchange rates. The Company enters into
hedging transactions from time to time to limit its exposure resulting from (1)
its anticipated sales of alumina, primary aluminum, and fabricated aluminum
products, net of expected purchase costs for items that fluctuate with aluminum
prices, (2) the energy price risk from fluctuating prices for natural gas, fuel
oil and diesel oil used in its production process, and (3) foreign currency
requirements with respect to its cash commitments with foreign subsidiaries and
affiliates.

Because the agreements underlying the Company's hedging positions provided that
the counterparties to the hedging contracts could liquidate the Company's
hedging positions if the Company filed for reorganization, the Company chose to
liquidate these positions in advance of the Filing Date. Proceeds from the
liquidation totaled approximately $42.2. A net gain of $23.3 associated with
these liquidated positions was deferred and is being recognized as income
through December 31, 2003 (the period during which the underlying transactions
to which the hedges related are expected to occur). The net gain consisted of:
gains of $30.2 for aluminum contracts, losses of $5.0 for Australian dollars and
losses of $1.9 for energy contracts. As of September 30, 2002, the unamortized
net gain was approximately $4.9.

During the first quarter of 2001, the Company recorded a mark-to-market benefit
of $6.8 related to the application of Statement of Financial Accounting
Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities. However, starting in the second quarter of 2001, the income
statement impact of mark-to-market changes was essentially eliminated as
unrealized gains or losses resulting from changes in the value of these hedges
began being recorded in other comprehensive income based on changes in SFAS No.
133 enacted in April 2001. Also during the first quarter of 2001, the Company
recorded the cumulative impact of adopting SFAS No. 133 of $1.8 in comprehensive
income.

During late 1999 and early 2000, the Company entered into certain aluminum
contracts with a counterparty. While the Company believed that the transactions
were consistent with its stated hedging objectives, these positions did not
qualify for treatment as a "hedge" under accounting guidelines. Accordingly, the
positions were marked-to-market each period. Mark-to-market pre-tax gains of
$13.9 and $25.5 associated with these positions during the quarter and
nine-month periods ended September 30, 2001, respectively, together with the
$6.8 discussed in the paragraph above, were recorded in Other income (expense)
(see Note 12). During the fourth quarter of 2001, the Company liquidated all of
the remaining positions.

As of September 30, 2002, the Company had sold forward substantially all of the
alumina available to it in excess of its projected internal smelting
requirements for 2002 and 2003, respectively, at prices indexed to future prices
of primary aluminum.

No hedging activities were conducted between the Filing Date and October 31,
2002. The Company anticipates that, subject to prevailing economic conditions,
it may reinstitute an active hedging program to protect the interests of its
constituents. Court approval for such activities was received in July 2002.
However, no assurance can be given as to when or if such hedging activities will
restart.

10.   TRUST FUNDS

In the first quarter of 2002, the Company paid an aggregate of $10.0 into two
separate trusts funds in respect of (a) potential directors and officers
liability obligations and (b) certain obligations attributable to certain
management compensation agreements. These payments resulted in an approximate
$5.0 increase in Other assets and an approximate $5.0 charge to Corporate
selling, administrative, research and development, and general expenses in the
nine-month period ended September 30, 2002.

11.   PENSION PLAN MATTERS

Possible Year-End Financial Statement Item. The assets of the Company sponsored
pension plans, like numerous other companies' plans, are, to a substantial
degree, invested in the capital markets and managed by a third party. Given the
year-to-date performance of the capital markets, it is likely that, barring a
material improvement in the capital markets during the fourth quarter of 2002,
the Company will be required to reflect a significant additional minimum pension
liability in its year-end financial statements as a result of a decline in the
value of the assets held by the Company's pension plans. Minimum pension
liability adjustments are non-cash adjustments that are reflected as an increase
in pension liability and an offsetting charge to stockholders' equity through
comprehensive income (rather than net income). The ultimate amount of such
additional adjustment cannot be determined until year-end 2002. However, based
on the year-to-date stock market performance and an estimated range of year-end
2002 asset values based, in part, upon year-to-date stock market performance,
the Company estimates that the minimum pension liability adjustment at December
31, 2002, could be in the $75.0 to $125.0 range. The Company also anticipates
that the decline in the value of the pension plans' assets will unfavorably
impact pension costs reflected in its 2003 operating results. Further, the
Company estimates that the impact of the adverse capital market performance
during the 2001 and 2002 year-to-date period, together with restructuring
efforts and the possible incurrence of substantial additional full early
retirement obligations in respect of the Company's Washington smelters in early
2003 or sooner (see Note 4), will cause expected minimum pension funding
requirements for the year ending December 31, 2003 to increase to approximately
$59.0. As reported in October 2002, the Company has disclosed that it intends to
meet with the PBGC and its labor unions to explore alternatives to the minimum
funding requirements. Such alternatives may include extended amortization
periods for payment of unfunded liabilities and the potential termination of the
pension plans. However, no assurances can be given as to the outcome of such
discussions.

Settlement Charge. During the quarter and nine-month periods ended September 30,
2002, the Company recorded non-cash charges of $1.1 and $10.4, respectively
(included in Corporate selling, administrative, research and development, and
general expense), for additional pension expense. The non-cash charges were
recorded because the lump sum payments from the assets of the Company's salaried
employee pension plan exceeded a stipulated level prescribed by GAAP.
Accordingly, a partial "settlement," as defined by GAAP, was deemed to have
occurred. Under GAAP, if a partial "settlement" occurs, a charge must be
recorded for a portion of any unrecognized net actuarial losses not reflected in
the consolidated balance sheet. The portion of the total unrecognized actuarial
losses of the plan ($75.0 at December 31, 2001) that must be recorded as a
charge is the relative percentage of the total projected benefit obligation of
the plan ($300.0 at December 31, 2001) settled by the lump sum payments ($4.0
and $40.0 for the quarter and nine-month periods ended September 30, 2002,
respectively). The Company had approximately 90 salaried employees announce
their retirement during October 2002. These additional retirements are expected
to result in additional settlement charges in the fourth quarter of 2002 of
between $7.0 and $8.0. To the extent that additional retirements occur over the
balance of 2002 and the salaried retirees exercise their lump sum payment option
under the salaried employees pension plan, additional charges to earnings will
occur. The amount of such charges could be significant.

12.   OTHER NON-RECURRING ITEMS

Non-Recurring Operating Charges (Benefits), Net. The income (loss) impact
associated with non-recurring operating (charges) benefits, net for the quarter
and nine-month periods ended September 30, 2002 and 2001, was as follows (the
business segment to which the items is applicable is indicated):

                                                               Quarter Ended              Nine Months Ended
                                                               September 30,                September 30,
                                                       ----------------------------- ---------------------------
                                                                 2002           2001          2002          2001
                                                       --------------  ------------- ---------------------------
Net gains from power sales (Primary Aluminum)
   (Note 4)                                            $         -     $        6.5  $        -     $     229.2
Restructuring charges  -
   Bauxite & Alumina                                         -             (2.9)         (1.9)         (4.9)
   Primary Aluminum                                             (1.0)          (4.8)         (2.7)         (4.8)
   Flat-Rolled Products                                         (1.5)         (10.7)         (5.4)        (10.7)
   Engineered Products                                          (1.3)           -            (1.3)           -
   Corporate                                                     -              (.5)          -            (1.0)
Impairment charges -
   Bauxite & Alumina                                         -             (5.0)          -            (5.0)
   Primary Aluminum                                             (3.4)           (.6)         (3.4)          (.6)
   Eliminations - intersegment profit elimination on
      Primary Aluminum impairment charges                        1.9            -             1.9            -
   Flat-Rolled Products - product line exit (Note 3)             -              -            (1.6)           -
   Corporate - non-operating properties                        (20.0)           -           (20.0)           -
Contractual labor costs related to smelter curtailment
   (Primary aluminum) (Note 4)                                   -             (3.3)          -            (3.3)
                                                       --------------  ------------- -------------  ------------
                                                       $       (25.3)  $      (21.3) $      (34.4)  $     198.9
                                                       ==============  ============= =============  ============

Restructuring charges result from the Company's initiatives to increase cash
flow, generate cash, and improve the Company's financial flexibility.
Restructuring charges in the third quarter of 2002, consist entirely of employee
benefit and related costs associated with 140 job eliminations, 74 of which had
occurred as of October 31, 2002, and the balance of which will occur during the
fourth quarter of 2002. Restructuring charges for the 2002 year-to-date period,
consist of $9.4 of employee benefit and related costs associated with 200 job
eliminations (119 of which have occurred and 81 of which will occur prior to
December 31, 2002) and $1.9 of third party costs associated with cost reduction
initiatives. Restructuring costs during the nine months ended September 30, 2001
resulted from the elimination of 125 positions at the Flat-rolled products and
Primary aluminum business segments ($14.1), all of which positions have been
eliminated, and $7.3 of third party costs associated with cost reduction
initiatives.

Impairment charges at the Primary aluminum business segment in 2002 includes a
third quarter charge of $3.4 to write-down certain alumina inventories at the
Company's Northwest smelters to their net realizable values (see Note 3). The
charge at Primary Aluminum was partially offset by a $1.9 benefit in the
Eliminations segment representing the elimination of deferred intersegment
profit included in the Primary aluminum inventory charge. Impairment charges at
the Bauxite & alumina and Primary aluminum business segments in 2001 of $5.6
related to the write-down of excess operating supplies and repairs and
maintenance parts that were sold to generate cash, rather than be used in
production.

The Company is continuing its efforts to sell non-core assets. Based on updated
reviews of the applicable markets and the status of its ongoing efforts, the
Company reflected a non-cash impairment charge of approximately $20.0 related to
its non-operating properties during the quarter ended September 30, 2002.

Other Income (Expense). Amounts included in other income (expense), other than
interest expense, for the quarter and nine-month periods ended September 30,
2002 and 2001, included the following pre-tax gains (losses):

                                                              Quarter Ended               Nine Months Ended
                                                              September 30,                 September 30,
                                                       ---------------------------   ---------------------------
                                                               2002           2001            2002          2001
                                                       ------------    -----------   ---------------------------
Gain on sale of real estate                            $        -      $      5.7    $        4.0   $       5.7
Mark-to-market gains (losses) (Note 9)                          -            13.9             (.4)         32.3
Asbestos-related charge (Note 8)                                -              -              -           (53.3)
Adjustment to environmental liabilities (Note 8)                -            (1.0)            -            (9.0)
MetalSpectrum investment write-off                              -              -              -            (2.8)
                                                       ------------    -----------   -------------  ------------
Special items, net                                              -            18.6             3.6         (27.1)
All other, net                                                (1.4)          (2.3)           (2.5)         (1.0)
                                                       ------------    -----------   -------------  ------------
                                                       $      (1.4)    $     16.3    $        1.1   $     (28.1)
                                                       ============    ===========   =============  ============

As previously disclosed, during the fourth quarter of 2001, the Company
reflected an impairment charge of $17.7 to adjust the carrying value of certain
equipment to its estimated fair value in connection with planned equipment sales
by the Flat-rolled products segment as a result of the Company's decision to
exit the lid and tab stock and brazing sheet product lines. In June 2002, with
Court approval, the Company sold certain of the equipment for total proceeds of
$15.8, which amount approximated its previously estimated fair value. As a
result, the sale did not have a material impact on the Company's operating
results for the nine-month period ended September 30, 2002.

During January 2002, the Company, in the ordinary course of business, sold
certain non-operating property for total proceeds of approximately $4.5,
resulting in a pre-tax gain of approximately $4.0.

As part of its ongoing initiatives to generate cash benefits, the Company sold
certain non-operating real estate during the third quarter of 2001 for net
proceeds totaling approximately $6.7, resulting in a gain of $5.7.

In June 2001, the Company wrote-off its investment of $2.8 in MetalSpectrum LLC,
a start-up, e-commerce entity in which the Company was a partner. During the
second quarter of 2001, MetalSpectrum ceased operations.

13.   KEY EMPLOYEE RETENTION PROGRAM

In June 2002, the Company adopted a key employee retention program (the "KERP"),
which was approved by the Court in September 2002. The KERP is a comprehensive
program that is designed to provide financial incentives sufficient to retain
certain key employees during the Cases. The KERP includes six key elements: a
retention plan, a severance plan, a change in control plan, a completion
incentive plan, the continuation for certain participants of an existing
supplemental employee retirement plan ("SERP") and a long-term incentive plan.
The retention plan is expected to have a total cost of approximately $7.3 per
year. Under the KERP, retention payments commenced in September 2002 and will be
paid every six months through March 31, 2004, except that 50% of the amounts
payable to certain senior officers will be withheld until the Debtors emerge
from the Cases or as otherwise agreed pursuant to the KERP. The severance and
change in control plans, which are similar to the provisions of previous
arrangements that existed for certain key employees, generally provide for
severance payments of between six months and three years of salary and certain
benefits, depending on the facts and circumstances and the level of employee
involved. The completion incentive plan generally provides for payments of up to
an aggregate of approximately $1.2 to certain senior officers provided that the
Debtors emerge from the Cases in 30 months or less from the Filing Date. If the
Debtors emerge from the Cases after 30 months from the Filing Date, the amount
of the payments will be reduced accordingly. The SERP generally provides
additional non-qualified pension benefits for certain active employees at the
time that the KERP was approved, who would suffer a loss of benefits based on
Internal Revenue Code limitations, so long as such employees are not
subsequently terminated for cause or voluntarily terminate prior to reaching
their retirement age. The long-term incentive plan generally provides for
incentive awards to key employees based on an annual cost reduction target.
Payment of such awards generally will be made: (a) 50% when the Debtors emerge
from the Cases and (b) 50% one year from the date the Debtors emerge from the
Cases. During the quarter and nine-month periods ended September 30, 2002, the
Company has recorded charges of $1.8 and $3.6, respectively, (included in
Selling, administrative, research and development, and general) related to the
KERP.

14.   SALE OF 8.3% INTEREST IN QAL

In September 2001, the Company sold an approximate 8.3% interest in QAL and
recorded a pre-tax gain of approximately $163.6 (included in Other income
(expense) in the accompanying condensed consolidated statements of income
(loss)). The total value of the transaction was approximately $189.0, consisting
of a cash payment of approximately $159.0 plus the purchaser's assumption of
approximately $30.0 of off-balance sheet QAL indebtedness currently guaranteed
by the Company. See Note 4 of Notes to Consolidated Financial Statements in the
Company's Form 10-K for the year ended December 31, 2001 for additional
information regarding the sale of the interest in QAL.

15.   INTERIM OPERATING SEGMENT INFORMATION

The Company uses a portion of its bauxite, alumina and primary aluminum
production for additional processing at its downstream facilities. Transfers
between business units are made at estimated market prices. The accounting
policies of the segments are the same as those described in Note 2 of Notes to
Consolidated Financial Statements in the Company's Form 10-K for the year ended
December 31, 2001. Business unit results are evaluated internally by management
before any allocation of corporate overhead and without any charge for income
taxes or interest expense. See Note 16 of Notes to Consolidated Financial
Statements in the Company's Form 10-K for the year ended December 31, 2001.

Financial information by operating segment for the quarter and nine-month
periods ended September 30, 2002 and 2001 is as follows:

                                                             Quarter Ended               Nine Months Ended
                                                             September 30,                 September 30,
                                                     ----------------------------- -----------------------------
                                                              2002            2001          2002            2001
                                                     ----------------------------- -----------------------------
Net Sales:
   Bauxite and Alumina:
      Net sales to unaffiliated customers            $       99.0    $      132.0  $      327.5   $       402.3
      Intersegment sales                                      9.2             9.1          41.4            55.0
                                                     -------------   ------------- -------------  --------------
                                                            108.2           141.1         368.9           457.3
                                                     -------------   ------------- -------------  --------------
   Primary Aluminum:
      Net sales to unaffiliated customers                    64.7            83.0         200.0           282.1
      Intersegment sales                                       .1              .5           2.5             3.8
                                                     -------------   ------------- -------------  --------------
                                                             64.8            83.5         202.5           285.9
                                                     -------------   ------------- -------------  --------------
   Flat-Rolled Products                                      39.9            75.5         145.6           248.3
   Engineered Products                                      109.7           101.4         328.4           337.9
   Commodities Marketing(a)                                   9.3             9.5          30.8             5.9
   Minority Interests                                        25.4            28.9          72.6            80.9
   Eliminations                                              (9.3)           (9.6)        (43.9)          (58.8)
                                                     -------------   ------------- -------------  --------------
                                                     $      348.0    $      430.3  $    1,104.9   $     1,357.4
                                                     =============   ============= =============  ==============
Operating income (loss):
   Bauxite and Alumina(b)                            $      (15.3)   $         .4  $      (30.5)  $       (12.4)
   Primary Aluminum                                          (6.8)            (.3)        (16.8)            8.1
   Flat-Rolled Products(c)                                   (9.8)             .2         (26.6)            6.5
   Engineered Products(d)                                     4.6             -            15.5             5.1
   Commodities Marketing                                      9.0             3.2          28.1            (5.8)
   Eliminations                                              (1.5)            (.4)          1.4             5.1
   Corporate and Other (Notes 10, 11 and 13)                (20.5)          (17.7)        (75.7)          (53.5)
   Non-Recurring Operating (Charges) Benefits, Net
      (Note 12)                                             (25.3)          (21.3)        (34.4)          198.9
                                                     -------------   ------------- -------------  --------------
                                                     $      (65.6)   $      (35.9) $     (139.0)  $       152.0
                                                     =============   ============= =============  ==============
Depreciation and amortization:
   Bauxite and Alumina                               $        9.8    $        9.6  $       29.4   $        27.2
   Primary Aluminum                                           5.4             5.3          16.1            16.3
   Flat-Rolled Products                                       3.9             4.9          11.9            12.9
   Engineered Products                                        3.0             3.0           9.1             9.3
   Corporate and Other                                         .5              .3           1.1              .9
                                                     -------------   ------------- -------------  --------------
                                                     $       22.6    $       23.1  $       67.6   $        66.6
                                                     =============   ============= =============  ==============
Capital expenditures:
   Bauxite and Alumina(e)                                                          $       17.2   $        98.0
   Primary Aluminum                                                                         6.7             5.2
   Flat-Rolled Products                                                                     1.1             1.3
   Engineered Products                                                                      3.9            15.3
   Corporate and Other                                                                       .3              .3
                                                                                   -------------  --------------
                                                                                   $       29.2   $       120.1
                                                                                   =============  ==============

(a)   Net sales in 2002 primarily represent partial recognition of deferred
      gains from hedges closed prior to the commencement of the Cases. Net sales
      in 2001 represent net settlements with counterparties for maturing
      derivative positions.
(b)   Results for the quarter and nine-month periods ended September 30, 2002,
      include $4.4 of charges resulting from an increase in the allowance for
      doubtful receivables; a LIFO inventory charge of $1.5; and estimated
      weather-related excess costs and inefficiencies of between $2.0 and $3.0
      resulting from hurricane conditions in the Caribbean and Gulf of Mexico in
      late September 2002. Operating results for the quarter and nine-month
      periods ended September 30, 2001 included: (1) abnormal Gramercy-related
      start-up costs of $13.9 and $54.9 offset by business interruption-related
      insurance accruals of $21.4 and $36.6; and (2) a LIFO inventory charge of
      $2.0.
(c)   Results for the quarter and nine-month periods ended September 30, 2002
      include a $1.5 LIFO inventory charge.
(d)   Results for the quarter and nine-month periods ended September 30, 2001
      include a $1.0 LIFO inventory charge.
(e)   Capital spending for the Bauxite and Alumina segment for the nine-month
      period ended September 30, 2001 includes $70.6 of Gramercy-related
      spending.  See Note 7 of Notes to Interim Consolidated Financial
      Statements.

16.   SUPPLEMENTAL GUARANTOR INFORMATION

Certain domestic, wholly-owned (direct or indirect) subsidiaries of the Company
(hereinafter collectively referred to as the Subsidiary Guarantors) have
provided, joint and several, guarantees of the 9 7/8% Senior Notes, the 10 7/8%
Senior Notes, due 2006 and the 12 3/4% Senior Subordinated Notes (the "Notes").
Such guarantees are full and unconditional. See Note 17 of Notes to Consolidated
Financial Statements in the Company's Form 10-K for the year ended December 31,
2001 for a more complete discussion regarding the Subsidiary Guarantors and
their operations.

The accompanying financial information presents consolidating balance sheets,
statements of income (loss) and statements of cash flows showing separately the
Company, Subsidiary Guarantors, other subsidiaries and eliminating entries.
Certain reclassifications have been made to the December 31, 2001 consolidating
balance sheets to conform to the current presentation.

                     CONDENSED CONSOLIDATING BALANCE SHEETS
                               SEPTEMBER 30, 2002

                                                         SUBSIDIARY          OTHER      ELIMINATING
                                            COMPANY      GUARANTORS      SUBSIDIARIES     ENTRIES     CONSOLIDATED
                                        -------------- ---------------  -------------- ------------- --------------
ASSETS
Current assets                          $       351.7  $         95.0   $       154.2  $        -    $       600.9
Investments in subsidiaries                   2,705.4           164.4             -        (2,869.8)           -
Intercompany advances receivable
   (payable)                                 (2,277.2)          594.8         1,682.4           -              -
Investments in and advances to
   unconsolidated affiliates                     17.2            27.5            24.0           -             68.7
Property and equipment, net                     734.4            22.9           403.4           -          1,160.7
Deferred income taxes                           (25.7)           (2.7)           28.4           -              -
Other assets                                    655.6              .2            22.1           -            677.9
                                        -------------- ---------------  -------------- ------------- --------------
                                        $     2,161.4  $        902.1   $     2,314.5  $   (2,869.8) $     2,508.2
                                        ============== ===============  ============== ============= ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                     $       177.5  $         26.7   $       119.2  $        -    $       323.4
Other long-term liabilities                      56.9            17.2            20.9           -             95.0
Long-term debt                                   20.8            -               22.0           -             42.8
Liabilities subject to compromise             2,570.7            12.8             8.8           -          2,592.3
Minority interests                                -              -               18.8         100.4          119.2
Stockholders' equity                           (664.5)          845.4         2,124.8      (2,970.2)        (664.5)
                                        -------------- ---------------  -------------- ------------- --------------
                                        $     2,161.4  $        902.1   $     2,314.5  $   (2,869.8) $     2,508.2
                                        ============== ===============  ============== ============= ==============

                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                DECEMBER 31, 2001

                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
ASSETS
Current assets                            $         510.2  $         76.0  $        179.5   $         -    $       765.7
Investments in subsidiaries                       2,697.3           161.4            -           (2,858.7)           -
Intercompany advances receivable
   (payable)                                     (2,296.3)          657.8         1,638.5             -              -
Investments in and advances to
   unconsolidated affiliates                         19.0            20.0            24.0             -             63.0
Property and equipment, net                         793.4            23.4           398.6             -          1,215.4
Deferred income taxes                               (26.9)           (2.7)           29.6             -              -
Other assets                                        682.4              .2            23.5             -            706.1
                                          ---------------- --------------- ---------------  -------------- --------------
                                          $       2,379.1  $        936.1  $      2,293.7   $    (2,858.7) $     2,750.2
                                          ================ =============== ===============  ============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                       $         638.0  $         50.2  $        115.2   $         -    $       803.4
Other long-term liabilities                       1,496.3            25.7            40.2             -          1,562.2
Long-term debt                                      678.8           -                22.0             -            700.8
Minority interests                                   -               -               19.0            98.8          117.8
Stockholders' equity                               (434.0)          860.2         2,097.3        (2,957.5)        (434.0)
                                          ---------------- --------------- ---------------  -------------- --------------
                                          $       2,379.1  $        936.1  $      2,293.7   $    (2,858.7) $     2,750.2
                                          ================ =============== ===============  ============== ==============

               CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002

                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net sales                                 $         248.9  $         99.7  $        202.5   $      (203.1) $       348.0
Costs and expenses:
   Operating costs and expenses                     300.5           102.7           188.2          (203.1)         388.3
   Non-recurring operating charges                   24.3            -                1.0             -             25.3
                                          ---------------- --------------- ---------------  -------------- --------------
Operating income (loss)                             (75.9)           (3.0)           13.3             -            (65.6)
Interest expense                                     (2.1)           -                (.1)            -             (2.2)
Reorganization items                                 (8.5)           -               -                -             (8.5)
Other income (expense), net                          (6.6)            4.9              .3             -             (1.4)
(Provision) benefit for income taxes                 (1.7)             .3            (5.6)            -             (7.0)
Minority interests                                   -                1.4            -                -              1.4
Equity in loss of subsidiaries                       11.5            -               -              (11.5)           -
                                          ---------------- --------------- ---------------  -------------- --------------
Net income (loss)                         $         (83.3) $          3.6  $          7.9   $       (11.5) $       (83.3)
                                          ================ =============== ===============  ============== ==============

               CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001

                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net sales                                 $         328.6  $        126.0  $        256.9   $      (281.2) $       430.3
Costs and expenses:
   Operating costs and expenses                     355.4           126.2           244.5          (281.2)         444.9
   Non-recurring operating items                     19.1            -                2.2             -             21.3
                                          ---------------- --------------- ---------------  -------------- --------------
Operating income (loss)                             (45.9)            (.2)           10.2             -            (35.9)
Interest expense                                    (26.9)           -                (.3)            -            (27.2)
Other income (expense), net                          (2.7)          166.8            15.8             -            179.9
Benefit (provision) for income taxes                 30.6           (69.0)          (11.0)            -            (49.4)
Minority interests                                   -                1.3             (.1)            -              1.2
Equity in income of subsidiaries                    113.5            -               -             (113.5)           -
                                          ---------------- --------------- ---------------  -------------- --------------
Net income (loss)                         $          68.6  $         98.9  $         14.6   $      (113.5) $        68.6
                                          ================ =============== ===============  ============== ==============

               CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net sales                                 $         820.0  $        313.8  $        657.6   $      (686.5) $     1,104.9
Costs and expenses:
   Operating costs and expenses                     955.7           323.8           616.5          (686.5)       1,209.5
   Non-recurring operating charges                   33.4            -                1.0             -             34.4
                                          ---------------- --------------- ---------------  -------------- --------------
Operating income (loss)                            (169.1)          (10.0)           40.1             -           (139.0)
Interest expense                                    (17.6)           -                (.6)            -            (18.2)
Reorganization items                                (24.6)           -               -                -            (24.6)
Other income (expense), net                           4.6            (5.2)            1.7             -              1.1
(Provision) benefit for income taxes                 (1.3)           (4.7)          (15.4)            -            (21.4)
Minority interests                                   -                4.2              .1             -              4.3
Equity in loss of subsidiaries                       10.2            -               -              (10.2)           -
                                          ---------------- --------------- ---------------  -------------- --------------
Net income (loss)                         $        (197.8) $        (15.7) $         25.9   $       (10.2) $      (197.8)
                                          ================ =============== ===============  ============== ==============

               CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001

                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net sales                                 $       1,050.3  $        419.5  $        821.7   $      (934.1) $     1,357.4
Costs and expenses:
   Operating costs and expenses                   1,162.1           393.6           782.7          (934.1)       1,404.3
   Non-recurring operating items                   (201.1)           -                2.2             -           (198.9)
                                          ---------------- --------------- ---------------  -------------- --------------
Operating income                                     89.3            25.9            36.8             -            152.0
Interest expense                                    (80.3)           -               (1.9)            -            (82.2)
Other income (expense), net                         (70.6)          188.4            17.7             -            135.5
Benefit (provision) for income taxes                 25.2           (87.6)          (21.5)            -            (83.9)
Minority interests                                   -                3.9             (.9)            -              3.0
Equity in income of subsidiaries                    160.8            -               -             (160.8)           -
                                          ---------------- --------------- ---------------  -------------- --------------
Net income (loss)                         $         124.4  $        130.6  $         30.2   $      (160.8) $       124.4
                                          ================ =============== ===============  ============== ==============

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net cash provided (used) by:
   Operating activities                   $         (75.6) $         24.7  $          8.0   $         -    $       (42.9)
   Investing activities                              15.9             (.7)          (23.6)            -             (8.4)
   Financing activities                              (8.1)           -               -                -             (8.1)
Intercompany activity                                 7.6           (23.9)           16.3             -              -
                                          ---------------- --------------- ---------------  -------------- --------------
Net (decrease) increase in cash and
   cash equivalents during the period               (60.2)             .1              .7             -            (59.4)
Cash and cash equivalents at
   beginning of period                              151.5            -                1.8             -            153.3
                                          ---------------- --------------- ---------------  -------------- --------------
Cash and cash equivalents at
   end of period                          $          91.3  $           .1  $          2.5   $         -    $        93.9
                                          ================ =============== ===============  ============== ==============

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001

                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net cash provided (used) by:
   Operating activities                   $         379.3  $       (122.1) $        (11.5)  $         -    $       245.7
   Investing activities                            (120.7)          146.6            (5.8)            -             20.1
   Financing activities                             (55.0)           -              (22.1)            -            (77.1)
Intercompany activity                               (14.7)          (24.5)           39.2             -              -
                                          ---------------- --------------- ---------------  -------------- --------------
Net increase in cash and cash
   equivalents during the period                    188.9            -                (.2)            -            188.7
Cash and cash equivalents at
   beginning of period                               22.4            -                1.0             -             23.4
                                          ---------------- --------------- ---------------  -------------- --------------
Cash and cash equivalents at
   end of period                          $         211.3  $         -     $           .8   $         -    $       212.1
                                          ================ =============== ===============  ============== ==============

Notes to Condensed Consolidating Financial Information

Income Taxes - The income tax provisions for the quarter and nine-month periods
ended September 30, 2002, relate primarily to foreign income taxes. As a result
of the Cases, the Company did not recognize income tax benefits for the losses
incurred from domestic operations or any U.S. tax benefit for foreign income
taxes. Instead, the increases in federal and state deferred tax assets as a
result of the losses were offset by equal increases in valuation allowances.
Consolidated income taxes for the quarter and nine-month periods ended September
30, 2001 have been allocated based on the income (loss) before income taxes of
the Company, Subsidiary Guarantors and other subsidiaries.

Foreign Currency - The functional currency of the Company and its subsidiaries
is the United States Dollar, and accordingly, pre-tax translation gains (losses)
are included in the Company's and Subsidiary Guarantors' operating income (loss)
and other income (expense), net balances. Such amounts for the Company totaled
$(5.6) and $(5.1) for the quarters ended September 30, 2002 and 2001,
respectively, and $10.1 and $(17.4) for the nine-month periods ended September
30, 2002 and 2001, respectively. Such amounts for the Subsidiary Guarantors
totaled $5.7 and $5.2 for the quarters ended September 30, 2002 and 2001,
respectively, and $(10.5) and $19.4 for the nine-month periods ended September
30, 2002 and 2001, respectively.

Debt Covenants and Restrictions - The Indentures contain restrictions on the
ability of the Company's subsidiaries to transfer funds to the Company in the
form of dividends, loans or advances.

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

This section should be read in conjunction with the response to Part I, Item 1,
of this Report.

This Report contains statements which constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements appear in a number of places in this section (see, for example,
"Recent' Events and Developments," "Results of Operations," and "Liquidity and
Capital Resources"). Such statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "estimates,"
"will," "should," "plans" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in the
forward-looking statements as a result of various factors. These factors include
the effectiveness of management's strategies and decisions, general economic and
business conditions, developments in technology, new or modified statutory or
regulatory requirements, and changing prices and market conditions. This section
and Part I, Item 1. "Business - Factors Affecting Future Performance" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001, each
identify other factors that could cause actual results to vary. No assurance can
be given that these are all of the factors that could cause actual results to
vary materially from the forward-looking statements.

REORGANIZATION PROCEEDINGS

On February 12, 2002, the Company, its parent company, Kaiser Aluminum
Corporation ("Kaiser") and 13 of its wholly owned subsidiaries filed separate
voluntary petitions in the United States Bankruptcy Court for the District of
Delaware (the "Court") for reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Code"). On March 15, 2002, two additional wholly owned
subsidiaries of the Company filed petitions. The Company and its 15 subsidiaries
that have filed petitions are collectively referred to herein as the "Debtors"
and the Chapter 11 proceedings of these entities are collectively referred to
herein as the "Cases." For purposes of this report, the term "Filing Date" shall
mean, with respect to any particular Debtor, the date on which such Debtor filed
its Case. The wholly owned subsidiaries of the Company included in the Cases
are: Kaiser Bellwood Corporation, Kaiser Aluminium International, Inc., Kaiser
Aluminum Technical Services, Inc., Kaiser Alumina Australia Corporation (and its
wholly owned subsidiary, Kaiser Finance Corporation) and ten other entities with
limited balances or activities. None of the Company's non-U.S. affiliates were
included in the Cases. The Cases are being jointly administered by the Court
with the Debtors managing their businesses in the ordinary course as
debtors-in-possession, subject to the control and supervision of the Court.

The necessity for filing the Cases was attributable to the liquidity and cash
flow problems of the Company arising in late 2001 and early 2002. The Company
was facing significant near-term debt maturities at a time of unusually weak
aluminum industry business conditions, depressed aluminum prices and a broad
economic slowdown that was further exacerbated by the events of September 11,
2001. In addition, the Company had become increasingly burdened by the asbestos
litigation and growing legacy obligations for retiree medical and pension costs.
The confluence of these factors created the prospect of continuing operating
losses and negative cash flow, resulting in lower credit ratings and an
inability to access the capital markets.

In light of the Cases, the accompanying financial information of the Company and
related discussions of financial condition and results of operations are based
on the assumption that the Company will continue as a "going concern," which
contemplates the realization of assets and the liquidation of liabilities in the
ordinary course of business; however, as a result of the commencement of the
Cases, such realization of assets and liquidation of liabilities are subject to
a significant number of uncertainties. Specifically, the financial information
for the quarter and nine-month periods ended September 30, 2002, contained
herein do not present: (a) the realizable value of assets on a liquidation basis
or the availability of such assets to satisfy liabilities, (b) the amount which
will ultimately be paid to settle liabilities and contingencies which may be
allowed in the Cases, or (c) the effect of any changes which may occur in
connection with the Debtors' capitalizations or operations resulting from a plan
of reorganization. Because of the ongoing nature of the Cases, the discussions
and consolidated financial statements contained herein are subject to material
uncertainties.

On October 29, 2002, the Court set January 31, 2003 as the last date by which
holders of pre-Filing Date claims against the Debtors (other than
asbestos-related personal injury claims and certain hearing loss claims) must
file their claims. Any holder of a claim that is required to file a claim by
such date and does not do so may be barred from asserting such claim against any
of the Debtors and, accordingly, may not be able to participate in any
distribution in any of the Cases on account of such claim. Because the January
31, 2003 bar date has not yet occurred and the asbestos bar date has not been
set, no provision has been included in the accompanying financial statements for
claims that may be filed. The bar date does not apply to asbestos-related
claims, for which the Debtors reserve the right to establish a separate bar date
at a later date. A separate bar date of June 30, 2003 has been set for certain
hearing loss claims.

The Company's objective in the Cases is to achieve the highest possible
recoveries for all creditors and stockholders and to continue the operation of
their businesses. However, there can be no assurance that the Debtors will be
able to attain these objectives or to achieve a successful reorganization.
Further, there can be no assurance that the liabilities of the Debtors will not
be found in the Cases to exceed the fair value of their assets. This could
result in claims being paid at less than 100% of their face value and the equity
of the Company's stockholders being diluted or cancelled. At this time, it is
not possible to predict the outcome of the Cases, in general, or the effect of
the Cases on the businesses of the Debtors or on the interests of creditors and
stockholders.

As provided by the Code, the Debtors had the exclusive right to propose a plan
of reorganization for 120 days following the Filing Date. The Court has
subsequently approved an extension of the exclusivity period through December
12, 2002. The Company intends to ask the Court for a further extension of the
exclusivity period to April 30, 2003. Extensions of this nature are believed to
be routine in complex cases such as the Debtors' Cases. However, no assurance
can be given that such extension or any future requests will be granted by the
Court. If the Debtors fail to file a plan of reorganization during the
exclusivity period, or if such plan is not accepted by the requisite numbers of
creditors and equity holders entitled to vote on the plan, other parties in
interest in the Cases may be permitted to propose their own plan(s) of
reorganization for the Debtors.

The Company expects that, when the Debtors ultimately file a plan of
reorganization, it will reflect the Company's strategic vision for emergence
from Chapter 11: (a) a standalone going concern with manageable leverage,
improved cost structure and competitive strength; (b) a company positioned to
execute its long-standing vision of market leadership and growth in fabricated
products specifically with a financial structure that enables access to capital
markets for accretive acquisitions; (c) a company that delivers a broad product
offering and leadership in service and quality for its customers and
distributors; and (d) a company with continued presence in key commodities
markets that have the potential to generate significant cash at steady-state
metal prices. The Company's advisors have developed a preliminary timeline that,
assuming the current pace of the Cases continues, could allow the Company to
emerge from Chapter 11 in 2004. While no assurances can be given in this regard,
the Company's management continues to push for an aggressive pace in advancing
the Cases.

RECENT EVENTS AND DEVELOPMENTS

Future Power Supply and its Impact on Future Operating Rate. During October
2000, the Company signed a new power contract with the Bonneville Power
Administration ("BPA") under which the BPA, starting October 1, 2001, was to
provide the Company's operations in the State of Washington with approximately
290 megawatts of power through September 2006. The contract provided the Company
with sufficient power to fully operate the Company's Trentwood facility (which
requires up to approximately 40 megawatts), as well as approximately 40% of the
combined capacity of the Company's Mead and Tacoma aluminum smelting operations,
which have been curtailed since the last half of 2000.

As a part of the reorganization process, the Company concluded that it was in
its best interest to reject the BPA contract as permitted by the Code. As such,
with the authorization of the Court, the Company rejected the BPA contract on
September 30, 2002. The contract rejection gives rise to a pre-petition claim by
the BPA that will be settled in the overall context of the Debtors' plan of
reorganization. Accordingly, any payments that may be required as a result of
the rejection of the BPA contract will only be made upon the Company's emergence
from the Cases. The amount of the BPA's claim in respect of the contract
rejection has not been determined and, as such, no provision has been made for
the claim in the accompanying financial statements. The amount of the BPA claim
will be determined either through a negotiated settlement, litigation or a
computation of prevailing power prices over the contract period. The Company has
entered into a short-term contract (pending the completion of a longer term
arrangement) with an alternate supplier to provide the power necessary to
operate its Trentwood facility.

The restart of a portion of the Company's Northwest smelters' capacity would
require the purchase of additional power from available sources. For the Company
to make such a decision, it would have to be able to purchase such power at a
reasonable price in relation to current and expected market conditions for a
sufficient term to justify its restart costs, which could be significant
depending on the number of lines restarted and the length of time between the
shutdown and restart. Given recent primary aluminum prices and the forward price
of power in the Northwest, it is unlikely that the Company would operate more
than a portion of its Northwest smelter capacity in the near future. If the
Company were to restart all or a portion of its Northwest smelting capacity, it
would take between three to six months to reach the full operating rate for such
operations, depending upon the number of lines restarted. Even after achieving
the full operating rate, operating only a portion of the Northwest capacity
would result in production/cost inefficiencies such that operating results
would, at best, be breakeven to modestly negative at long-term primary aluminum
prices. However, operating at such a reduced rate could, depending on prevailing
economics, result in improved cash flows as opposed to remaining curtailed and
incurring the Company's fixed and continuing labor and other costs. This is
because the Company is contractually liable for certain severance, supplemental
unemployment benefits and early retirement benefits for laid-off workers under
the Company's contract with the United Steelworkers of America ("USWA") during
periods of curtailment. All such contractual compensation costs have been
accrued for all USWA workers in excess of those expected to be required to run
the Northwest smelters at an operating rate of up to 40%. These costs were
triggered periodically through September 2002. Costs associated with the USWA
workers that the Company estimates would be required to operate the smelters at
an operating rate of up to 40% ($3.3 of which was reflected in the third quarter
of 2001) have been accrued through early 2003, as the Company does not currently
expect to restart the Northwest smelters prior to that date. If such workers are
not recalled prior to the end of the first quarter of 2003, the Company could
become liable for additional early retirement costs. Such costs could be
significant and could adversely impact the Company's operating results and, over
the long-range, its liquidity. The present value of such costs, which would
likely be paid out over an extended period of time, could be in the $60.0
million to $65.0 million range.

The Company continues to evaluate its options for minimizing the near-term
negative cash flow at its Mead and Tacoma facilities. The Company is also
exploring how to optimize the use and/or value of the facilities (which had a
carrying value of approximately $143.0 million at September 30, 2002) in
connection with the development of a plan of reorganization. The Company is
conducting a study of the long-term competitive position of the Mead and Tacoma
facilities and potential options for these facilities. A preliminary draft
report from this study is expected to be completed during November 2002. Once
the Company has received the preliminary results of the study, it plans to
analyze the findings and it expects to meet with the USWA and other parties
prior to making its determination as to any appropriate action(s). It is
possible that the outcome of this study and the Company's ongoing work on
developing a plan of reorganization could impact the Company's view of the
recoverability of the carrying value of the facilities. During October 2002, the
Company obtained a waiver to the financial covenants of its post-petition credit
agreement to exclude the impact of up to $230.0 million of possible charges that
could result from a change in its assessment regarding the recoverability of the
Washington smelters (including the $60.0 million to $65.0 million of possible
early retirement charges discussed above) (see Note 5 of Notes to Interim
Consolidated Financial Statements).

Valco Operating Level. During late 2000, the Company's 90%-owned Volta Aluminium
Company Limited ("Valco"), the Government of Ghana ("GoG") and the Volta River
Authority ("VRA") reached an agreement, subject to Parliamentary approval, that
would provide sufficient power for Valco to operate at least three and one-half
of its five potlines through 2017. However, Parliamentary approval has not been
received and, in March 2002, the GoG reduced Valco's power allocation forcing
Valco to curtail one of its four operating potlines. Valco has objected to the
power curtailment and expects to seek remedies from the GoG. Valco has met with
the GoG and the VRA and anticipates such discussions will continue in respect of
the current and future power situation. Valco currently expects to operate
approximately three potlines during the remainder of 2002. However, no
assurances can be provided that Valco will continue to receive sufficient power
to operate three potlines for the balance of 2002 or thereafter.

The amount of power made available to Valco by the VRA depends in large part on
the level of the lake that is the primary source for generating the
hydroelectric power used to supply the smelter. The level of the lake is
primarily a function of the level of annual rainfall and the alternative
(non-Valco) uses of the power generated, as directed by the VRA. At October 31,
2002, the level of the lake was near a ten-year low for the applicable time of
year. As such, additional reductions of Valco's power allocation (below the
current three-potline operating level) are possible. If any such reductions are
made, Valco will pursue its legal rights and seek appropriate compensation.
However, no assurances can be given as to the ultimate success of any such
actions.

Strategic Initiatives. The Company's strategy is to improve its financial
results by: increasing the competitiveness of its existing plants; continuing
its cost reduction initiatives; adding assets to businesses it expects to grow;
pursuing divestitures of its non-core businesses; and strengthening its
financial position by divesting of part or all of its interests in certain
operating and non-operating assets.

During the first nine months of 2002, the Company recorded restructuring charges
of $11.3 million (see Note 12 of Notes to Interim Consolidated Financial
Statements) in connection with these initiatives. Additional cash and non-cash
charges may be required in the future as these initiatives continue. Such
additional charges could be material.

Start-up Related Costs at Gramercy Facility. Initial production at the Company's
Gramercy, Louisiana, alumina refinery, which had been curtailed since July 1999
as a result of an explosion in the digestion area of the plant, commenced during
the middle of December 2000. Construction at the facility was substantially
completed during the third quarter of 2001. During the first nine months of
2001, the plant operated at approximately 68% of its newly-rated estimated
annual capacity of 1,250,000 tons. During the fourth quarter of 2001, the plant
operated at approximately 90% of its newly-rated capacity. Since the end of
February 2002, the plant has, except for normal operating variations, generally
operated at approximately 100% of its newly-rated capacity. The facility is now
focusing its efforts on achieving its full operating efficiency. During the
quarter and nine-month periods ended September 30, 2001, abnormal
Gramercy-related start-up costs totaled approximately $13.9 million and $54.9
million, respectively. These incremental costs for the nine-month period ended
September 30, 2001, were offset by approximately $15.2 million of additional
insurance benefit (recorded as a reduction of Bauxite and alumina business
unit's cost of products sold) during the second quarter of 2001. The abnormal
costs in 2001 resulted from operating the plant in an interim mode pending
completion of construction at well less than the expected production rate or
full efficiency. During 2002, because the plant was operating at near full
capacity, the amount of start-up costs was substantially reduced compared to
prior periods. Such costs were approximately $3.0 million during the first
quarter of 2002 and were substantially eliminated during the second and third
quarters of 2002.

Labor Matters. From September 1998 through September 2000, the Company and the
USWA were involved in a labor dispute as a result of the September 1998 USWA
strike and the subsequent "lock-out" by the Company in February 1999. Although
the USWA dispute was settled and the workers returned to the facilities, two
allegations of unfair labor practices ("ULPs") in connection with the USWA
strike and subsequent lock-out by the Company remain to be resolved. In May
2002, an administrative law judge of the National Labor Relations Board ("NLRB")
ruled against the Company in respect of the two remaining ULP allegations and
recommended that the NLRB award back wages, plus interest, less any earnings of
the workers during the period of the lockout. The Company continues to believe
that the allegations are without merit and will vigorously defend its position.
The Company has appealed the ruling of the administrative law judge to the full
NLRB. Any outcome from the NLRB appeal would be subject to additional appeals in
a United States Circuit Court of Appeals by the general counsel of the NLRB, the
USWA or the Company. This process could take several years. Because the Company
believes that it may prevail in the appeals process, the Company has not
recognized a charge in response to the adverse ruling. However, it is possible
that, if the Company's appeal(s) are not ultimately successful, a charge in
respect of this matter may be required in one or more future periods and the
amount of such charge(s) could be significant. Any amounts ultimately determined
by a court to be payable in this matter will be dealt with in the overall
context of the Debtors' plan of reorganization and will be subject to
compromise. Accordingly, any payments that may ultimately be required in respect
of this matter would likely only be paid upon or after the Company's emergence
from the Cases. See Note 8 of Notes to Interim Consolidated Financial Statements
for additional discussions of the ULP charges.

Pension Plan Matters. The assets of the Company sponsored pension plans, like
numerous other companies' plans, are, to a substantial degree, invested in the
capital markets and managed by a third party. Given the year-to-date performance
of the capital markets, it is likely that, barring a material improvement in the
capital markets during the fourth quarter of 2002, the Company will be required
to reflect a significant additional minimum pension liability in its year-end
financial statements as a result of a decline in the value of the assets held by
the Company's pension plans. Minimum pension liability adjustments are non-cash
adjustments that are reflected as an increase in pension liability and an
offsetting charge to stockholders' equity through comprehensive income (rather
than net income). The ultimate amount of such additional adjustment cannot be
determined until year-end 2002. However, based on the year-to-date stock market
performance and an estimated range of year-end 2002 asset values based, in part,
upon year-to-date stock market performance, the Company estimates that the
minimum pension liability adjustment at December 31, 2002, could be in the $75.0
million to $125.0 million range. The Company also anticipates that the decline
in the value of the pension plans' assets will unfavorably impact pension costs
reflected in its 2003 operating results. Further, the Company estimates that the
impact of the adverse capital market performance during the 2001 and 2002
year-to-date period, together with restructuring efforts and the possible
incurrence of substantial additional full early retirement obligations in
respect of the Company's Washington smelters in early 2003 or sooner (see Note 4
of Notes to Interim Consolidated Financial Statements), will cause expected
minimum pension funding requirements for the year ending December 31, 2003 to
increase to approximately $59.0 million. As reported in October 2002, the
Company has disclosed that it intends to meet with the PBGC and its labor unions
to explore alternatives to the minimum funding requirements. Such alternatives
may include extended amortization periods for payment of unfunded liabilities
and the potential termination of the pension plans. However, no assurances can
be given as to the outcome of these discussions.

Post-Petition Credit Agreement. During October 2002, the Company obtained a
waiver to the financial covenants of the post-petition credit agreement (the
"DIP Facility") that excludes up to $230.0 million of possible charges that
could result from a change in its assessment of recoverability regarding the
Washington smelters (see Note 4 of Notes to Interim Consolidated Financial
Statements). The waiver covers all reporting periods through December 31, 2002.
The Company and the lenders to the DIP Facility have agreed to the terms of an
amendment that will permanently exclude the $230.0 million of charges from the
financial covenant computations. The amendment will also (a) allow for the sale
of certain non-core and non-operating properties, subject to certain possible
reductions in the fixed asset component of the borrowing base, (b) clarify the
Company's ability to provide certain guarantees in respect of certain debt
obligations of Queensland Alumina Limited ("QAL"), in which the Company owns a
20% interest (see Note 8 of Notes to Interim Consolidated Financial Statements),
(c) adjust a financial compliance test under the DIP Facility to reflect more
recent market trends, (d) exclude certain non-cash, restructuring and
benefit-related charges reflected in year-to-date results and certain possible
additional charges (see Note 4 of Notes to Interim Consolidated Financial
Statements) from the calculation of one of the financial covenants and (e) to
clarify that the adverse ruling received in respect of certain unfair labor
practices ("ULPs" - see Note 8 of Notes to Interim Consolidated Financial
Statements) does not represent a material adverse effect on the DIP Facility as
long as such ruling is subject to appeal and no amounts are paid during the term
of the DIP Facility. The amendment is expected to be filed with the Court during
November 2002 and, while no assurances can be given, is expected to be approved
at the regularly scheduled December 19, 2002 Court hearing.

RESULTS OF OPERATIONS

As an integrated aluminum producer, the Company uses a portion of its bauxite,
alumina, and primary aluminum production for additional processing at certain of
its downstream facilities. Intersegment transfers are valued at estimated market
prices. The following table provides selected operational and financial
information on a consolidated basis with respect to the Company for the quarter
and nine-month periods ended September 30, 2002 and 2001. The following data
should be read in conjunction with the Company's interim consolidated financial
statements and the notes thereto contained elsewhere herein. All references to
tons refer to metric tons of 2,204.6 pounds. See Note 16 of Notes to
Consolidated Financial Statements in the Company's Form 10-K for the year ended
December 31, 2001, for further information regarding segments.

Interim results are not necessarily indicative of those for a full year. Average
realized prices for the Company's Flat-rolled products and Engineered products
segments are not presented in the following table as such prices are subject to
fluctuations due to changes in product mix.

                 SELECTED OPERATIONAL AND FINANCIAL INFORMATION
                                   (Unaudited)
              (In millions of dollars, except shipments and prices)

                                                                   Quarter Ended              Nine Months Ended
                                                                   September 30,                September 30,
                                                           ----------------------------  --------------------------
                                                                      2002         2001          2002          2001
                                                           ----------------------------  --------------------------

Shipments: (000 tons)
     Alumina
       Third Party                                                  566.1        680.2       1,839.7       2,009.1
       Intersegment                                                  53.8         51.2         240.1         286.0
                                                           --------------- ------------  ------------  ------------
           Total Alumina                                            619.9        731.4       2,079.8       2,295.1
                                                           --------------- ------------  ------------  ------------
     Primary Aluminum
       Third Party                                                   49.2         59.7         145.2         186.4
       Intersegment                                                    .1           .3           1.7           2.3
                                                           --------------- ------------  ------------  ------------
           Total Primary Aluminum                                    49.3         60.0         146.9         188.7
                                                           --------------- ------------  ------------  ------------
     Flat-Rolled Products                                             9.6         17.0          37.2          59.8
                                                           --------------- ------------  ------------  ------------
     Engineered Products                                             32.5         28.0          95.0          92.2
                                                           --------------- ------------  ------------  ------------
Average Realized Third Party Sales Price:
     Alumina (per ton)                                     $          169  $       183   $       168   $       189
     Primary Aluminum (per pound)                          $          .60  $       .63   $       .62   $       .69
Net Sales:
     Bauxite and Alumina
       Third Party (includes net sales of bauxite)         $         99.0  $     132.0   $     327.5   $     402.3
       Intersegment                                                   9.2          9.1          41.4          55.0
                                                           --------------- ------------  ------------  ------------
           Total Bauxite and Alumina                                108.2        141.1         368.9         457.3
                                                           --------------- ------------  ------------  ------------
     Primary Aluminum
       Third Party                                                   64.7         83.0         200.0         282.1
       Intersegment                                                    .1           .5           2.5           3.8
                                                           --------------- ------------  ------------  ------------
           Total Primary Aluminum                                    64.8         83.5         202.5         285.9
                                                           --------------- ------------  ------------  ------------
     Flat-Rolled Products                                            39.9         75.5         145.6         248.3
     Engineered Products                                            109.7        101.4         328.4         337.9
     Commodities Marketing(a)                                         9.3          9.5          30.8           5.9
     Minority Interests                                              25.4         28.9          72.6          80.9
     Eliminations                                                    (9.3)        (9.6)        (43.9)        (58.8)
                                                           --------------- ------------  ------------  ------------
           Total Net Sales                                 $        348.0  $     430.3   $   1,104.9   $   1,357.4
                                                           =============== ============  ============  ============

Operating Income (Loss):
     Bauxite and Alumina(b)                                $        (15.3) $        .4   $     (30.5)  $     (12.4)
     Primary Aluminum                                                (6.8)         (.3)        (16.8)          8.1
     Flat-Rolled Products(c)                                         (9.8)          .2         (26.6)          6.5
     Engineered Products(d)                                           4.6           -           15.5           5.1
     Commodities Marketing                                            9.0          3.2          28.1          (5.8)
     Eliminations                                                    (1.5)         (.4)          1.4           5.1
     Corporate and Other (Notes 10, 11 and 13)                      (20.5)       (17.7)        (75.7)        (53.5)
     Non-Recurring Operating (Charges) Benefits, Net
       (Note 12)                                                    (25.3)       (21.3)        (34.4)        198.9
                                                           --------------- ------------  ------------  ------------
           Total Operating Income (Loss)                   $        (65.6) $     (35.9)  $    (139.0)  $     152.0
                                                           =============== ============  ============  ============
Net Income (Loss)                                          $        (83.3) $      68.6   $    (197.8)  $     124.4
                                                           =============== ============  ============  ============
Capital Expenditures                                       $          9.3  $      33.3   $      29.2   $     120.1
                                                           =============== ============  ============  ============

(a)  Net sales in 2002 primarily represent partial recognition of deferred gains
     from hedges closed prior to the commencement of the Cases. Net sales in
     2001 represent net settlements with counterparties for maturing derivative
     positions.
(b)  Results for the quarter and nine-month period ended September 30, 2002,
     include $4.4 of charges resulting from an increase in the allowance for
     doubtful receivables; a LIFO inventory charge of $1.5; and estimated
     weather-related excess costs and inefficiencies of between $2.0 and $3.0
     resulting from hurricane conditions in the Caribbean and Gulf of Mexico in
     late September 2002. Operating results for the quarter and nine-month
     periods ended September 30, 2001 included: (1) abnormal Gramercy-related
     start-up costs of $13.9 and $54.9 offset by business interruption-related
     insurance accruals of $21.4 and $36.6; and (2) a LIFO inventory charge of
     $2.0.
(c)  Results for the quarter and nine-month periods ended September 30, 2002
     include a $1.5 LIFO inventory charge.
(d)  Results for the quarter and nine-month ended September 30, 2001 include a
     $1.0 LIFO inventory charge.

OVERVIEW
The Company's operating results are sensitive to changes in prices of alumina,
primary aluminum, and fabricated aluminum products, and also depend to a
significant degree on the volume and mix of all products sold and on the
Company's hedging strategies. Primary aluminum prices have historically been
subject to significant cyclical price fluctuations. See Notes 2 and 9 of Notes
to Interim Consolidated Financial Statements for a discussion of the Company's
hedging activities.

Changes in global, regional, or country-specific economic conditions can have a
significant impact on overall demand for aluminum-intensive fabricated products
in the transportation, distribution, packaging, and other markets. Such changes
in demand can directly affect the Company's earnings by impacting the overall
volume and mix of such products sold. To the extent that these end-use markets
weaken, demand can also diminish for what the Company sometimes refers to as the
"upstream" products: alumina and primary aluminum.

During the nine months ended September 30, 2001, the Average Midwest United
States transaction price ("AMT price") per pound of primary aluminum was $.76
per pound. During the nine months ended September 30, 2002, the average AMT
price was $.65 per pound. The average AMT price for primary aluminum for the
week ended November 1, 2002 was $.65 per pound.

QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2002, COMPARED TO QUARTER AND NINE
MONTHS ENDED SEPTEMBER 30, 2001

SUMMARY
The Company reported a net loss of $83.3 million for the quarter ended September
30, 2002, compared to net income of $68.6 million for the third quarter of 2001.
For the nine months ended September 30, 2002, the Company reported a net loss of
$197.8 million, compared to net income of $124.4 million for the same period in
2001.

Net sales in the third quarter of 2002 totaled $348.0 million compared to $430.3
million in the third quarter of 2001. Net sales for the nine-month period ended
September 30, 2002, totaled $1,104.9 million compared to $1,357.4 million for
the nine-month period ended September 30, 2001.

Bauxite and Alumina. Third party net sales of alumina for the quarter ended
September 30, 2002, decreased 25% as compared to the same period in 2001, due to
an 8% decrease in third party average realized prices and a 17% decrease in
third party shipments. The decrease in average realized prices was due to a
decrease in primary aluminum market prices to which the Company's third party
alumina sales contracts are linked. The decrease in quarter-over-quarter
shipments resulted primarily from the sale of an approximately 8.3% interest in
Queensland Alumina Limited ("QAL") in September 2001 and the timing of
shipments. From a timing perspective, third quarter 2002 alumina shipments from
the Company's 65%-owned Alumina Partners of Jamaica ("Alpart") refinery and the
Company's 100%-owned Gramercy, Louisiana alumina refinery were adversely
affected by weather-related delays caused by hurricane conditions in the
Caribbean and Gulf of Mexico in late September 2002. It is anticipated that
higher alumina shipments during the fourth quarter of 2002 will offset most of
this impact.

For the nine-month period ended September 30, 2002, third party net sales of
alumina were 19% lower than the comparable period in 2001 as the result of an
11% decrease in third party average realized prices and a 9% decrease in third
party shipments. The decrease in average realized prices and third party
shipments during the first nine months of 2002 as compared to 2001 was
attributable to the same volume and price factors discussed above.

Intersegment net sales for the nine-month period ended September 30, 2002,
decreased 25% as compared to the same period in 2001 as the result of a 16%
decrease in the intersegment shipments and a 10% decrease in intersegment
average realized prices. The decrease in shipments was due to reduced shipments
to the Primary alumina business unit primarily due to timing. The decrease in
intersegment average realized prices is the result of a decrease in primary
aluminum prices from period to period as intersegment transfers are made on the
basis of primary aluminum market prices on a lagged basis of one month.

Segment operating results (excluding non-recurring items) for the quarter and
nine-month periods ended September 30, 2002 were worse than the comparable
periods in 2001 primarily due to the decreases in the average realized prices
and shipments discussed above and a LIFO inventory charge of $1.5 million and an
increase of $4.4 million in the allowance for doubtful accounts both recorded in
the third quarter of 2002. The increase in the allowance for doubtful accounts
represents concerns regarding certain customers as a result of continued weak
market conditions. Segment operating results in the nine-month period were also
adversely affected by adverse cost performance during the second quarter of
2002. The adverse cost performance primarily resulted from higher than normal
maintenance and turnaround work at the Alpart refinery, higher fuel oil costs at
Alpart than those experienced in 2001 and $2.0 million of incremental cost at
the Gramercy facility that was not start-up related. While a specific amount has
yet to be determined, the Company estimates that the adverse weather conditions
in the Caribbean and Gulf of Mexico in late September 2002 resulted in higher
operating costs and inefficiencies in the $2.0 million to $3.0 million range.
These decreases were offset in part by favorable caustic prices and the decrease
in abnormal Gramercy related net start-up costs (see "Recent Events and
Developments - Start-up Related Costs at Gramercy Facility" above). Operating
results for the quarter and nine-month periods ended September 30, 2001
included: (1) abnormal Gramercy-related start-up costs of $13.9 million and
$54.9 million offset by business interruption-related insurance accruals of
$21.4 million and $36.6 million; and (2) a LIFO inventory charge of $2.0
million.

Segment operating results for the nine-month period ended September 30, 2002,
discussed above, excludes non-recurring costs of $1.9 million incurred in
connection with cost reduction initiatives. Segment operating results for the
quarter and nine-month periods ended September 30, 2001, exclude non-recurring
costs of $7.9 million and $9.9 million, respectively, also incurred in
connection with cost reduction initiatives.

Primary Aluminum. Third party net sales of primary aluminum decreased 22% for
the third quarter of 2002 as compared to the same period in 2001 as a result of
a 18% decrease in third party shipments and a 5% decrease in third party average
realized prices. The decrease in shipments was primarily due to the curtailment
of one of Valco's operating potlines in March 2002. The decrease in the average
realized prices was primarily due to the decrease in primary aluminum market
prices.

For the nine-month period ended September 30, 2002, third party sales of primary
aluminum decreased approximately 29% from the comparable period in 2001,
reflecting a 22% decrease in third party shipments and a 10% decrease in third
party average realized prices. The decreases in year-to-date 2002 shipments and
prices compared to 2001 were attributable to the same factors described above.
In addition, year-to-date 2002 shipments were also adversely affected by the
curtailment of the rod operations at the Tacoma facility in the second quarter
of 2001.

Since the beginning of 2001, the Northwest smelters have been completely
curtailed and are expected to remain curtailed at least through early 2003 (see
Note 4 of Notes to Interim Consolidated Financial Statements). As a result,
intersegment net sales of primary aluminum for both the quarter and nine-month
periods ended September 30, 2002 and 2001 have been minimal. Beginning in the
first quarter of 2001, the Flat-rolled products business unit began purchasing
its own primary aluminum rather than relying on the Primary aluminum business
unit to supply its aluminum requirements through production or third party
purchases. The Engineered products business unit was already responsible for
purchasing the majority of its primary aluminum requirements.

Segment operating results (before non-recurring items) for the quarter and
nine-month periods ended September 30, 2002, were worse than the comparable
periods in 2001. The primary reasons for the decreases were the decreases in the
average realized prices and net shipments discussed above. Operating results for
all periods reported were adversely impacted by overhead and other fixed costs
at the curtailed Washington smelters.

Segment operating results for the quarter and nine-month periods ended September
30, 2002, discussed above, excludes a non-cash charge of approximately $3.4
million related to a write-down of certain alumina inventories and non-recurring
costs of $1.0 million and $2.7 million, respectively, incurred in connection
with cost reduction initiatives. Segment operating results for the quarter and
nine-month periods ended September 30, 2001, excludes non-recurring net power
sales gains of $6.5 million and $229.2 million, respectively. These gains were
offset in both periods by costs of $5.4 million also incurred in connection with
cost reduction initiatives.

Flat-Rolled Products. Net sales of flat-rolled products decreased 47% during the
third quarter of 2002 as compared to 2001 primarily due to a 44% decrease in
product shipments and a 6% decrease in realized prices. Current period shipments
were adversely affected primarily by a continuation of soft aerospace products
demand and by the second quarter of 2002 exit of the can lid and tab stock and
brazing sheet products offset in part by an increase in general engineering
plate demand. The decrease in average realized prices was due to a decrease in
metal prices and the impact of weaker demand.

For the nine-month period ended September 30, 2002, net sales of flat-rolled
products decreased by approximately 41% as compared to the same period in 2001
as the result of a 38% decrease in shipments and a 5% decrease in realized
prices. The decline in year-to-date 2002 shipments and prices were attributable
to the same factors described above, as well as the planned exit from can lid
and tab and brazing sheet products during the first half of 2002.

Segment operating results (before non-recurring items) for the quarter and
nine-month periods ended September 30, 2002, were worse than the comparable
periods in 2001 primarily due to the decrease in shipments and product prices
discussed above. Third quarter 2002 results were also adversely impacted by a
LIFO inventory charge of $1.5 million. Partially offsetting these adverse
impacts were reductions in overhead and other costs as a result of cost cutting
initiatives. Operating results for the quarter and nine-month periods ended
September 30, 2001, included a LIFO inventory charge of $2.0 million.

Segment operating results for the quarter and nine-month periods ended September
30, 2002, exclude non-recurring costs of $1.5 million and $5.4 million,
respectively, incurred in connection with cost reduction initiatives. Segment
operating results for the nine-month period ended September 30, 2002, also
excludes a $1.6 million non-cash LIFO inventory charge associated with the
product line exits. Segment operating results for both the quarter and
nine-month periods ended September 30, 2001, exclude non-recurring costs of
$10.7 also incurred in connection with cost reduction initiatives.

Engineered Products. Net sales of engineered products increased 8% during the
third quarter 2002 as compared to 2001, as a 16% increase in product shipments
was partially offset by a 7% decrease in average realized prices. The increase
in product shipments was the result of increased general engineering and ground
transportation shipments due to increased market demand. The decrease in average
realized prices was due to lower metal prices as well as some erosion in overall
product prices resulting from continuing weak overall market conditions.

For the nine-month period ended September 30, 2002, net sales of engineered
products decreased by approximately 3% from the comparable period in 2001 due to
a 5% decrease in average realized prices partially offset by a 3% increase in
product shipments. The decrease in sales prices was attributable to the same
factor listed above. The increase in product shipments was the result of
increased ground transportation markets offset in part by reduced general
aviation market shipments.

The improvements in segment operating results (before non-recurring items) for
the quarter and nine-month periods ended September 30, 2002, as compared to the
comparable periods in 2001 were primarily attributable to improved cost
performance, higher shipment volumes and reductions in energy and overhead
costs. Operating results for the nine-month period ended September 30, 2002,
were offset in part by the net effect of the price factor described above.
Operating results for the quarter and nine-month periods ended September 30,
2001, included a LIFO inventory charge of $1.0 million.

Segment operating results for both the quarter and nine-month periods ended
September 30, 2002, exclude $1.3 million incurred in connection with cost
reduction initiatives.

Commodities Marketing. In 2002, net sales for this segment primarily represents
recognition of deferred gains from hedges closed prior to the commencement of
the Cases. See Note 9 of Notes to Interim Consolidated Financial Statements.
Gains or losses associated with these liquidated positions are initially
deferred in Other comprehensive income and are subsequently recognized over the
original hedging periods as the underlying purchases/sales occur. In 2001, net
sales for this segment represented net settlements with third party brokers for
maturing derivative positions.

Segment operating results for the quarter and nine-month periods ended September
30, 2002, increased compared to the comparable periods in 2001 due to the higher
prices implicit in the liquidation of the positions in January 2002 versus the
prevailing market prices during the quarter and nine-month periods ended
September 30, 2001.

No hedging activities were conducted between the Filing Date and October 31,
2002. The Company anticipates that, subject to prevailing economic conditions,
it may reinstitute an active hedging program to protect the interests of its
constituents. Court approval for such activities was received in July 2002.
However, no assurance can be given as to when or if such hedging activities will
restart.

Eliminations. Eliminations of intersegment profit vary from period to period
depending on fluctuations in market prices as well as the amount and timing of
the affected segments' production and sales. Eliminations for the third quarter
of 2002 include a benefit of $1.9 million of deferred intersegment profit
offsetting the $3.4 million inventory write-down in the Primary Aluminum segment
discussed above.

Corporate and Other. Corporate operating expenses represent corporate general
and administrative expenses which are not allocated to the Company's business
segments. The increase in corporate operating expenses (excluding non-recurring
items) in the quarter and nine-month periods ended September 30, 2002, as
compared to the comparable periods in 2001 was due largely to higher medical and
pension cost accruals for active and retired employees and non-cash pension
charges of $1.1 million and $10.4 million (see Note 11 of Notes to Interim
Consolidated Financial Statements), charges of $1.8 million and $3.6 million
related to the Company's key employee retention program (see Note 13 of Notes to
Interim Consolidated Financial Statements) and payments in January 2002 of
approximately $5.0 million to a trust in respect of certain management
compensation agreements (see Note 10 of Notes to Interim Consolidated Financial
Statements).

Corporate operating results for both the quarter and nine-month periods ended
September 30, 2002, discussed above, exclude a non-cash impairment charge of
approximately $20.0 million related to the Company's non-operating properties.
Corporate operating results for the quarter and nine-month periods ended
September 30, 2001, discussed above, exclude non-recurring costs of $.5 million
and $1.0 million, respectively, incurred in connection with the Company's cost
reduction initiatives.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the filing of the Cases, claims against the Debtors for principal
and accrued interest on secured and unsecured indebtedness existing on the
Filing Date are stayed while the Debtors continue business operations as
debtors-in-possession, subject to the control and supervision of the Court. See
Note 1 of Notes to Interim Consolidated Financial Statements for additional
discussion of the Cases. At this time, it is not possible to predict the effect
of the Cases on the businesses of the Debtors.

Operating Activities. Cash flow used by operations during the nine-month period
ended September 30, 2002 primarily reflects: (a) operating results at a
near-break even level at current primary aluminum prices and with the continuing
weak market for fabricated metal products; (b) approximately $29.5 million of
funding to QAL in respect of QAL's regularly scheduled debt maturities; and (c)
year-to-date foreign income tax payments of $31.3 million. Cash flow from
operations during the nine-month period ended September 30, 2001 primarily
reflects power sale proceeds offset by higher payments of wages and related
benefit costs associated with the Washington smelter curtailments as well as
foreign income tax payments.

At September 30, 2002, the Company had working capital of $277.9 million,
compared with a negative working capital of $37.7 million at December 31, 2001.
In addition to normal operating changes, the increase in working capital
primarily resulted from the reclassification of pre-petition liabilities to be
resolved in connection with the Cases (i.e. accounts payable, accrued interest,
other accrued liabilities and current portion of long-term debt) to Liabilities
subject to compromise.

Investing Activities. Capital expenditures during the nine-month period ended
September 30, 2002, were $29.2 million. The 2002 capital expenditures were
incurred to improve production efficiency and reduce operating costs at the
Company's facilities. Total consolidated capital expenditures are expected to be
between $40.0 and $75.0 million per annum in each of 2002 and 2003 (of which
approximately 15% is expected to be funded by the Company's minority partners in
certain foreign joint ventures).

Financing Activities and Liquidity. On February 12, 2002, the Company and Kaiser
entered into the DIP Facility with a group of lenders. The DIP Facility provides
for a secured, revolving line of credit through the earlier of February 12,
2004, the effective date of a plan of reorganization or voluntary termination by
the Company. Under the DIP Facility, the Company is able to borrow amounts by
means of revolving credit advances and have issued for its benefit letters of
credit (up to $125.0 million) in an aggregate amount equal to the lesser of
$300.0 million or a borrowing base relating to eligible accounts receivable,
eligible inventory and eligible fixed assets reduced by certain reserves, as
defined in the DIP Facility agreement. The DIP Facility is guaranteed by the
Company, the Debtor subsidiaries and two non-Debtor subsidiaries, Kaiser Jamaica
Corporation and Alpart Jamaica Inc. Interest on any outstanding balances will
bear a spread over either a base rate or LIBOR, at the Company's option. The
Court signed a final order approving the DIP Facility on March 19, 2002.

During October 2002, the Company obtained a waiver to the financial covenants of
the DIP Facility that excludes up to $230.0 million of possible charges that
could result from a change in its assessment of recoverability regarding the
Washington smelters (see Note 4 of Notes to Interim Consolidated Financial
Statements). The waiver covers all reporting periods through December 31, 2002.
The Company and the lenders to the DIP Facility have agreed to the terms of an
amendment that will permanently exclude the $230.0 million of charges from the
financial covenants computations. The amendment will also (a) allow for the sale
of certain non-core and non-operating properties, subject to certain possible
reductions in the fixed asset component of the borrowing base, (b) clarify the
Company's ability to make investments in or to provide certain guarantees in
respect of certain debt obligations of QAL, in which the Company owns a 20%
interest (see Note 8 of Notes to Interim Consolidated Financial Statements), (c)
adjust a financial compliance test under the DIP Facility to reflect more recent
market trends, (d) exclude certain non-cash, restructuring and benefit-related
charges reflected in year-to-date result and certain possible additional charges
(see Note 4 of Notes to Interim Consolidated Financial Statements) from the
calculation of the financial covenant and (e) to clarify that the adverse ruling
received in respect of certain unfair labor practices ("ULPs" - see Note 8 of
Notes to Interim Consolidated Financial Statements) does not represent a
material adverse effect on the DIP Facility as long as such ruling is subject to
appeal and no amounts are paid during the term of the DIP Facility. The
amendment has been filed with the Court and is expected to be approved at the
regularly scheduled December 17, 2002 Court hearing.

The Company believes that the cash and cash equivalents, cash flows from
operations and cash available from the DIP Facility will provide sufficient
working capital to allow the Company to meet its required obligations during the
pendency of the Cases. At October 31, 2002, cash and cash equivalents were
approximately $74.1 million, there were no outstanding borrowings under the
revolving credit facility and outstanding letters of credit were approximately
$40.7 million. The October 31, 2002 balance of cash and cash equivalents
declined from the balance at September 30, 2002 primarily because alumina
customer shipments from Alpart and Gramercy that were scheduled for the end of
September 2002 had to be delayed until early-to-mid October 2002 due to the
adverse weather conditions in the Caribbean and Gulf of Mexico during late
September 2002 and early October 2002. Thus cash receipts from these sales,
which ordinarily would have been received by October 31, 2002, are not expected
to be received until November 2002.

In accordance with the Code and the DIP Facility, the Company is not permitted
to pay any dividends or purchase any of its common or preference stock.

CRITICAL ACCOUNTING POLICIES
Critical accounting policies are those that are both very important to the
portrayal of the Company's financial condition and results, and require
management's most difficult, subjective, and/or complex judgments. Typically,
the circumstances that make these judgments difficult, subjective and/or complex
have to do with the need to make estimates about the effect of matters that are
inherently uncertain. While the Company believes that all aspects of its
financial statements should be studied and understood in assessing its current
(and expected future) financial condition and results, the Company believes that
the accounting policies that warrant additional attention include-

1.   The fact that the consolidated financial statements as of (and for the
     periods ended) September 30, 2002, and December 31, 2001 have been prepared
     on a "going concern" basis and do not include possible impacts arising in
     respect of the Cases. See Note 2 of Notes to Interim Consolidated Financial
     Statements.

2.   The Company's judgments and estimates with respect to commitments and
     contingencies; in particular: (a) future environmental costs, (b) future
     asbestos related costs and obligations as well as estimated insurance
     recoveries; and (c) possible liability in respect of claims of ULPs which
     were not resolved as a part of the Company's September 2000 labor
     settlement. See Note 8 of Notes to Interim Consolidated Financial
     Statements.

3.   The Company's judgments and estimates in respect of ongoing and future
     costs and obligations associated with its smelter curtailments in the State
     of Washington and any related impacts on the Company's ability to realize
     recorded asset values in the ordinary course. See Note 4 of Notes to
     Interim Consolidated Financial Statements.

4.   The Company's judgments and estimates in respect of its employee benefit
     plans. See Note 10 of Notes to Consolidated Financial Statements in the
     Company's Form 10-K for the year ended December 31, 2001.

5.   The accounting methodologies employed by the Company in respect of
     non-recurring items and the impacts of the Gramercy incident. See Note 12
     of Notes to Interim Consolidated Financial Statements and Notes 3 and 6 of
     Notes to Consolidated Financial Statements in the Company's Form 10-K for
     the year ended December 31, 2001.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's operating results are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also depend to
a significant degree upon the volume and mix of all products sold. As discussed
more fully in Notes 2 and 9 of Notes to Interim Consolidated Financial
Statements, the Company historically has utilized hedging transactions to
lock-in a specified price or range of prices for certain products which it sells
or consumes in its production process and to mitigate the Company's exposure to
changes in foreign currency exchange rates. However, because the agreements
underlying the Company's hedging positions provided that the counterparties to
the hedging contracts could liquidate the Company's hedging positions if the
Company filed for reorganization, the Company chose to liquidate these positions
in advance of the Filing Date. No hedging activities were conducted between the
Filing Date and October 31, 2002. The Company anticipates that, subject to
prevailing economic conditions, it may reinstitute an active hedging program to
protect the interests of its constituents. Court approval for such activities
was received in July 2002. However, no assurance can be given as to when or if
such hedging activities will restart.

SENSITIVITY
Alumina and Primary Aluminum. Alumina and primary aluminum production in excess
of internal requirements is sold in domestic and international markets, exposing
the Company to commodity price opportunities and risks. The Company's hedging
transactions are intended to provide price risk management in respect of the net
exposure of earnings resulting from (i) anticipated sales of alumina, primary
aluminum and fabricated aluminum products, less (ii) expected purchases of
certain items, such as aluminum scrap, rolling ingot, and bauxite, whose prices
fluctuate with the price of primary aluminum. On average, before consideration
of hedging activities, any fixed price contracts with fabricated aluminum
products customers, variations in production and shipment levels, and timing
issues related to price changes, the Company estimates that each $.01 increase
(decrease) in the market price per price-equivalent pound of primary aluminum
increases (decreases) the Company's annual pre-tax earnings by approximately
$10.0 million, based on recent fluctuations in operating levels.

Foreign Currency. The Company has historically entered into forward exchange
contracts to hedge material cash commitments for foreign currencies. The
Company's primary foreign exchange exposure is related to the Company's
Australian Dollar (A$) commitments in respect of activities associated with its
20.0%-owned affiliate, QAL. The Company estimates that, before consideration of
any hedging activities, a US $0.01 increase (decrease) in the value of the A$
results in an approximate $1.0 - $2.0 million (decrease) increase in the
Company's annual pre-tax operating income.

Energy. The Company is exposed to energy price risk from fluctuating prices for
natural gas, fuel oil and diesel oil consumed in the production process. The
Company estimates that each $1.00 change in natural gas prices (per mcf) impacts
the Company's pre-tax operating results by approximately $20.0 million. Further,
the Company estimates that each $1.00 change in fuel oil prices (per barrel)
impacts the Company's pre-tax operating results by approximately $3.0 million.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. An evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures was performed within 90 days of the filing date of this Report
under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer. Based on that
evaluation, the Company's management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company's disclosure controls and
procedures were effective.

Changes in Internal Control. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation.

                           PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The information regarding the Cases included in Note 1 of Notes to Interim
Consolidated Financial Statements and the information regarding ULP allegations
included in Note 8 of Notes to Interim Consolidated Financial Statements is
incorporated herein by reference. For additional information concerning material
legal proceedings with respect to the Company, reference is made to Part I, Item
3. "LEGAL PROCEEDINGS" in the Company's Form 10-K for the year ended December
31, 2001, Part II, Item 1. "LEGAL PROCEEDINGS" in the Company's Form 10-Q for
the period ended March 31, 2002 and Part II, Item 1. "LEGAL PROCEEDINGS" in the
Company's Form 10-for the period ended June 30, 2002.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

          99.1    Certification of Jack A. Hockema pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002

          99.2    Certification of John T. La Duc pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002

     (b)  Reports on Form 8-K.

          On August 13, 2002, under Item 9 "Regulation FD Disclosure" of Form
          8-K, the Company filed a Current Report on Form 8-K which included the
          certifications by Jack A. Hockema, the Company's Chief Executive
          Officer, and John T. La Duc, the Company's Chief Financial Officer,
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, related to
          the Company's Quarterly Report on Form 10-Q for the period ended June
          30, 2002.

          No other Reports on Form 8-K were filed by the Company during the
          quarter ended September 30, 2002. However, on October 23, 2002, under
          Item 5. "Other Events" of Form 8-K, the Company filed a Current Report
          on Form 8-K reporting that the Company intended to seek discussions
          with Pension Benefit Guaranty Corporation regarding alternatives to
          minimum pension funding requirements.

                                    SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, who have signed this report on behalf of
the registrant as the principal financial officer and principal accounting
officer of the registrant, respectively.

                                      KAISER ALUMINUM & CHEMICAL CORPORATION

                                      By:         /s/ John T. La Duc
                                                    John T. La Duc
                                             Executive Vice President and
                                                Chief Financial Officer
                                             (Principal Financial Officer)

                                      KAISER ALUMINUM & CHEMICAL CORPORATION

                                      By:         /s/ Daniel D. Maddox
                                                    Daniel D. Maddox
                                              Vice President and Controller
                                             (Principal Accounting Officer)

Dated:   November 11, 2002

                                 CERTIFICATIONS

      I, Jack A. Hockema, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of Kaiser Aluminum
& Chemical Corporation;

      2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

           a)   designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within
                those entities, particularly during the period in which this
                quarterly report is being prepared;

           b)   evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing date of this quarterly report (the "Evaluation Date");
                and

           c)   presented in this quarterly report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

           a)   all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

           b)   any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

      6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:   November 11, 2002                            /s/ Jack A. Hockema
                                                         Jack A. Hockema
                                                     Chief Executive Officer

      I, John T. La Duc, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of Kaiser Aluminum
& Chemical Corporation;

      2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13 a- 14 and 15d-14) for the registrant and we have:

           a)   designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within
                those entities, particularly during the period in which this
                quarterly report is being prepared;

           b)   evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing date of this quarterly report (the "Evaluation Date");
                and

           c)   presented in this quarterly report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

           a)   all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

           b)   any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

      6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  November 11, 2002                             /s/ John T. La Duc
                                                         John T. La Duc
                                                     Chief Financial Officer
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