WELLS ALUMINUM CORP, 10-K, 2000-03-24

WELLS ALUMINUM CORP
10-K, 2000-03-24
ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
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|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 1999

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

For the transition period from ___________ to ___________

Commission File Number: 333-31071

Wells Aluminum Corporation
(Exact name of Registrant as Specified in Its Charter)

Maryland 35-1139550
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

809 Gleneagles Court, Suite 300 21286
Baltimore, Maryland (Zip Code)
(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (410) 494-4500

-----------

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

As of March 24, 2000, the registrant had 744,392.5 shares of Common Stock
outstanding.

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TABLE OF CONTENTS

Page
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PART I .................................................................... 1

Item 1. Business .......................................................... 1

Item 2. Properties ........................................................ 9

Item 3. Legal Proceedings ................................................. 10

Item 4. Submission of Matters to a Vote of Security Holders ............... 10

PART II ................................................................... 11

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ............................................... 11

Item 6. Selected Financial Data ........................................... 11

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 12

Item 7A. Quantitative and Qualitative Disclosures about Market Risk ....... 21

Item 8. Financial Statements and Supplementary Data ....................... 22

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .......................................... 40

PART III .................................................................. 41

Item 10. Directors and Executive Officers of the Registrant ............... 41

Item 11. Executive Compensation ........................................... 42

Item 12. Security Ownership of Certain Beneficial Owners
and Management ................................................... 45

Item 13. Certain Relationships and Related Transactions ................... 46

PART IV ................................................................... 47

Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K .............................................. 47

SIGNATURES ................................................................ 48

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PART 1.

ITEM 1. BUSINESS

The following description of Wells Aluminum Corporation ("Wells" or the
"Company"), the aluminum extrusion industry, and the Company's business contains
statements which constitute forward looking statements, and not historical
facts, within the meaning of the Private Securities Litigation Reform Act of
1995. These statements appear in a number of places and include statements
regarding the intent, belief or current expectations of the Company or its
officers primarily with respect to the future prospects, financial condition and
operating performance of the Company. Any such forward looking statements
regarding the Company, the aluminum extrusion industry, and the Company's
business are not guarantees of future performance and involve risks and
uncertainties. A variety of factors could cause actual results to differ
materially from those anticipated in the Company's forward looking statements.

THE COMPANY

Wells Aluminum Corporation was incorporated in Maryland in November 1967 as
the successor to an aluminum extrusion business which began in the early 1950's.
Gibbons, Goodwin, van Amerongen ("GGvA") is the sole general partner of Wells
Holdings Limited Partnership, which as of December 31, 1999 owned 75.2% of the
outstanding shares of the Company's common stock. As a result, GGvA had the
controlling interest in the Company and had the power to elect a majority of the
directors of the Company and to control all matters submitted to the
stockholders of the Company, including approving business combinations involving
the Company.

On February 23, 2000, Norsk Hydro Americas, Inc. ("Norsk Hydro") acquired
from Wells Holdings Limited Partnership and the other stockholders of the
Company all of the outstanding shares of the Company's common stock. As a
result, as of February 23, 2000, Norsk Hydro controls the Company and has the
power to elect the directors of the Company.

Wells is a custom extruder, finisher and fabricator of soft alloy aluminum
products, principally for the building/construction, transportation, consumer
durables and equipment/electrical markets. In addition to the production of mill
finished extrusions, the Company's operations include painting, anodizing and
fabrication, which enables the Company to provide its customers with
assembly-ready aluminum components and assemblies. The Company shipped
approximately 165.5 million pounds of aluminum extrusions in 1999, a decrease of
0.8 million pounds, or 0.5%, over the 1998 shipments of 166.3 million pounds.

The Company's network of plants consists of seven facilities in six states
in the midwestern and southeastern United States. These facilities contain
twelve extrusion presses with circle sizes of 7" to 10" and are located to meet
various regional demands, minimize transportation costs, balance production
requirements among plants and provide single source reliability to large
customers. The Company also operates its own casting facility for aluminum
billet, enabling the Company to manage its internal billet requirements as well
as to recycle its scrap for use in its extrusion operations. The Company
believes that its ability to cast the majority of its billet needs provides a
cost advantage over those extruders without an internal casting capability.

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The Company sells its products to approximately 800 customers primarily in
the building/construction, transportation, consumer durables and
equipment/electrical markets. In 1999, the Company's top ten customers received
approximately 42% of the Company's shipped volume in pounds sold, with the top
twenty-five customers accounting for approximately 60%. In 1999, one customer,
Navistar International Corporation, accounted for 15.1% of the Company's gross
sales measured in dollars.

The Company focuses on long-term customer relationships to maintain and
enhance its business prospects. Approximately two-thirds of the Company's 1999
sales in extrusion pounds shipped were made to customers that have been
customers of the Company for more than ten years. The Company believes that its
relatively stable customer base is attributable, in part, to the Company's
ability to provide a high level of customer service, engineering expertise and
quality products at competitive prices.

PRODUCTS

Through its regional plant system, Wells is able to produce a broad range
of extruded, finished and fabricated aluminum products used by its customers in
the manufacture of their end products. In 1999, over 90% of the products sold by
the Company were designed and manufactured according to individual customer
specifications. The Company believes that the large share of customized products
sold by the Company can be attributed to product quality, a high level of
customer service, the coordination between its sales force and engineering staff
at each plant, engineering design capabilities, and its extensive extrusion,
finishing and fabrication capabilities.

Building/Construction

In the building/construction market, the Company produces extrusions and
fabricated products for residential and commercial window and door frames, storm
doors, vents and louvers, railings, stadium seating systems, patio enclosures
and a variety of architectural specialty applications. The Company also
manufactures and markets a proprietary line of sliding patio doors and a line of
commercial entrance doors and storefront systems. In 1999, shipments to
customers in the building/construction market represented approximately 41% of
the Company's total pounds sold. Of the pounds sold in this market,
approximately 54% were shipped to customers in the residential segment with the
remaining pounds being shipped to customers in the commercial segment.

Transportation

In the transportation market, the Company produces extrusions and
fabricated products for truck cabs, truck trailers, recreational vehicles, golf
carts, utility trailers and automotive accessories. The Company also produces a
number of complex assemblies, including door assemblies and structural sub
frames for use in Class 8 truck tractors and complete window assemblies for use
in school buses and delivery vans. In 1999, approximately 28% of the Company's
total pounds sold were shipped to customers in the transportation market.

Consumer Durables

In the consumer durables market, the Company produces extrusions and
fabricated products for a wide range of applications, including the manufacture
of high-end office furniture and pleasure boats. In 1999, shipments to customers
in the consumer durables market represented approximately 11% of the Company's
total pounds sold.

Equipment/Electrical

In the equipment/electrical market, the Company produces extrusions and
fabricated products for applications such as heat sinks and electronic component
mounting systems, electrical distribution and commercial lighting systems,
material handling systems, and industrial guarding and fixturing systems. In
1999,

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approximately 7% of the Company's total pounds sold were shipped to customers in
the equipment/electrical market.

Distributors

For the distributor market, the Company produces extruded products which
the distributors then resell to manufacturers, contractors and other industrial
end users. The Company's focus in the distribution market is on producing
application specific components, which are sold via specialty, value added
distributors. The Company does not regularly participate in the stock
shape/metal service center portion of the distribution market. Thus, the Company
believes that the end use of products produced for distributors and then resold
tends to parallel the uses of customers which the Company serves directly. In
1999, shipments to distributors represented approximately 13% of the Company's
total pounds sold.

MANUFACTURING

Wells' manufacturing processes involve casting, extruding, finishing and
fabricating soft alloy aluminum. The Company's operations and engineering
activities are directed by its Vice President, Operations, from the Company's
corporate headquarters. Management of production activities is structured to
provide strong decentralized plant operations in combination with certain
centralized corporate functions. Each plant location, of which there are seven,
is managed by an operations manager, who in most cases, is supported by a plant
manager. Operations management focuses on plant site issues, such as customer
service, delivery, product quality, productivity, operating costs and labor,
that are directly under operations control.

Casting

The Company has two casting furnaces and ancillary equipment which are used
to produce aluminum billet. The first step in the casting process is to melt
primary aluminum and aluminum scrap in a large furnace. The molten aluminum is
either directly alloyed in this furnace or transferred to another furnace where
the alloying materials are added. The aluminum is then cast into logs of varying
diameters with lengths of up to 16 feet. Next, these logs are heated and then
cooled at a controlled rate to allow the cast aluminum to achieve the optimally
distributed chemical composition for extrusion, a process called homogenization.
Afterwards, some aluminum logs are cut into shorter lengths called billets, the
main raw material for the production of aluminum extrusions. Aluminum logs and
billets are then transferred to the Company's extrusion plants for subsequent
production of aluminum extrusions.

Extrusion

The Company operates five extrusion plants which have in the aggregate
twelve extrusion presses producing varying sizes of extrusions. Extrusion is a
manufacturing process by which aluminum billet is heated and pushed by a press,
or extruded, through a die to produce a piece of metal in the shape of the die
and at the desired length. Extrusions are then straightened by stretching and
cut to the required lengths which range from 8 to 50 feet. Most extrusions are
hardened by aging in large ovens from 6 to 12 hours. Typically, 75% of the
results of the extrusion process are salable products; the remaining 25% is
aluminum scrap, which is either recast into aluminum billet by the Company or
sold on the open market to metal dealers. Almost all of the Company's dies are
designed to produce aluminum extrusions according to individual customer
specifications.

Finishing

The Company has extensive finishing capabilities with two painting and two
anodizing facilities providing coverage of markets from the East Coast through
the Midwest. In addition, the Company uses contract painters and anodizers to
augment its finishing capabilities. These combined finishing capabilities allow
the Company to provide its customers a single source for components and
assemblies ready for processing. Often additional

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finishing-related services are provided, including two-tone painting and taping
of painted surfaces for protection during the customer's manufacturing process.
These services enhance the Company's value to its customers and provide
appreciable added income and profit margin.

Fabrication

The Company has six fabrication operations, of which two are dedicated
fabrication plants. The Company employs a variety of fabrication processes,
including notching, bending, punching, drilling, tight tolerance cutting,
computerized numerical control ("CNC") machining, manual and robotic welding,
and assembly. These fabrication operations differ in complexity, ranging from
Tier #3 activities, which include welding, high tolerance machining and
assembly, to Tier #1 activities, which involve light punching, manual sawing and
drilling, and hand deburring. Fabricated products may range from a simple
cut-to-length extrusion notched and punched for use as a door threshold, to a
step assembly for a truck cab, to a curved and fully formed trim cap for use on
an office partition, to a panel van window assembly complete with glass. In
1998, the Company's two Tier #3 operations received QS9000/ISO9002 certification
demonstrating the Company's commitment to the production of quality products.
The Company's fabrication operations are attractive to those customers
interested in outsourcing certain manufacturing in order to better control
operating costs, manage inventory, accommodate growth, or more sharply focus
their own operations. The Company's fabrication operations provide additional
opportunities to enhance profit margins and help protect the business from
market penetration by other competitors.

Backlog

Extrusion turnaround time is generally sufficiently short as to permit the
Company to fill customer orders for most of its products in a short time period.
Accordingly, the Company does not consider backlog to have a material effect on
its business.

RAW MATERIALS

Wells' principal raw material for aluminum extrusions is aluminum billet,
the majority of which the Company produces at its own casting facility. The main
materials used in the production of billet are primary aluminum ingot and
aluminum scrap. In 1999, the Company purchased its primary aluminum requirements
pursuant to supply agreements with six North American suppliers at current
market prices at the delivery dates. Over 54% of the aluminum scrap required in
1999 was sourced from the Company's own manufacturing processes. The remaining
requirements for primary ingot and scrap were purchased from a variety of metal
and scrap brokers and dealers.

For 2000, the Company has secured commitments with five North American
suppliers to purchase primary aluminum for its casting requirements at current
market prices at the delivery dates. Over 50% of the aluminum scrap required for
2000 is expected to be sourced from the Company's own manufacturing processes.
The Company believes that its remaining requirements for primary ingot and scrap
are readily available in the open market from metal and scrap brokers and
dealers.

Aluminum Cost Recovery

Aluminum is subject to extensive price volatility in the world market,
reflecting both domestic and international economic demand as well as activities
by financial hedge investment funds. The Company seeks to reduce its exposure to
the volatility in aluminum prices by fixing the cost of metal by hedging against
committed fixed price sales or by passing cost increases through to customers by
systematic market indexed sales pricing.

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The Company limits its hedging activities to committed sales and does not engage
in speculative hedging. As a further control technique, the Company maintains
its inventory at levels consistent with operating needs (32.5 days on hand)
through centralized purchasing and logistics, and sells any excess primary
aluminum in the open market, closely matching the cost of metal purchased to the
price of such metal sold. Notwithstanding the Company's efforts, any increase in
the cost of aluminum purchases could have an adverse effect on the Company's
financial condition and operations if the Company is unable to pass such
increases to its customers or it does not effectively hedge against such
aluminum price changes.

CAPITAL IMPROVEMENTS

Capital expenditures for 1999 totaled $5.7 million, with expenditures of
$0.8 million on cast house improvements, $0.6 million on extrusion press
upgrades, $0.3 million on finishing capabilities, $2.7 million on additional
fabrication capabilities, and $1.3 million on other capital items. Since the
middle of 1995, the Company has focused the majority of its capital investment
on technology and productivity improvements in extrusion and casting that
support the Company's marketing initiatives. These investments generally have
expected paybacks of less than 18 months and have increased capacity without
requiring the acquisition of major new equipment.

In 1999, the Company enhanced its fabrication manufacturing capabilities in
Sidney, Ohio, in response to the introduction of a significant new fabrication
program with a large transportation account. Capital investments included
leasehold improvements related to a move to a new leased manufacturing facility
and the purchase of new fabrication equipment and tooling.

Under the ownership of Norsk Hydro, the Company will be preparing a new
capital expenditure program for the years 2000-2004. In its original capital
expenditure program, the Company expected to make capital expenditures of at
least $3.5 million in 2000 and 2001 and approximately $3.5 million annually from
2002 through 2004. Approximately $1.0 million of the annual expenditure for the
years 2000-2004 was expected to be used for maintenance capital with the
remainder invested in productivity improvements and capacity enhancements.

In 2000, the Company plans to initiate the acquisition of a new 10"
extrusion press rather than rebuild an existing 10" extrusion press. In
addition, for the years 2000 through 2004, the Company will continue its program
of updating and modernizing its extrusion presses, increasing the extrusion
capacity of each press by at least 10% per press and reducing scrap generated in
the process by 1.5%. The Company believes that by upgrading its extrusion
presses, the Company will receive 90% of the productivity benefits realized by
replacing equipment but at 50% of the capital investment required. The Company
will continue to invest selectively in advanced computer isothermal control
equipment, where cost justified, to further enhance extrusion press
productivity.

SALES AND MARKETING

Wells' sales and marketing activities and its field sales force are
directed by its Senior Vice President, Sales and Marketing, from the corporate
headquarters. The centralized sales and marketing organization is accountable
for market research and all product and market development activities, including
promotional materials and activities. These activities include the development
and implementation of customer strategies and the strict maintenance of pricing
discipline throughout the Company. All extrusion pricing is centrally managed
and administered by the Vice President, Business Selection and Capacity
Management, who reports to the Senior Vice President, Sales and Marketing.

Two regional sales managers, located in the East and Midwest, have
day-to-day responsibility for directing the sales force and implementing
agreed-to market and customer strategies. In addition, there is a sales manager
specifically for patio doors and a sales manager specifically for architectural
products and select national accounts. These sales managers work hand-in-hand
with the operations managers at each plant location to

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coordinate customer service and tailor their sales activities to meet the
business needs of the plants. This arrangement allows field sales and operations
personnel to react to changing market conditions, while facilitating a uniform
approach to the market and the reassignment of production requirements among
plants when warranted to maintain customer service or plant utilization. In
addition to the sales managers, the Company employs nine direct sales persons
and utilizes four independent manufacturers' representatives for its extrusion
and fabrication businesses. The Company also utilizes a number of specialty
representatives for its patio door and architectural product, including
commercial door, businesses. Compensation for the direct sales force is
comprised of salary plus performance-based bonuses.

The Company has implemented a program to upgrade its field sales
organization, which continued in 1999. Key elements include increasing the
responsibility of sales managers and representatives for account strategy
development and forecasting, providing easy access to the Company's central data
bases via portable laptop computers, adding additional employed sales personnel,
and tying sales manager compensation to account profitability.

Customer Service

Wells seeks to provide high quality customer service for the markets it
serves by capitalizing on its marketing experience, manufacturing flexibility
and technical expertise. The Company believes that its strategic network of
facilities and the integration among marketing, sales and manufacturing provide
it with a competitive advantage by allowing it to respond quickly to customer
demands. Customer service organizations are located at each of the Company's
plants, reporting to the operations manager, in order to ensure sensitivity and
facilitate quick response to customer needs and inquiries. Customer service
representatives are responsible for order entry, and in coordination with the
field sales force, routinely initiate day-to-day contact with long-standing
customers. The Company believes that this close, local contact between
experienced customer service personnel and its established customers is a
critical factor in maintaining strong customer relationships.

Pricing and Hedging Programs

The Company offers its customers three basic pricing alternatives: forward
sales contracts; market indexed sales pricing; that is, formula pricing; and
open market sales pricing. These alternatives can be tailored to meet a
customer's specific market and risk management requirements.

Forward sales contracts, accounting for approximately 26% of total pounds
sold by the Company in 1999, are "take or pay" agreements negotiated with
long-standing customers. These contracts fix the sales price at which the
Company agrees to sell and the customer agrees to purchase a specified quantity
of aluminum extrusions in the future. These contracts typically cover a
substantial portion of the customer's requirements for a three to six month
period. The fixed sales price is based on the price at which aluminum can be
hedged for future delivery plus a conversion spread to cover operating costs and
provide a profit margin.

The Company also offers to long-standing customers a formula pricing
mechanism which adjusts pricing monthly based on aluminum price movements.
Monthly price changes are based on the Midwest Transaction Price Average (the
"MWTP"), plus a negotiated spread to cover operating costs and provide a profit
margin. Formula pricing allows the Company to stay current with the aluminum
market, balancing upward and downward movements on a monthly basis. In 1999,
approximately 59% of total pounds sold were sold by the Company using the
formula pricing mechanism.

The Company also quotes individual orders, based on the MWTP in the
previous month, for its remaining open market accounts. Profit margins on such
market accounts are often higher than on forward sales contracts or formula
priced accounts. In addition, the Company's exposure to aluminum price movements
is nominal since such orders are based on 30 day delivery, enabling the Company
to manage its metal cost.

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Fabricated components and assemblies, including the Company's patio door
and commercial door product lines, are typically priced quarterly utilizing a
formula mechanism based on the previous quarter's average metal cost. Aluminum
costs are generally a less significant element of such product costs, which
typically include purchased parts and substantial fabrication and assembly
labor. Pricing, however, is tightly controlled via a quote process during which
purchased parts are quoted and internal costs are established and then
appropriate burden rates and target profit margins are added. The quarterly
metal price adjustments allow for a "natural" hedge in the first month, which
minimizes the risk of changes in metal prices. In certain cases, the Company
will enter into aluminum futures contracts to hedge against price volatility in
the second and third months based on expected purchases, although such hedges
have certain risks because customers are not bound to purchase fixed volumes.

The Company takes forward positions in the aluminum market, but only when
supported by forward sales contracts or by firm orders for fabricated products.
As a matter of corporate policy, the Company does not engage in speculative
hedging activities regarding future aluminum price movements.

Product Delivery

In 1999, Wells distributed approximately 60% of its products through its
own fleet of 32 tractors and 142 trailers. All of the Company's tractors are
leased whereas all of its trailers are owned. The Company believes that its
selected use of its tractor-trailer fleet enhances the level of service to its
long-standing customers by enabling more timely delivery with less damage. The
Company also uses motor common carriers for certain hauls, such as partial truck
loads and situations where no back haul of aluminum scrap is available, when
cost effective.

COMPETITION

The North American aluminum extrusion market is reasonably fragmented and
highly competitive in that there are still over 100 extruders who operate more
than 170 extrusion plants with more than 450 extrusion presses. Consolidation
has been taking place in aluminum extrusion industry. In the past two years,
ALCOA Inc. has acquired Alumax, Inc., including its thirteen extrusion
facilities, and Excel Extrusions Inc., a single extrusion facility. Also in past
two years, William L. Bonnell, Inc. has acquired three extrusion facilities from
Reynolds Metals Company and Exal Aluminum Inc. adding another two extrusion
facilities. In 1999, Caradon Indalex, a division of Caradon Limited, acquired
Easco Corporation, including its six extrusion facilities. Currently, ALCOA is
attempting to complete its acquisition of Reynolds Metal Company.

In the U.S. aluminum extrusion market, the Company believes that
competition is regionally oriented and that aluminum extrusion end users are
typically looking for "local" plants with a strong focus on customer service,
quality and a reputation for fair market pricing. In addition, competition is
based on delivery time and specialty engineering/design/production capabilities.
The Company also believes that a regional network of plants is important to
large end users in order to meet the needs of their multi-plant locations and to
ensure continuity of sourcing.

Competitors in the U.S. aluminum extrusion market include the extrusion
businesses of primary aluminum producers, such as ALCOA and Kaiser Aluminum
Corporation, and sizeable multi-plant independent extruders, such as Aluminum
Shapes, Inc., Caradon/Easco, Bonnell, and V.A.W. of America, Inc. Competitors
also include small local operators, such as Elixir Industries, Western
Extrusions Corp., Jordan Company, and Astro Shapes, Inc., and Canadian and
Mexican exporters, such as Caradon Indalex and Cuprum S.A. de C.V.

Material Substitution

A factor potentially affecting the Company's future operating performance
is material substitution. Other materials, such as vinyl and rolled steel, may
be used as substitutes for aluminum extrusions in certain markets

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and under certain circumstances. Over the past decade, vinyl, with its
penetration of the residential window and door market, has been the most
commonly used substitute for aluminum extrusions. Industry forecasts indicate
that the movement away from aluminum in this market has slowed and that aluminum
should essentially maintain its unit volume (though not its market share in the
window and door market) over the next several years. In areas where the Company
does significant business, such as window components for the modular and mobile
home segments, which represented approximately 9% of pounds sold by the Company
in 1999, vinyl is a less attractive substitute due to cost and strength
limitations. Rolled steel may be another substitute for aluminum when aluminum
costs rise to such an extent that rolled steel becomes a viable economic
alternative for certain manufacturing needs. However, the Company estimates its
participation in markets which may utilize rolled steel to be approximately 2%
of the pounds sold by the Company in 1999. An increase in the use of substitutes
for aluminum extrusions could have a material adverse effect on the financial
condition and operations of the Company.

EMPLOYEES

As of December 31, 1999, Wells employed 1,682 full time employees, 841 of
whom are covered by collective bargaining agreements at five plant locations.
These collective bargaining agreements are with local unions of the United Steel
Workers of America, representing workers at two plant locations, the
International Brotherhood of Teamsters, representing workers at two plant
locations, and the International Union of United Automobile, Aerospace and
Agricultural Implement Workers (the "UAW"), representing workers at one plant
location. The Company's collective bargaining agreements are independently
negotiated at each plant location and expire on a staggered basis.

The Company believes that its labor relationships with employees, union and
non-union, are generally satisfactory. In January 1999, a new collective
bargaining agreement was negotiated at the Company's plant in Moultrie, Georgia
prior to the expiration of the old agreement. In November 1999, the Company
reached an impasse with the local union at the Company's plants in Monett and
Cassville, Missouri, and subsequently implemented its last, best and final
contract offer. No new agreement has been signed. Since implementing the
Company's last, best and final offer, there have been no work stoppages or other
union actions taken.

The Company is committed to maintain or improve its labor relations with
employees, union and non-union. However, there can be no assurance that there
will be no further union organizing activities or no further work stoppages or
other union actions in the future. A future work stoppage or other union action
could have a material adverse effect on the financial performance of the
Company.

ENVIRONMENTAL MATTERS

Wells is subject to extensive and evolving environmental laws, regulations
and rules that have been enacted in response to technological advances and
increased concern over environmental issues. These regulations are administered
by the U.S. Environmental Protection Agency and other federal, state and local
environmental, transportation, and health and safety agencies. The Company
believes that over time there will continue to be increased legislation,
regulation and regulatory enforcement actions.

In order to operate its business, the Company must obtain and maintain in
effect one or more permits for each of its facilities and comply with complex
regulations and rules governing air emissions, waste water discharges, the use,
storage, treatment and disposal of solid and hazardous wastes and other items
which might affect environmental quality. As a result, the Company from time to
time is required to make expenditures for pollution control equipment and for
other purposes related to its permits and compliance.

Among the laws that may affect the Company are the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") and
analogous state laws that impose joint and several liability, without regard to
fault, on persons that own or operate locations where there has been, or is
threatened

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to be, a release of any hazardous substances into the environment, as well as
persons who arranged for the disposal of such substances at such locations. Such
persons may become liable for the costs of investigating and remediating such
substances. There are often also substantial legal and administrative expenses
incurred in dealing with remediation claims and activities.

The Company has been notified by either the U.S. Environmental Protection
Agency or other persons that it is considered to be a "potentially responsible
party" for the costs of investigating and remediating hazardous substances at
several locations owned and operated by third persons. At each such location,
the Company understands that it is one of many "potentially responsible
parties." The Company believes that the volume of hazardous substances, if any,
for which it may be held responsible at each such location is not significant.
While the Company believes that it may have valid defenses to liability claims
at these locations, it has been settling such claims where an opportunity to do
so is presented at a cost which probably would not exceed the expenses of
asserting such defenses through available administrative and judicial processes.
The Company believes that none of these contingencies, individually or in the
aggregate, could have a material adverse impact on the Company's operations or
financial condition.

Environmental Issues

Certain of the Company's manufacturing facilities have been in operation
for several decades and, over such time, these facilities have used substances
and generated and disposed of wastes which are or may be considered hazardous.
For example, certain of these facilities have in the past stored or disposed of
wastewater treatment sludge in on-site catch ponds, lagoons or other surface
impoundments. Although the Company believes that these facilities are in
substantial compliance with current environmental laws and regulations
applicable to such storage and disposal activities, it is possible that
additional environmental issues and related matters may arise relating to such
past activities which could require additional expenditures by the Company.

In 1998, the Environmental Protection Division of the Georgia Department of
Natural Resources approved the Company's work plan for the modification of its
waste water treatment facilities at its Moultrie, Georgia facility. Under the
work plan, which calls for the end of direct discharge of treated waste water
and connection to the City of Moultrie sewer system, three settling ponds on the
Company's property would be removed from service and their remaining structural
components stabilized and capped in place. Phase 1 of the work plan, the
reinforcement of pond berms, and the first pond under Phase 2 of the work plan,
the stabilizing and capping of the ponds, have been completed. The stabilizing
and capping of the two remaining ponds is scheduled to be completed in 2000. The
total cost of the work plan will be approximately $2.1 million, of which $1.85
million was recorded as selling, general and administrative expense in 1998.

The Company cannot predict what environmental legislation or regulations
will be enacted in the future, how existing or future laws or regulations will
be administered or interpreted, or what environmental conditions may be found to
exist. Enactment or more stringent laws or regulations or more strict
interpretation of existing laws and regulations could require additional
expenditures by the Company, some of which could be material.

PATENTS AND TRADEMARKS

Wells owns certain patents and trademarks but does not believe that its
business is dependent on its intellectual property rights.

ITEM 2. PROPERTIES

Wells has seven production facilities, which enable the Company to
serve customers effectively in markets in the East, Midwest and Southeast. The
following table describes owned and leased properties as of December 31, 1999.
None of the owned properties is subject to an encumbrance that is material to
the Company's operations.

9
<PAGE>

Site Facilities
----------------- ------------------
Location Operations Acres Own/Lease Sq. Ft. Own/Lease
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Monett, Missouri Extrusion, painting, 21.1 Owned 185,000 Owned
casting 0.3 Leased

Cassville, Missouri Fabrication 9.6 Owned 32,224 Owned
0.5 Owned

North Liberty, Indiana Extrusion, anodizing, 48.9 Owned 215,890 Owned
fabrication

Kalamazoo, Michigan Extrusion, complex 23.3 Owned 132,784 Owned
fabrication

Sidney, Ohio Complex fabrication 17.7 Leased 209,150 Leased
4.8 Owned

Belton, South Carolina Extrusion, painting, 54.5 Owned 165,000 Owned
fabrication

Moultrie, Georgia Extrusion, anodizing, 24.1 Leased 315,352 Leased
fabrication 65.3 Owned
</TABLE>

In December 1999, the Company leased a new manufacturing facility, a
106,500 square foot facility on 14.0 acres, in Sidney, Ohio. This new facility
replaces an existing manufacturing facility, a 60,400 square foot facility on
3.7 acres. In early 2000, the Company was released from its lease obligation on
the existing manufacturing facility, and has sold real property encompassing 4.8
acres of unimproved land next to that facility.

The Company considers the condition of its properties to be good and the
capacity of its facilities to be adequate for the immediate needs of its
business. The principal executive office of the Company is located at 809
Gleneagles Court, Suite 300, Baltimore, Maryland 21286.

ITEM 3. LEGAL PROCEEDINGS

From time to time, Wells is a party to legal actions in the normal
course of its business. The Company is not currently involved in any legal
proceedings that it believes would have a material adverse effect upon its
financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

Wells held its annual meeting of stockholders on December 14, 1999 during
which the stockholders voted on: (1) the election of eight directors of the
Company to serve until the 2000 annual meeting of stockholders and until their
respective successors are duly elected and qualified, and (2) the appointment of
Ernst & Young LLP as the Company's auditors to serve at the discretion of the
Board of Directors. The directors nominated and duly elected were Russell W.
Kupiec, W. Russell Asher, Lynn F. Brown, Elizabeth Varley Camp, Todd Goodwin,
Edward R. Heiser, Leo A. McCafferty, Jr. and Lewis W. van Amerongen. The
stockholders approved all actions presented to them at the annual meeting.

10
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Wells' common stock is not registered under the Securities Act of 1933, as
amended, and is not traded on any organized securities market.

On December 9, 1998, the Board of Directors of the Company declared a cash
dividend of $2.64 per share of Class A common stock, or $1.9 million, to the
holders of its Class A common stock, which was paid on January 12, 1999.

On February 23, 2000, pursuant to a Stock Purchase Agreement among Norsk
Hydro, Norsk Hydro USA L.P. and the stockholders of the Company, Norsk Hydro
acquired all of the outstanding shares of Class A common stock of the Company
for approximately $58 million. In connection with the sale of the Company, all
of the Company's outstanding stock options were settled during the first quarter
of 2000.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth summary financial data with respect to Wells
for the periods ended and as of the dates indicated. The summary historical
financial data for the five years ended December 31, 1999 are derived from the
audited financial statements of the Company. The following table should be read
in conjunction with the Company's financial statements and related notes,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the other financial information included elsewhere herein. All
amounts are in thousands.

Fiscal Year Ended December 31,
Statement of Operations Data: 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales ............................ $246,194 $251,191 $267,349 $228,161 $232,555
Cost of sales ........................ 205,816 209,368 225,681 191,206 194,414
-------- -------- -------- -------- --------
Gross profit ......................... 40,378 41,823 41,668 36,955 38,141
Selling, general and
administrative expenses ............ 20,714 16,093 17,446 15,877 16,211
Compensation from
settlement of employee
stock options ...................... -- -- 4,070 -- --
-------- -------- -------- -------- --------
Operating profit ..................... 19,664 25,730 20,152 21,078 21,930
Interest expense (a) ................. 10,838 10,806 8,390 5,176 7,087
Income taxes ......................... 3,929 6,157 5,073 7,059 6,262
-------- -------- -------- -------- --------
Earnings before extraordinary
losses (b) ......................... $ 4,897 $ 8,767 $ 6,689 $ 8,843 $ 8,581
======= ======= ======= ======= =======
</TABLE>

11
<PAGE>

<TABLE>
<CAPTION>
As of December 31,
Balance Sheet Data: 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents ............ $ 8,239 $ 7,619 $ 5,352 $ 277 $ 342
Working capital ...................... 38,027 32,306 29,989 18,175 19,355
Inventories .......................... 23,213 20,394 20,209 19,838 19,972
Property, plant and equipment, net ... 30,994 28,276 27,269 26,723 26,489
Total assets ......................... 133,413 124,478 125,383 108,726 112,261
Total indebtedness ................... 105,000 105,000 105,000 40,091 51,683
Total stockholders' (deficit) equity . (6,914) (12,779) (16,068) 34,472 25,246
</TABLE>

Notes to Selected Financial Data:

(a) Interest expense includes amortization of debt issuance costs of $621, $622,
$593, $495 and $570 for the years ended December 31, 1999, 1998, 1997, 1996
and 1995, respectively, and is net of interest income of $471, $504 and $452
for the years ended December 31, 1999, 1998 and 1997.

(b) Earnings before extraordinary loss excludes an extraordinary loss of $1,292
(net of applicable income taxes of $826) on the refinancing of debt in 1997.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Wells Aluminum Corporation is a custom extruder, finisher and
fabricator of soft alloy aluminum products, serving principally the
building/construction, transportation, consumer durable and equipment/electrical
markets. The Company operates a network of seven facilities with 12 extrusion
presses, located in six states in midwestern and southeastern United States, and
also has its own casting facility for aluminum billet.

The following discussion contains forward-looking statements which
involve risks and uncertainties. The Company's actual results or future events
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, raw
material costs and availability (primarily aluminum), labor market conditions,
the Company's level of utilization of its extrusion, finishing and fabrication
capacities, and the impact of capacity utilization on costs, whether and to what
extent the Company's capital expenditures can facilitate reductions in variable
costs, the highly competitive nature of the extrusion industry, and developments
with respect to contingencies such as environmental matters and litigation.

Basis of Presentation

The following discussion of financial condition and the results of
operations for the years ended 1999, 1998 and 1997 is based on the historical,
audited results achieved by the Company. The following tables set forth for the
periods indicated, net sales, gross profit, operating profit and net earnings,
and for performance and other measurements, pounds of product shipped, gross
sales price per pound, Adjusted EBITDA (as defined below) and Adjusted EBITDA
per pound. The table also includes average market prices of aluminum per pound
and market price of aluminum per pound at period-end. All amounts are in
thousands except for per pound data.

Adjusted EBITDA is defined as earnings before interest expense, income
taxes, depreciation and amortization of goodwill, and excludes LIFO charges or
income, extraordinary items, charges for the capping of settling ponds in 1998,
gain or loss from the termination of a pension plan in 1999 and 1998, and
compensation from settlement of employee stock options in 1997. Adjusted EBITDA
should not be considered in isolation of, nor in substitute for,

12
<PAGE>

net income, cash flows from operations, or other income or cash flow data
prepared in accordance with generally accepted accounting principles.

1999 1998 1997
--------- --------- ---------
Statement of Operations Data:
Net Sales - Products ...................... $ 246,194 $ 247,662 $ 235,467
Net Sales - Metal ......................... -- 3,529 31,882
--------- --------- ---------
Net Sales ............................. 246,194 251,191 267,349
Cost of Sales - Products .................. 204,393 208,636 192,201
Cost of Sales - Metal ..................... -- 3,492 31,409
LIFO Charges (Income) ..................... 1,423 (2,760) 2,071
--------- --------- ---------
Cost of Sales ......................... 205,816 209,368 225,681

Gross Profit .............................. 40,378 41,823 41,668
Operating Profit .......................... 19,664 25,730 20,152
Net Earnings .............................. 4,897 8,767 5,397

1999 1998 1997
--------- --------- ---------
Other Measurement Data:
Pounds of Product Shipped ................. 165,515 166,260 154,930
Gross Sales - Products .................... $ 258,598 $ 259,269 $ 244,760
Gross Sales Price per Pound ............... 1.562 1.559 1.580
Adjusted EBITDA ........................... 26,889 26,765 29,970
Adjusted EBITDA per Pound ................. 0.162 0.161 0.193
Average Market Price of Aluminum per Pound 0.651 0.672 0.775
Market Price of Aluminum per Pound at
Period-End ................................ 0.787 0.599 0.797

Aluminum Prices. For 1999, approximately 54%, and for 1998 and 1997,
approximately 60% of the Company's cost of sales - products reflect the cost of
aluminum, its principal raw material. The Company seeks to manage aluminum price
fluctuations, which can be volatile, principally either by passing aluminum
prices through to customers by systematic market indexed pricing or by fixing
the cost of aluminum by hedging against committed fixed price sales to
customers. As a result, increases and decreases in aluminum prices have
generally caused similar increases and decreases in selling prices, sales and
costs of sales, and generally have had little impact on the Company's level of
profitability for the periods described herein.

Business Activity. The Company's experience indicates that pounds of
product shipped has a direct impact on profitability, since a significant
portion of the Company's operating costs are semi-variable or fixed. The Company
defines pounds of product shipped as the weight of all extrusions shipped,
including those pounds transferred within the Company from which it manufactures
fabricated parts, components and assemblies, but excluding the pounds of
aluminum related to excess metal sales as described herein.

Financial and Other Measures. The Company believes that its ability to
manage its sales spread (gross sales minus aluminum costs), control variable and
semi-variable spending and minimize its fixed cost structure are significant
determinants of profitability and resultant cash flow. The Company, therefore,
monitors its sales spread per pound, variable and semi-variable costs per pound
and fixed costs per pound, focusing on operating profit as a key performance
measure. In addition, the Company monitors Adjusted EBITDA, as it is relevant
for debt covenant

13
<PAGE>

analysis under the New Credit Agreement (as defined herein) and it can also be
used as a measure of the Company's ability to service its debt.

LIFO Inventory. The Company values its aluminum inventory under the
last-in, first-out (LIFO) method. During periods of rising aluminum prices,
compared to historical LIFO inventory values, the Company may incur LIFO
charges, which will reduce taxable income, and when aluminum prices subsequently
decline, the Company may recognize LIFO income, which will increase taxable
income. As a result of fluctuations in earnings levels resulting from the
application of LIFO, the Company excludes LIFO charges and income from certain
measures, such as Adjusted EBITDA.

Excess Metal Sales. The Company's policy is to sell excess metal (primary
aluminum ingot and billet) on the open market when necessary to maintain
aluminum inventory levels consistent with near-term business needs. Imbalances
in inventory can arise from the ongoing and efficient operation of the Company's
casting facility and from the Company's obligations to purchase fixed amounts of
primary aluminum ingot and billet under long-term supply agreements. The sale of
excess metal, which also reflects aluminum price fluctuations, has minimal
effect on profit performance since the prices of metal bought and metal sold are
closely matched. Pounds of excess metal sold are not included in the calculation
of pounds of product shipped, the Company's primary indicator of business
activity. In the normal course of business, the Company also sells secondary
aluminum billet and aluminum scrap, which are not accounted for as excess metals
sales.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

The Company's net sales decreased to $246.2 million in 1999 from $ 251.2
million in 1998, a decrease of $5.0 million or 2.0%. Net sales - products
decreased to $246.2 million in 1999 from $247.7 million in 1998, a decrease of
$1.5 million or 0.6%. Gross sales of value added products increased $9.2
million, or 6.5%, to $151.4 in 1999 from $142.2 million in 1998. The increase in
value added sales reflected the introduction of a significant fabrication
program with a large transportation account. Gross sales of mill finished
extrusions decreased $9.5 million, or 8.1%, to $107.5 million in 1999 from
$117.0 million in 1998. The gross sales price per pound increased by 0.4%,
reflecting a higher percentage of value added sales as compared to mill finished
sales and an improved customer and product mix in value added sales , offsetting
the effect of a decrease of $0.021 in the average market price per pound of
aluminum and a changing customer and product mix in mill finished sales.

Pounds of product shipped decreased 0.8 million pounds, or 0.5-%, to 165.5
million in 1999 from 166.3 million pounds of product shipped in 1998. The
decrease in shipments reflected a reduction in effective capacity from the level
of the prior year as a result of a management decision to limit overtime and the
use of temporary workers. Shipments to commercial construction increased 0.8
million pounds, primarily due to increased shipments to a number of specialty
products manufacturers, offset by reduced shipments to air handling accounts. In
residential construction, shipments decreased 5.5 million pounds, reflecting
reduced demand at some door and window accounts as well as a management decision
to limit capacity allocated to lower margin residential door, window and
manufactured housing accounts. Shipments to transportation increased 4.5 million
pounds, primarily due to increased business with major truck, bus and specialty
vehicle manufacturers. In consumer durables, shipments increased 1.3 million
pounds, reflecting increased shipments to manufacturers of pleasure boats and
office furniture. Shipments to equipment/electrical decreased 1.1 million
pounds, primarily due to decreased shipments to a manufacturer of material
handling systems. The decrease of 0.8 million pounds of shipments to
distributors/other reflected a management decision to limit capacity allocated
to select lower margin distributor accounts.

Cost of sales decreased to $205.8 million in 1999 from $209.4 million in
1998, a decrease of $3.6 million or 1.7%. Cost of sales - products decreased to
$204.4 million in 1999 from $208.6 million in 1998, a decrease of $4.2 million
or 2.0%. This decrease resulted from a $16.3 million decrease in aluminum costs
partially offset by a $12.1 million increase in operating costs. Variable costs
per pound increased to $0.512 in 1999 from $0.442 in 1998, a change of $0.070
per pound. This increase was primarily due to increases in labor costs,
purchased services and

14
<PAGE>

maintenance expenses related to the accelerated introduction of the significant
new fabrication program at Sidney, Ohio and increased maintenance activities
related to improving extrusion press, paint and anodizing line utilization.

Gross profit decreased to $40.4 million in 1999 from $41.8 million in 1998,
a decrease of $1.4 million or 3.3%.

Selling, general and administrative expenses increased to $20.7 million in
1999 from $16.1 million in 1998, an increase of $4.6 million or 28.6%. This
increase is attributable to increases in compensation costs of $0.9 million
resulting from the employment of new management personnel, non-recurring costs
of $0.3 million related to the significant new fabrication program at Sidney,
Ohio, an increase of $3.2 million related to the termination and prior
curtailment of the Retirement Plan for Salaried Employees (a loss of $1.6
million in 1999 and a gain of $1.6 million in 1998), non-recurring professional
fees of $0.4 million for a profit system consulting engagement, and increases of
$1.1 million in other selling and administrative expenses as well as expenses of
$1.9 million for environmental remediation, which occurred in 1998, and the loss
of $0.6 million of miscellaneous income received from an insurance refund in
1998.

Operating profit decreased to $19.7 million in 1999 from $25.7 million in
1998, a decrease of $6.0 million or 23.3%.

Interest expense, net of interest income, was $10.8 million in 1999 and
1998, respectively. Income tax expense decreased to $3.9 million in 1999 from
$6.2 million in 1998, a decrease of $2.3 million, or 37.1%. The effective tax
rates for the years ended December 31, 1999 and 1998 were 44.3% and 41.3%,
respectively, which differed from the federal statutory rate of 35% due to the
goodwill amortization and state income taxes.

As a result of the above factors, net earnings decreased to $4.9 million in
1999 from $8.8 million in 1998, a decrease of $3.9 million or 44.3%.

Adjusted EBITDA, as previously defined herein, increased to $26.9 million
in 1999 from $26.8 million in 1998, an increase of $0.1 million or 0.4%. The
increase in Adjusted EBITDA consisted of an increase in sales spread of $16.2
million, offset by an increase in operating costs of $15.9 million and a
decrease of $0.2 million from slightly reduced sales volume. The increase in
sales spread resulted from a significant increase in value added sales and a
relatively modest increase in aluminum prices in the last three quarters of 1999
since market indexed prices charged to customers increased relatively more
rapidly than the costs charged from aluminum inventory. Adjusted EBITDA per
pound increased $0.001 to $0.162 in 1999, reflecting slightly higher Adjusted
EBITDA on slightly lower pounds of product shipped.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

The Company's net sales decreased to $251.2 million in 1998 from $ 267.3
million in 1997, a decrease of $16.1 million or 6.0%. Net sales - products
increased to $247.7 million in 1998 from $235.5 million in 1997, an increase of
$12.2 million or 5.2%. Gross sales of value added products increased $7.4
million, or 5.5%, to $142.2 in 1998 from $134.8 million in 1997. Gross sales of
mill finished extrusions increased $7.0 million, or 6.4%, to $117.0 million in
1998 from $110.0 million in 1997. The gross sales price per pound declined by
1.3%, reflecting a higher percentage of mill finished sales as compared to value
added sales, the effect of a decrease of $0.103 in the average market price per
pound of aluminum, and a changing customer and product mix in value added sales,
offset by an improved customer and product mix in mill finished sales.

Pounds of product shipped increased 11.4 million pounds, or 7.4-%, to 166.3
million in 1998 from 154.9 million pounds of product shipped in 1997. Shipments
to commercial construction increased 2.2 million pounds, with increased
shipments for several large architectural projects offsetting decreased
shipments to the commercial door and window market. In residential construction,
shipments increased 1.2 million pounds, reflecting increased shipments to
suppliers to the mobile and manufactured home market counteracting decreased
shipments to suppliers to the residential door and window market. Shipments to
transportation increased 4.0 million pounds, with

15
<PAGE>

increased shipments to manufacturers of truck trailers, golf carts and utility
vehicles and manufacturers of specialty automobile and truck accessories,
offsetting declines in delivery van accounts. In consumer durables, shipments
increased 2.1 million pounds, reflecting increased shipments to manufacturers of
pleasure boats and office furniture. Shipments to equipment/electrical decreased
1.0 million pounds, primarily due to decreased shipments to one specialty
industrial account that was adversely impacted by a General Motors strike in
1998. The increase of 2.9 million pounds of shipments to distributors/other
resulted mainly from increased shipments to distributors of specialty products
serving the southeastern and midwestern markets and increased shipments to
distributors in Puerto Rico serving the Caribbean basin.

Cost of sales decreased to $209.4 million in 1998 from $225.7 million in
1997, a decrease of $16.3 million or 7.2%. Cost of sales - products increased to
$208.6 million in 1998 from $192.2 million in 1997, an increase of $16.4 million
or 8.5%. This increase resulted from a $8.8 million increase in operating costs
and a $7.6 million increase in aluminum costs. Variable costs per pound
increased to $0.442 in 1998 from $0.423 in 1997, a change of $0.019 per pound.
This increase was primarily due to additional costs associated with a major
upgrade of an extrusion press, the effect of a 4 1/2 week work stoppage at one
plant location, additional overtime costs incurred in response to the increase
in sales volume and the effect of initial lower productivity related to the use
of temporary help and the hiring of new personnel.

Gross profit increased to $41.8 million in 1998 from $41.7 million in 1997,
an increase of $0.1 million or 0.2%.

Selling, general and administrative expenses decreased to $16.1 million in
1998 from $21.5 million in 1997, a decrease of $5.4 million or 25.1%. This
decrease is primarily attributable to a decrease in compensation expense of $5.4
million, of which $4.1 million related to the settlement of employee stock
options as part of the Recapitalization (as defined herein) and $1.3 million
related to reduced incentive compensation. A gain of $1.6 million from the
curtailment of the Retirement Plan for Salaried Employees offsets an increase in
costs of $1.6 million for environmental remediation.

Operating profit increased to $25.7 million in 1998 from $20.2 million in
1997, an increase of $5.5 million or 27.2%.

Interest expense, net of interest income, increased to $10.8 million in
1998 from $8.4 million in 1997, an increase of $2.4 million or 28.6%. This
increase was mainly attributable to the increase in debt outstanding and higher
effective interest rates as a result of the Recapitalization, offset in part by
an increase in interest income. Income tax expense increased to $6.2 million in
1998 from $5.1 million in 1997, an increase of $1.1 million, or 21.6%. The
effective tax rates for the years ended December 31, 1998 and 1997 were 41.3%
and 43.1%, respectively, which differed from the federal statutory rate of 35%
due to the goodwill amortization and state income taxes.

In 1997, the Company incurred an extraordinary loss of $1.3 million (net of
applicable income taxes of $0.8 million) on the refinancing of debt related to
the Recapitalization.

As a result of the above factors, net earnings increased to $8.8 million in
1998 from $5.4 million in 1997, an increase of $3.4 million or 63.0%.

Adjusted EBITDA, as previously defined herein, decreased to $26.8 million
in 1998 from $30.0 million in 1997, a decrease of $3.2 million or 10.7%. The
decline in Adjusted EBITDA consisted of a decrease in sales spread of $2.4
million and an increase in operating costs of $4.5 million, offset by $3.7
million from increased sales volume. The decrease in sales spread was affected
by a continuing decrease in aluminum prices in 1998 since market indexed prices
charged to customers declined more rapidly than the costs charged from aluminum
inventory. Adjusted EBITDA per pound decreased $0.032 to $0.161 in 1998,
reflecting both lower Adjusted EBITDA and increased pounds of product shipped.

16
<PAGE>

Liquidity and Capital Resources

The Company has historically obtained funds from its operations, augmented
by borrowings under various credit agreements. Aluminum price changes increase
or decrease working capital requirements since the dollar value of accounts
receivable, inventories and accounts payable reflect these changes. Working
capital requirements are generally higher during periods of higher aluminum
prices.

As of December 31, 1999, the Company had $105 million of New Notes (as
defined herein) outstanding and no borrowings under the New Credit Facility (as
defined herein). The significant indebtedness incurred by the Company as a
result of the Recapitalization in 1997 had several important consequences, the
foremost being that interest expense is now substantially higher than it had
been prior to the Recapitalization. The ability of the Company to satisfy its
obligations pursuant to such indebtedness, including pursuant to the New Notes
and the Indenture (under which the New Notes were issued), will be dependent
upon the Company's future performance, which, in turn, will be subject to
management, financial and other business factors affecting the business and
operations of the Company, some of which are not in the Company's control. The
Company's liquidity may also be impacted by environmental and other regulatory
matters.

On March 1, 2000, the Company notified holders of the New Notes of its
intention to redeem all of the outstanding New Notes at a redemption price of
107.92% of the principal amount plus accrued and unpaid interest to, but not
including, March 31, 2000 (the "Redemption Date"). The Company expects to
complete redemption of all of the New Notes on the Redemption Date. The
aggregate redemption price will be paid by Norsk Hydro on behalf of the Company.

The Company currently believes that cash flow from operating activities,
together with borrowings available under the New Credit Facility, will be
sufficient to fund currently anticipated working capital needs and capital
expenditure requirements for at least several years. However, there can be no
assurance that this will be the case.

Cash Flows from Operating Activities

Cash provided by operations in 1999, 1998 and 1997 was $8.1 million, $8.7
million and $5.3 million , respectively. In 1999, cash flow decreased primarily
as a result of reduced net earnings, reflecting among other things, increased
costs related to the accelerated introduction of a significant fabrication
program with a major transportation account. In addition, cash flow decreased as
a result of increases in accounts receivable and inventories resulting from
increased levels of business activity and increased aluminum prices. In 1998,
cash flow increased primarily because of improved net earnings and continued
emphasis on working capital management, particularly accounts receivable and
inventories. In addition, cash flow increased as a result of decreases in
accounts receivable and inventories from decreased aluminum prices despite the
increased level of business activity. In 1997, cash flow decreased primarily as
a result of reduced net earnings, reflecting the non-recurring compensation
charge and increased interest costs. In addition, cash flow decreased as a
result of increases in accounts receivable and inventories resulting from
increased levels of business activity and increased aluminum prices.

Total working capital at December 31, 1999, 1998 and 1997 was $38.0
million, $32.3 million and $30.0 million, respectively. In 1999, cash and cash
equivalents increased $0.6 million to $8.2 million. Increases in current
liabilities of $2.6 million were offset by larger increases in current assets,
particularly accounts receivable and inventories. In 1998, cash and cash
equivalents increased $2.3 million to $7.6 million. Decreases in current assets
of $1.1 million were offset by larger decreases in current liabilities,
particularly accounts payable relating to metal purchases. In 1997, cash and
cash equivalents increased $5.1 million to $5.4 million due in part to the terms
and conditions of the New Notes outstanding (see Cash Flows from Financing
Activities). Increases in other working capital accounts reflected the impact of
increased business activity, the effect of rising aluminum prices, and the
change in timing of interest payments.

17
<PAGE>

Cash Flows from Investing Activities

Expenditures for property, plant and equipment in 1999, 1998 and 1997 were
$5.7 million, $3.3 million and $3.0 million, respectively. During the last three
years, the Company has successfully increased its casting capacity by 15% and
capacities on five extrusion presses by an average of 11% without the
acquisition of expensive new equipment. The Company also made investments in CNC
mills, benders, saws and presses to increase its fabrication capabilities. In
1999, the Company enhanced its fabrication manufacturing capabilities in Sidney,
Ohio, in response to the introduction of a significant fabrication program with
a large transportation account. Capital investments included leasehold
improvements related to a move to a new leased manufacturing facility and the
purchase of new fabrication equipment and tooling.

Cash Flows from Financing Activities

Cash used in financing activities was $1.8 million and $3.1 million in 1999
and 1998, respectively, as compared to cash provided by financing activities of
$2.8 million in 1997. Cash used in financing activities in 1999 included the
payment of a cash dividend offset by cash received on the exercise of stock
options. Cash used in financing activities in 1998 included the repurchase of
common stock (as described herein). Cash provided from financing activities in
1997 resulted from the Recapitalization of the Company (as defined herein).

On May 28, 1997, the Company issued and sold $105.0 million principal
amount of 10.125% Series A Senior Notes (the "Notes") due 2005. The Company is
required to make semi-annual payments of interest on the Notes on June 1 and
December 1 of each year. As of May 28, 1997, the Company used a portion of the
proceeds from the issuance of the Notes to repay an existing credit facility
(the "Old Credit Facility") of $21.2 million outstanding (including accrued
interest and agency fees) and to retire its $16.3 million (including accrued
interest and a prepayment penalty for the early retirement of debt) of 14.125%
Senior Subordinated Notes due 2001 (the "Subordinated Notes"). Upon the issuance
of the Notes, the Company entered into a new credit facility (the "New Credit
Facility"), which provides a $15.0 million secured line of revolving credit
maturing on the last business day of June 2002. Under the New Credit Facility,
the Company is required to make payments of interest on a monthly or quarterly
basis. As of December 31, 1999 and 1998, there were no loans outstanding under
the New Credit Facility.

The offering of the Notes, the repayment of the Old Credit Facility, the
retirement of the Subordinated Notes, and the entering into of a New Credit
Facility were part of an overall recapitalization of the Company (the
"Recapitalization"). As part of the Recapitalization, the Company used a
substantial portion of the proceeds received from the issuance and sale of the
Notes to pay a special cash dividend to holders of its common stock, settle
existing employee stock options, and repurchase, or offer to repurchase, shares
of common stock held by certain stockholders.

18
<PAGE>

In 1997, the Company paid a special cash dividend of $62.00 per share, or
$56.0 million, to holders of common stock, paid an aggregate of $37.5 million
for the repayment and retirement of debt, and paid $1.2 million for the
repurchase and retirement of 152,100 shares of Class A Common Stock from certain
shareholders. The Company also incurred $4.1 million of compensation expense and
issued 158,042.5 shares of Class A Common Stock related to the settlement of
employee stock options. The compensation expense represents the difference
between fair market value and the exercise price on the settlement of 57,000
employee stock options and $0.9 million of bonuses paid to satisfy a portion of
income taxes incurred by option holders as a result of receiving shares of
common stock.

On November 7, 1997, the Company consummated an exchange of 100% of the
Notes for $105.0 aggregate principal amount of 10.125% Series B Senior Notes
(the "New Notes") due 2005, which are registered under the Securities Act of
1933, as amended.

In October 1998, the Company entered into a Stock Purchase Agreement to
repurchase all of the shares of Class A common stock of the Company owned by CVG
Industria Venezolana de Aluminio, C.A. ("Venalum") for an aggregate purchase
price of $3.1 million. On November 13, 1998, the repurchase was completed, and
as of that date, Venalum no longer owned any shares of common stock of the
Company.

Declaration and Payment of Cash Dividend

Futures Contracts and Forward Sales Contracts

In the normal course of business, the Company enters into forward sales
contracts with certain customers for the sale of fixed quantities of finished
products at scheduled intervals. The aluminum cost component of the forward
sales contract is fixed for the duration of the contract, based on forward
market prices at the inception of the contract. In order to hedge its exposure
to aluminum price volatility under these forward sales contracts, the Company
enters into aluminum futures contracts (a financial hedge) based on scheduled
deliveries.

At December 31, 1999, the Company was party to $9.7 million of aluminum
futures contracts through nationally recognized brokerage firms and major metal
brokers. These aluminum futures contracts are for periods between January 2000
and October 2000, covering 14.4 million pounds of aluminum at prices expected to
be settled financially in cash as they reach their respective settlement dates.
The market value of these aluminum futures contracts at December 31, 1999 was
$10.8 million. The Company does not engage in any speculative trading of
aluminum futures contracts.

LIFO Adjustment and Inflation

The largest component of the Company's cost of sales is aluminum, its
principal raw material. Aluminum costs can be volatile, and reported results may
vary due to LIFO adjustments, as previously discussed. With the exception of
LIFO adjustments, the Company does not believe that inflation has had a
significant impact on its results of operations for the years ended December 31,
1999, 1998 and 1997.

Seasonality

The Company generally does not experience significant seasonality in its
business. However, working capital requirements are often higher and operating
results are often lower during the fourth quarter principally due to reduced
shipments of product and increased inventory due to the decrease in sales during
the holiday season and increased accounts receivable due to customers delaying
payment until after the year-end.

19
<PAGE>

Year 2000 Systems Compliance

The year 2000 issue arose out of the fact that many computer programs were
written using two digits to identify the applicable year rather than four
digits. It was feared that computer programs with date-sensitive software or
equipment with embedded date-sensitive technology might misinterpret a two-digit
year code. This error could result in system or equipment failures or
miscalculations and disruptions of operations. As of December 31, 1999, the
Company had completed all aspects of its year 2000 readiness program and through
March 3, 2000, the Company has not experienced any significant problems related
to the year 2000 issue.

Retirement Plan for Salaried Employees

In 1998, the Company recorded a gain of $1.6 million related to the
curtailment of the Retirement Plan for Salaried Employees. In 1999, the Company
recorded expenses of approximately $1.6 million associated with settling the
Retirement Plan for Salaried Employees. These expenses included professional
fees of $0.1 million and a loss of $1.5 million related to the termination of
the Retirement Plan for Salaried Employees.

In 1999, the Company amended the Wells Aluminum 401(k) Retirement Plan to
provide for additional employee contributions and a profit sharing feature for
salaried employees funded at the discretion of the Board of Directors of the
Company. The Company's expense related to the profit sharing feature of the
Wells Aluminum 401(k) Retirement Plan was $550,000 in 1999.

Commitments and Contingencies

At December 31, 1999, the Company has commitments with nine North American
suppliers to purchase 101.4 million pounds of primary aluminum and aluminum
billet from January 2000 through December 2000 at current market prices at the
specified delivery dates. Management expects that such quantities of aluminum
will be utilized in the normal course of operations during the terms of these
agreements.

In the normal course of business, the Company has received notice of claims
asserting potential liability under various federal and state environmental
laws. The Company accrues for losses associated with environmental remediation
obligations when such losses are probable and reasonably estimable. Based upon
information that is currently available, management does not expect that the
resolution of environmental claims will have a material adverse effect on the
Company. However, given the inherent uncertainties in evaluating environmental
exposure, it is not possible to predict the amount of future costs of
environmental claims which may be subsequently determined. The Company has not
anticipated any insurance proceeds or third-party payments in determining its
estimated liability for environmental remediation.

The Company is also a party to a number of other lawsuits and claims
arising out of the conduct of its business. Although the ultimate results of
lawsuits and other proceedings against the Company cannot be predicted with
certainty, management does not expect that these matters will have a material
adverse effect on the Company and its operations.

Subsequent Event

20
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

See "Item 1. Business - Pricing and Hedging Programs" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Future Contracts and Forward Sales Contracts."

21
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Page
----
Report of Independent Auditors...............................................23
Balance Sheets as of December 31, 1999 and 1998..............................24
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997..........................................25
Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997..........................................26
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997..........................................27
Notes to Financial Statements................................................28
Schedule II -- Valuation and Qualifying Accounts.............................40

22
<PAGE>

Report of Independent Auditors

The Board of Directors
Wells Aluminum Corporation

We have audited the accompanying balance sheets of Wells Aluminum
Corporation (the "Company") as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. Our audits also included the
financial statement schedule in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wells Aluminum Corporation
as of December 31, 1999 and 1998, and the results of operations and its cash
flows for each of the three years ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

/s/ Ernst & Young LLP

March 3, 2000
Baltimore, Maryland

23
<PAGE>

WELLS ALUMINUM CORPORATION
BALANCE SHEETS
(Dollars in Thousands)
December 31,
1999 1998
---- ----
Assets
------
Current assets:
<S> <C> <C>
Cash and cash equivalents ................................................ $ 8,239 $ 7,619
Accounts receivable, principally trade, less allowances of $469 and $442 . 30,915 26,213
Inventories .............................................................. 23,213 20,394
Other current assets ..................................................... 2,479 2,319
-------- ---------
Total current assets ................................................ 64,846 56,545
Property, plant and equipment, at cost less accumulated depreciation ........ 30,994 28,276
Debt issuance costs, net of accumulated amortization of $1,605 and $984 .... 3,144 3,765
Goodwill, net of accumulated amortization of $14,850 and $13,662 ............ 32,174 33,362
Other assets ................................................................ 2,255 2,530
-------- ---------
Total assets ........................................................ $ 133,413 $ 124,478
-------- ---------
Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable, principally trade ..................................... $ 19,800 $ 14,186
Accrued expenses ........................................................ 7,019 10,053
-------- ---------
Total current liabilities ........................................... 26,819 24,239
Long-term debt, less current portion ........................................ 105,000 105,000
Deferred income taxes ....................................................... 5,243 5,446
Deferred benefit plan obligations ........................................... 3,349 2,572
-------- ---------
Total liabilities ................................................... 140,411 137,257
-------- ---------
Stockholders' equity:
Common stock, Class A, par value $0.01 per share, 1,100,000 shares
authorized, 744,392.5 and 728,642.5 shares issued ................... 7 7
Additional paid-in capital .............................................. 126 --
Accumulated deficit ..................................................... (6,914) (11,811)
Additional minimum pension liability .................................... (217) (975)
-------- ---------
Total stockholders' equity .......................................... (6,998) (12,779)
-------- ---------
Total liabilities and stockholders' equity .......................... $ 133,413 $ 124,478
========= =========
</TABLE>

See accompanying notes.

24
<PAGE>

WELLS ALUMINUM CORPORATION
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales ................................................. $ 246,194 $ 251,191 $ 267,349
Cost of sales ............................................. 205,816 209,368 225,681
--------- --------- ---------
Gross profit .............................................. 40,378 41,823 41,668
Selling, general and administrative expenses .............. 20,714 16,093 17,446
Compensation from settlement of employee stock options .... -- -- 4,070
--------- --------- ---------
Operating profit .......................................... 19,664 25,730 20,152
Interest expense, net of interest income .................. 10,838 10,806 8,390
--------- --------- ---------
Earnings before income taxes and extraordinary item ....... 8,826 14,924 11,762
Income taxes .............................................. 3,929 6,157 5,073
--------- --------- ---------
Earnings before extraordinary item ........................ 4,897 8,767 6,689
Extraordinary loss on refinancing of debt,
net of applicable income taxes of $826 ............... -- -- (1,292)
--------- --------- ---------
Net earnings .............................................. $ 4,897 $ 8,767 $ 5,397
========= ======== =========
</TABLE>

See accompanying notes.

25
<PAGE>

WELLS ALUMINUM CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in Thousands)

<TABLE>
<CAPTION>
Accumu- Additional
Additional lated Minimum
Common Paid-In Earnings Pension
Stock Capital (Deficit) Liability Total
----- ------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 .................. 9 24,390 10,565 (492) 34,472
-------- -------- -------- -------- --------
Net earnings for 1997 .................... -- -- 5,397 -- 5,397
Change in additional minimum
pension liability,
net of tax of $3 ...................... -- -- -- 5 5
-------- -------- -------- -------- --------
Comprehensive income ...................... -- -- 5,397 5 5,402
Dividend declared ......................... -- (24,390) (31,600) -- (55,990)
Repurchase of common stock ................ (2) (48) (1,167) -- (1,217)
Settlement of stock options ............... 2 1,263 -- -- 1,265
-------- -------- -------- -------- --------
Balance at December 31, 1997 .................. 9 1,215 (16,805) (487) (16,068)
-------- -------- -------- -------- --------
Net earnings for 1998 ..................... -- -- 8,767 -- 8,767
Change in additional minimum
pension liability,
net of tax of $312 .................... -- -- -- (488) (488)
-------- -------- -------- -------- --------
Comprehensive income
(expense) ............................. -- -- 8,767 (488) 8,279
Repurchase of common stock ................ (2) (241) (2,823) -- (3,066)
Dividend declared ......................... -- (974) (950) -- (1,924)
-------- -------- -------- -------- --------
Balance at December 31, 1998 .................. 7 -- (11,811) (975) (12,779)
-------- -------- -------- -------- --------
Net earnings for 1999 ..................... -- -- 4,897 -- 4,897

Change in additional minimum
pension liability,
net of tax of $485 .................... -- -- -- 758 758
-------- -------- -------- -------- --------
Comprehensive income ...................... -- -- 4,897 758 5,655
Exercise of stock options ................. -- 126 -- -- 126
-------- -------- -------- -------- --------
Balance at December 31, 1999 .................. $ 7 $ 126 $ (6,914) $ (217) $ (6,998)
======== ======== ======== ======== ========
</TABLE>

See accompanying notes.

26
<PAGE>

WELLS ALUMINUM CORPORATION

STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

<TABLE>
<CAPTION>
Year Ended
December 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net earnings ........................................................... $ 4,897 $ 8,767 $ 5,397
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization .................................. 4,813 4,130 4,270
Settlement of employee stock options ........................... -- -- 1,263
Deferred income taxes .......................................... (252) (278) 30
Extraordinary loss on refinancing of debt ...................... -- -- 1,292
Changes in operating assets and liabilities:
Accounts receivable, net ................................... (4,702) 4,386 (8,320)
Inventories ................................................ (2,819) (185) (371)
Accounts payable and accrued expenses ...................... 5,180 (5,825) 2,471
Other assets and liabilities ............................... 1,022 (2,328) (728)
----- ----- -----
Net cash provided by operating activities .............................. 8,139 8,667 5,304
----- ----- -----

Investing activities:

Purchase of property, plant and equipment .............................. (5,721) (3,334) (3,035)
----- ----- -----
Net cash used in investing activities ................................. (5,721) (3,334) (3,035)
----- ----- -----
Financing activities:

Principal payments on long-term debt .................................. -- -- (69,791)
Proceeds from long-term debt .......................................... -- -- 134,700
Payment of debt issuance costs ........................................ -- -- (4,749)
Proceeds from the exercise of stock options ........................... 126 -- --
Payment of cash dividend ............................................. (1,924) -- (55,990)
Prepayment penalty on early retirement of debt ........................ -- -- (149)
Purchase of common stock .............................................. -- (3,066) (1,215)
--------- --------- ---------
Net cash (used in) provided by financing activities .................... (1,798) (3,066) 2,806
--------- --------- ---------
Net increase in cash and cash equivalents .............................. 620 2,267 5,075
Cash and cash equivalents at beginning of year ......................... 7,619 5,352 277
--------- --------- ---------
Cash and cash equivalents at end of year ............................... $ 8,239 $ 7,619 $ 5,352
========= ========= =========
</TABLE>

See accompanying notes.

27
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Wells Aluminum Corporation (the "Company") is a domestic manufacturer
of aluminum extruded and fabricated products sold throughout North America to
several diverse industries including building/construction, transportation,
durable goods and equipment/electrical. Gibbons, Goodwin, van Amerongen ("GGvA")
is the sole general partner of Wells Holdings Limited Partnership, which as of
December 31, 1999 owned 75.2% of the outstanding shares of the Company's common
stock.

Reclassification

Certain amounts previously reported have been reclassified to conform
with the 1999 presentation.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results inevitably will differ from those estimates,
and such differences may be material to the financial statements.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short-term
investments with original maturities of three months or less.

Inventories

The aluminum component of inventories, representing 62% and 67% of
total inventories at December 31, 1999 and 1998, respectively, is stated at the
lower of cost or market, using the last-in, first-out method (LIFO). The labor,
overhead and supplies components of inventories are carried at the lower of cost
or market using the first-in, first-out method (FIFO). The outside purchased
parts component of inventories are carried at the lower of cost or market using
the weighted average cost method.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Maintenance and
repairs are charged to operations when incurred, while expenditures having the
effect of extending the useful life of an asset are capitalized. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets. Depreciation expense for the years ended December 31, 1999, 1998 and
1997 was $3,003,000, $2,321,000 and $2,489,000, respectively.

Debt Issuance Costs

Costs incurred to obtain financing are capitalized and amortized using
the straight-line method over the term of the related financing. Amortization of
debt issuance costs is included in the Statements of Operations as an item of
interest expense, net of interest income.

28
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies (Continued)

Goodwill

The excess of the purchase price of the Company over the fair value of
the net assets acquired was recorded as goodwill. Amortization is recorded on
the straight-line method over forty years. On a periodic basis, the Company
estimates its future undiscounted cash flows of the business to which goodwill
relates in order to ensure that the carrying value of such goodwill has not been
impaired.

Credit Risk

The Company is potentially subject to concentrations of credit risk
with accounts receivable and futures contracts. Although the Company has a
diverse customer base, 35% and 31% of the accounts receivable balance was due in
aggregate from five customers as of December 31, 1999 and 1998, respectively.
The Company performs ongoing credit evaluations of customers and does not
require collateral for accounts receivable. The Company evaluates the
creditworthiness of the counterparties to the futures contracts and considers
nonperformance risk to be remote.

Pension Plans and Other Postretirement Benefits

In 1998, the Company terminated its defined benefit pension plan for
salaried employees, with benefits under the plan curtailed effective September
30, 1998, and with plan assets distributed as of December 31, 1999. In 1999, the
Company implemented a defined contribution plan for salaried employees, amending
an existing 401(k) plan, with benefits retroactive to January 1, 1999.

The Company sponsors several defined benefit pension plans covering
substantially all employees. The Company uses the "projected unit credit"
actuarial method for financial reporting purposes and the "entry age normal"
actuarial method for funding purposes.

The Company has historically provided postretirement medical insurance and
life insurance benefits (primarily for salaried employees). The Company accounts
for postretirement benefits by accruing such benefits during the employees'
years of service.

Forward Sales Contracts and Futures Contracts

In the normal course of business, the Company enters into forward sales
contracts with certain customers for the sale of fixed quantities of extruded
aluminum at scheduled intervals whereby the cost of the aluminum component of
the contract is fixed for the duration of the contract, based on market price at
the inception of the contract. In order to hedge its exposure to aluminum price
volatility under these forward sales contracts, the Company enters into aluminum
futures contracts to purchase aluminum, based on scheduled deliveries under the
forward sales contracts. Gains and losses on futures contracts designated and
effective as hedges of aluminum price exposure are recorded as adjustments to
the cost of inventory. If it becomes probable that the anticipated transaction
will not occur as expected, the deferred gain or loss on the hedging transaction
applicable to the portion of the transaction that will not occur will be
recognized in income currently.

29
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies (Continued)

Forward Sales Contracts and Futures Contracts (Continued)

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. The Company
is required to adopt this new accounting standard beginning January 1, 2001.
Early adoption of SFAS No. 133 is permitted as of the beginning of any fiscal
quarter after its issuance. SFAS No. 133 will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that do not
qualify as hedges under the new standard must be adjusted to fair value through
income. If a derivative qualifies as a hedge, depending on the nature of the
hedge, changes in fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in value will be immediately recognized in earnings. The Company has not yet
determined what effect SFAS No. 133 will have on its earnings and financial
position.

Related Party Transactions

During the years ended December 31, 1998 and 1997, the Company
purchased aluminum from CVG Industria Venezolana de Aluminio C.A. ("Venalum"),
previously an owner of 180,362.5 shares of Class A common stock, with total
amounts purchased of $5,371,000 and $69,606,000, respectively.

In 1987, the Company entered into an agreement with GGvA, pursuant to
which GGvA provides financial advisory and other services to the Company. For
such services, GGvA was paid an annual retainer of $350,000 in 1999 and 1998,
and $250,000 in 1997, plus reimbursement for its out-of-pocket expenses. In
addition, GGvA received a fee of $500,000 for financial advisory and other
services in connection with the Recapitalization (as herein defined) in 1997.

Stock-Based Compensation

As described in Note 14, the Company has elected to follow the
provisions of Accounting Principles Board Opinion ("APB") No. 25, Accounting for
Stock Issued to Employees, for stock based compensation. Pro forma disclosures
required under Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation, are not included herein since the
information is not materially different from the amounts reported.

Revenue Recognition

Sales of the Company's products are generally unconditional sales that are
recorded when the products are shipped and invoiced.

Business Segments

In 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, which is
required to be adopted effective December 31, 1998, and requires, among other
things, that the Company provide financial and descriptive information about its
operating segments. Under SFAS No. 131, operating segments are components of an
enterprise about which separate financial information is available that is
regularly evaluated by the enterprise's chief operating decision maker deciding
how

30
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

Business Segments (Continued)

to allocate resources and in assessing performance. The Company has evaluated
the adoption of the new standard and has concluded that it has only one
reportable operating segment.

In 1999 and 1998, one customer, Navistar International Corporation,
accounted for 15.1% and 10.4%, respectively, of the Company's gross sales
measured in dollars.

2. Inventories

A summary of inventories at December 31 follows (dollars in thousands):

1999 1998
------- -------
Cost for aluminum and FIFO cost for other components:
Raw materials ........................................ $11,592 $10,233
Finished goods and work-in-process ................... 12,339 9,589
Supplies ............................................. 705 572
------- -------
24,636 20,394
Less LIFO reserve .................................... ( 1,423) --
------- -------
$23,213 $20,394
======= =======

3. Property, Plant and Equipment

A summary of property, plant and equipment at December 31 follows
(dollars in thousands):

1999 1998
-------- --------
Land ....................................... $ 816 $ 816
Buildings and improvements ................. 9,827 9,138
Machinery and equipment .................... 54,950 50,304
Construction in progress ................... 816 576
-------- --------
66,409 60,834
Less accumulated depreciation .............. (35,415) (32,558)
-------- --------
$ 30,994 $ 28,276
======== ========

4. Recapitalization

In May 1997, the Company issued and sold $105,000,000 principal amount of
10.125% Series A Senior Notes ("Series A Notes") due 2005. In connection with
the consummation of the issuance and sale of the Notes, the Company repaid
existing indebtedness and entered into a new bank credit facility providing a
secured working capital line of $15,000,000, which matures in 2002.

The offering of the Series A Notes, the repayment of $20,992,000 of
indebtedness under an old bank credit facility, the retirement of $15,000,000 of
14.125% Senior Subordinated Notes ("Subordinated Notes") due 2001 and the
entering into of a new bank credit facility were part of an overall
recapitalization of the Company ("Recapitalization"). As part of the
Recapitalization, the Company used a substantial portion of the proceeds
received from the issuance and sale of the Series A Notes to pay a special cash
dividend to holders of its common

31
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

4. Recapitalization (Continued)

stock, settle existing employee stock options, and repurchase, or offer to
repurchase, shares of common stock held by certain stockholders.

In 1997, the Company paid a special cash dividend of $62.00 per share,
or $55,990,000, to the holders of common stock, paid an aggregate of $37,467,000
related to the repayment or retirement of debt, and paid $1,217,000 for the
repurchase and retirement of 152,100 shares of Class A common stock from certain
shareholders. The Company also incurred $4,070,000 of compensation expense and
issued 158,042.5 shares of Class A common stock related to the settlement of
employee stock options. The compensation expense represents the difference
between fair market value and the exercise price on the settlement of 57,000
employee stock options and $900,000 of bonuses paid to satisfy a portion of
income taxes incurred by option holders as a result of receiving shares of
common stock.

In November 1997, the Company consummated an exchange of 100% of the
Series A Notes for $105,000,000 aggregate principal amount of 10.125% Series B
Senior Notes due 2005, which are registered under the Securities Act of 1993, as
amended.

5. Repurchase of Common Stock

In October 1998, the Company entered into a Stock Purchase Agreement to
repurchase all of the shares of Class A common stock of the Company owned by
Venalum for an aggregate purchase price of $3.1 million. On November 13, 1998,
the repurchase was completed, and as of that date, Venalum no longer owned any
shares of common stock of the Company.

6. Declaration and Payment of Cash Dividend

On December 9, 1998, the Board of Directors of the Company declared a
cash dividend of $2.64 per share of Class A common stock, or $1.9 million, to
the holders of its common stock, which was paid on January 12, 1999.

7. Accrued Expenses

A summary of accrued expenses at December 31 follows (dollars in
thousands):

1999 1998
------- -------
Interest ........................................... $ 886 $ 900
Salaries, wages and other compensation ............. 1,427 1,160
Environmental remediation .......................... 1,588 2,100
Cash dividend on common stock ...................... -- 1,924
Other .............................................. 3,118 3,969
------- -------
$ 7,019 $10,053
======= =======

32
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

8. Debt Obligations

Credit Agreement

In May 1997, the Company entered into a $15,000,000 credit agreement
("1997 Credit Agreement") with Credit Agricole Indosuez ("Agent") by amending
and restating a 1994 credit agreement. The 1997 Credit Agreement with the Agent
is comprised of a $15,000,000 secured line of revolving credit maturing on the
last business day of June 2002. Outstanding balances under this agreement are
subject to interest, at the Company's option, at either 1.0% over the Agent's
prime lending rate or 2.25% over LIBOR. In addition, the Company pays a
commitment fee of 0.35% per annum on the average daily unused amounts. The 1997
Credit Agreement also includes available letters of credit of $5,000,000, which
have not been used by the Company. There are no additional fees with respect to
unused letters of credit.

The 1997 Credit Agreement contains numerous covenants, including: (a) a
limitation on the payment of dividends or the repurchase of common stock; (b) a
restriction on redemption or purchase of any indebtedness or the alteration of
terms of any indebtedness; (c) a restriction on the incurrence of future
indebtedness, capital expenditures, investments, liens, transactions with
affiliates and disposition of assets; and (d) the maintenance of specified
financial rations and minimum net worth. The Company was in compliance with
these covenants at December 31, 1999 and 1998.

The Company's obligations under the 1997 Credit Agreement are secured by
substantially all of the Company's inventories and accounts receivable. No
borrowings were outstanding under the 1997 Credit Agreement as of December 31,
1999 and 1998.

Long-Term Debt

As of December 31, 1999, the Company had outstanding long-term debt
consisting of $105,000,000 aggregate principal amount of 10.125% Series B Senior
Notes due 2005.

9. Interest Expense, Net of Interest Income

A summary of interest expense, net of interest income, for the years ended
December 31 follows (dollars in thousands):

1999 1998 1997
-------- -------- --------
Interest expense ........................ $ 10,688 $ 10,688 $ 8,249
Amortization of debt issuance costs ..... 621 622 593
-------- -------- --------
11,309 11,310 8,842
Interest income ......................... (471) (504) (452)
-------- -------- --------
Interest expense, net of interest ....... $ 10,838 $ 10,806 $ 8,390
======== ======== ========

Cash paid for interest amounted to $10,703,000, $10,674,000 and $8,375,000
for the years ended December 31, 1999, 1998 and 1997, respectively.

33
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

10. Financial Instruments

Statement of Financial Accounting Standard No. 107, Disclosures about
Fair Values of Financial Instruments, defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. The carrying value reported in the balance
sheets for cash, accounts receivable and accounts payable approximate their fair
values. The fair value for long-term debt as of December 31, 1999 was
$100,275,000 whereas the fair value of long-term debt as of December 31, 1998
was $98,175,000.

11. Income Taxes

Significant components of deferred tax liabilities and assets at
December 31 follow (dollars in thousands):

1999 1998
---- ----
Deferred tax liabilities:
Property, plant and equipment ................... $6,290 $6,281
Inventory ........................................ 137 167
------ ------
Total deferred tax liabilities ....................... 6,427 6,448
------ ------
Deferred tax assets:
Pension and benefit plan liabilities ............. 427 17
Accrued liabilities .............................. 329 318
Environmental remediation ........................ 619 819
Allowance for doubtful accounts .................. 183 172
------ ------
Total deferred tax assets ............................ 1,558 1,326
------ ------
Net deferred tax liabilities ......................... $4,869 $5,122
====== ======

Deferred income taxes are included in the Balance Sheets in other current
assets and deferred income taxes.

A reconciliation of the statutory income tax to the income tax expense
included in the Statements of Operations for the years ended December 31 follows
(dollars in thousands):

1999 1998 1997
---- ---- ----

Income tax expense calculated at the statutory
federal income tax rate .................... $ 3,089 $ 5,224 $ 4,117
Amortization of goodwill ....................... 416 416 416
State taxes, net of federal benefits ........... 401 644 518
Prior years' income taxes ...................... -- -- --
Other .......................................... 23 (127) 22
------- ------- -------
Income tax expense ............................. $ 3,929 $ 6,157 $ 5,073
======= ======= =======

1999 1998 1997
------- ------- -------
Current taxes .................................. $ 4,182 $ 6,435 $ 5,043
Deferred taxes ................................. (253) (278) 30
------- ------- -------
Income tax expense ............................. $ 3,929 $ 6,157 $ 5,073
======= ======= =======

Cash paid for federal and state income taxes amounted to $4,700,000,
$4,575,000 and $4,490,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.

34
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

12. Leases

The Company leases various facilities and equipment under short-term rental
and operating lease agreements. Rent expense under these agreements amounted to
$2,002,000, $1,760,000 and $1,752,000 for the years ended December 31, 1999,
1998 and 1997, respectively. Future minimum payments under noncancellable
operating leases as of December 31, 1999 are: $1,430,000 in 2000, $964,000 in
2001, $716,000 in 2002, $650,000 in 2003, $570,000 in 2004 and $2,350,000
thereafter.

13. Pension Plans and Other Postretirement Benefits

The following table sets forth the funded status of the defined benefit and
postretirement plans, and amounts recognized in the Balance Sheet (thousands of
dollars). Assets of the defined benefit pension plans consist principally of
equity securities, debt securities, mutual funds and cash equivalents. Defined
postretirement benefits consist of unfunded health care plans that provide
certain postretirement medical and life insurance benefits for employees
(primarily salaried employees) who retire under certain eligibility
requirements. The postretirement benefits are contributory and include certain
cost-sharing features, such as deductibles and co-payments.

35
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

13. Pension Plans and Other Postretirement Benefits (Continued)

<TABLE>
<CAPTION>
Pension Benefits: Plans Other Postretirement
in the United States Benefits: All Plans
-------------------------- ----------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of
year ............................................. $ 14,291 $ 15,661 $ 4,244 $ 3,821
Service cost ......................................... 556 832 324 239
Interest cost ........................................ 874 1,030 274 247
Participants' contributions .......................... -- -- 58 49
Actuarial (gains) losses ............................. (1,341) 1,802 (1,025) (73)
Benefit payments ..................................... (595) (616) (174) (93)
Plan amendments ...................................... 247 -- 119 54
Curtailment (gains) losses ........................... -- (2,190) -- --
Settlements .......................................... (5,298) (2,228) -- --
-------- -------- -------- --------
Benefit obligation at end of year .................... $ 8,734 $ 14,291 $ 3,820 $ 4,244
======== ======== ======== ========

Change in Plan Assets:
Fair value of plan assets at
beginning of year ................................ $ 14,599 $ 13,142 -- --
Actual return on plan assets ......................... 1,199 1,476 -- --
Employer contributions ............................... 383 2,825 -- --
Benefit payments ..................................... (595) (616) -- --
Settlements .......................................... (5,298) (2,228) -- --
-------- -------- -------- --------
Fair value of plan assets at
end of year ...................................... $ 10,288 $ 14,599 -- --
======== ======== ======== ========

Funded Status:
Funded status at end of year ......................... $ 1,553 $ 308 $ (3,820) $ (4,244)
Unrecognized net actuarial
(gain) loss ...................................... (784) 2,220 (1,233) (209)
Unrecognized prior service cost ...................... 1,232 1,132 159 50
Unrecognized net asset at date of
adoption, net of amortization .................... -- -- 2,156 2,300
-------- -------- -------- --------
Prepaid (accrued) benefit cost ....................... $ 2,001 $ 3,660 $ (2,738) $ (2,103)
======== ======== ======== ========
Amounts Recognized in the
Balance Sheet:
Prepaid benefit cost ................................. $ 1,916 $ 2,287 -- --
Accrued benefit liability ............................ (610) (469) (2,738) (2,103)
Intangible asset ..................................... 339 243 -- --
Accumulated other comprehensive
income ........................................... 356 1,599 -- --
-------- -------- -------- --------
Net amount recognized ............................... $ 2,001 $ 3,660 $ (2,738) $ (2,103)
======== ======== ======== ========
</TABLE>

36
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

13. Pension Plans and Other Postretirement Benefits (Continued)

The net periodic benefit cost related to the defined benefit pension plans
included the following components (dollars in thousands):

<TABLE>
<CAPTION>
Pension Benefits: Plans in the United States
--------------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service cost .................................. $ 556 $ 832 $ 803
Interest cost ................................. 874 1,030 1,005
Expected return on plan assets ................ (1,059) (1,031) (836)
Amortization of prior service cost ............ 148 132 118
Recognized actuarial (gain) loss .............. 14 21 20
------- ------- -------
Net periodic benefit cost ..................... 533 984 1,110
Curtailment (gain) loss ....................... -- (1,724) --
Settlement (gain) loss ........................ 1,510 160 --
------- ------- -------
Net period benefit cost after curtailments and
settlements ............................... $ 2,043 $ (580) $ 1,110
======= ======= =======

Weighted average assumptions as of December 31:
Discount rate ............................... 8.00% 6.75% 7.25%
Expected return on plan assets .............. 8.00 8.00 8.00
Rate of compensation increase ............... -- -- 4.50
</TABLE>

The net periodic benefit cost related to the defined benefit postretirement
plans included the following components (dollars in thousands):

<TABLE>
<CAPTION>
Other Postretirement Benefits: All Plans
----------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost ..................................... $ 324 $ 239 $ 183
Interest cost .................................... 274 247 243
Amortization of transition obligation ............ 144 144 144
Amortization of prior service cost ............... 10 4 --
Amortization of net actuarial (gain) loss ........ (1) (12) (2)
----- ----- -----
Net periodic benefit cost ........................ $ 751 $ 622 $ 568
==== ==== ====
Weighted average assumptions as of December 31:
Discount rate .................................. 8.00% 6.75% 7.25%

</TABLE>

The health care cost trend rate used to determine the postretirement benefit
obligation was 6.0% for 1999, decreasing gradually to an ultimate rate of 5.0%
in 2002 and remains at that level thereafter. The trend rate is a significant
factor in determining the amounts reported. The effect of a one-percentage-point
change in these assumed health care cost trend rates would have the following
effects (dollars in thousands):

<TABLE>
<CAPTION>
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of service and interest cost component .... $ 82 $ (78)
Effect on postretirement obligation ....................... 524 (422)
</TABLE>

37
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

13. Pension Plans and Other Postretirement Benefits (Continued)

Employees may participate in the Wells Aluminum 401(k) Retirement Plan
which was established as a supplemental retirement plan. Participants may elect
a salary reduction of an amount between one and twenty percent of compensation
not to exceed the maximum amount permitted under the Internal Revenue Code. The
plan provides a matching contribution by the Company in the amount of $0.50 per
$1.00 of non-union hourly and salaried participant contributions up to six
percent of pay. In 1999, the Company amended the Wells Aluminum 401(k)
Retirement Plan to provide for a profit sharing feature for salaried employees
funded at the discretion of the Board of Directors. The Company's expense
related to the Wells Aluminum 401(k) Retirement Plan was $789,000 in 1999,
$81,000 in 1998 and $36,000 in 1997.

14. Stock Option Plan

In June 1997, the Board of Directors of the Company approved a stock
option plan which authorized up to 65,000 shares of Class A common stock for the
plan. The plan provides for the granting of options to officers, other key
employees and directors at an exercise price not to exceed the fair market value
on the date of the grant as determined by the Board of Directors. Under terms of
the plan, the maximum term for the options granted is ten years with the options
vesting ratably over a period of four years. In November 1998, the Stock Option
Committee of the Company approved and amended the number of shares authorized
from 65,000 to 75,650. The options granted have exercise prices ranging from
$8.00 to $17.00 a share. All of the options granted in 1997 were at an exercise
price of $8.00. In 1998, the Company granted 13,000 options to various Company
employees at a weighted average exercise price of $12.29. The weighted average
exercise price of options canceled in 1998 was $8.00. In 1999, the Company
granted 4,150 options to various employees at a weighted average exercise price
of $17.00. As of December 31, 1999, the Company had 48,850 options outstanding
at a weighted average price of $9.91 with 11,787 options exercisable at a
weighted average exercise price of $9.18. The weighted-average remaining
contractual life of the options outstanding as of December 31, 1999 approximates
7.9 years.

1999 1998
---- ----

Options outstanding at January 1 . 60,450 51,700
Options exercised ................ (15,750) --
Options granted .................. 4,150 13,000
Options canceled ................. -- (4,250)
------ ------
Options outstanding at December 31 48,850 60,450
====== ======
Options exercisable at December 31 11,787 12,425
====== ======

15. Futures Contracts

The Company, in the normal course of business, enters into futures
contracts to manage the risk of fluctuations in the price of aluminum.
Fluctuations in the price of aluminum can have a significant impact upon the
operations of the Company. These instruments involve elements of credit and
market risk that are not reflected on the Company's balance sheet. Entering into
these contracts involves not only the risk of dealing with counterparties and
their ability to meet the terms of the contracts, but also of movements in
market value of the futures contracts. The Company is required to place amounts
on deposit with brokers based on the market value of certain contracts. These
margin deposits bear interest based on the rate of certain U.S. Treasury
instruments and are to be refunded as the market value changes or contracts are
closed.

38
<PAGE>

WELLS ALUMINUM CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

15. Futures Contracts (Continued)

As of December 31, 1999 and 1998, the Company has contracts outstanding
with a notional principal amount of $9,721,000 and $18,842,000, respectively,
all of which the Company has used to hedge forward sales contracts. At December
31, 1999, the unrealized gain related to the futures contracts was approximately
$1,100,000, and at December 31, 1998, the unrealized loss related to the futures
contracts was approximately $1,280,000.

16. Environmental Remediation

In 1998, the Environmental Protection Division of the Georgia
Department of Natural Resources approved the Company's work plan for the
modification of its waste water treatment facilities at its Moultrie, Georgia
facility. Under the work plan, which calls for the end of direct discharge of
treated waste water and connection to the City of Moultrie sewer system, three
settling ponds on the Company's property would be removed from services and
their remaining structural components stabilized and capped in place. Phase 1 of
the work plan, the reinforcement of pond berms, has been completed, and the
first pond under Phase 2 of the work plan, the stabilizing and capping of the
ponds, has also been completed. The stabilizing and capping of the two remaining
ponds is scheduled to be completed in 2000. The total cost of the work plan will
be approximately $2.1 million of which $1.85 million was recorded as selling,
general and administrative expense in 1998.

17. Commitments and Contingencies

At December 31, 1998, the Company has commitments with eleven North
American suppliers to purchase 101.4 million pounds of primary aluminum and
aluminum billet from January 1999 through December 1999 at current market prices
at the delivery dates. Management expects that such quantities of aluminum will
be utilized in the normal course of operations during the terms of these
agreements.

The Company has received notice of claims asserting potential liability
under various federal and state environmental laws. The Company accrues for
losses associated with environmental remediation obligations when such losses
are probable and reasonably estimable. Based upon information that is currently
available, management does not expect that the resolution of environmental
claims will have a material adverse effect on the Company. However, given the
inherent uncertainties in evaluating environmental exposure, it is not possible
to predict the amount of future costs of environmental claims which may be
subsequently determined. The Company has not anticipated any insurance proceeds
or third-party payments in determining its estimated liability for environmental
remediation.

The Company is also a party to a number of other lawsuits and claims
arising out of the conduct of its business. Although the ultimate results of
lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not expect that these matters will have a material
adverse effect on the Company or its operations.

18. Subsequent Events

On February 23, 2000, pursuant to a Stock Purchase Agreement among
Norsk Hydro, Norsk Hydro USA L.P. and the stockholders of the Company, Norsk
Hydro acquired all of the outstanding shares of Class A common stock of the
Company for approximately $58 million. In connection with the sale of the
Company, all of the Company's outstanding stock options were settled during the
first quarter of 2000.

39
<PAGE>

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

WELLS ALUMINUM CORPORATION

December 31, 1999

(Dollars in Thousands)

<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- -------------------------- --------- ---------------------------- ---------- ----------
Additions
---------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
- ----------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>

Year Ended December 31, 1999:

Deducted from asset accounts:
Allowance for doubtful $ 442 $ 150 -- $ (123) (1) $ 469
-------- ------- ------ ------ -------
Total $ 442 $ 150 -- $ (123) $ 469
======== ======= ====== ====== =======
Year Ended December 31, 1998:

Deducted from asset accounts:
Allowance for doubtful $ 825 $ 150 -- $ (533) (1) $ 442
-------- ------- ------ ------ -------
Total $ 825 $ 150 -- $ (533) $ 442
======== ======= ====== ====== =======

Year Ended December 31, 1997:

Deducted from asset accounts:
Allowance for doubtful $ 1,170 $ 150 -- $ (495) (1) $ 825
-------- ------- ------ ------ -------
Total $ 1,170 $ 150 -- $ (495) $ 825
======== ======= ====== ====== =======
</TABLE>

(1) Uncollectible accounts written off, net of recoveries and adjustments.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

40
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table set forth certain information with respect to the
individuals who were the directors and executive officers of Wells at December
31, 1999.

Name Position
- -------------------------------- ---------------------------------------
Russell W. Kupiec .............. 52 President, Chief Executive Officer and
Director
W. Russell Asher ............... 57 Senior Vice President, Chief Financial
Officer and Director
Lynn F. Brown .................. 55 Senior Vice President, Sales and
Marketing and Director
William J. Milam ............... 59 Vice President, Business Selection and
Capacity Management
Geoffrey A Nelson .............. 59 Vice President, Human Resources
David J. Raymonda .............. 42 Controller, Secretary and Treasurer
Elizabeth Varley Camp .......... 42 Director
Todd Goodwin ................... 68 Director
Edward R. Heiser ............... 64 Director
Leo A McCafferty ............... 62 Director
Lewis W. van Amerongen ......... 59 Director

Each director of the Company holds office until the next annual meeting of
the stockholders of the Company or until his or her successor has been elected
and qualified. Officers of the Company are elected by and serve at the
discretion of the Board of Directors. See "Certain Relationships and Other
Transactions."

Russell W. Kupiec joined the Company in April 1991. Mr. Kupiec has been
President and Chief Executive Officer since April 1996. From March 1995 to April
1996, he served as Chief Operating Officer. From November 1991 to March 1995,
Mr. Kupiec served as Vice President, Manufacturing. From April 1991 to November
1991, he served as Vice President, Administration. Mr. Kupiec has been a
director of the Company since 1991.

W. Russell Asher, a certified public accountant, joined the Company in
January 1994 and has been Chief Financial Officer since that time. From December
1991 to January 1994, he served as Chief Financial Officer of the Federal
Emergency Management Agency. Prior thereto, Mr. Asher was Vice President,
Finance of MB America Inc., a packaging and printing business, and President and
General Manager of AmeriForms Inc., a printing company which was a subsidiary of
MB America Inc. Mr. Asher has been a director of the Company since 1994.

Lynn F. Brown joined the Company in January 1996 and has been Senior Vice
President, Sales and Marketing since that time. From December 1994 to January
1996, he served as Executive Vice President, Sales and Marketing of Terra Green
Technologies, a start-up business in the ceramics industry. From July 1986 to
December 1994, Mr. Brown was Business Manager of International Paper's
Fountainhead Products Group. Mr. Brown has been a director of the Company since
June 1997.

William J. Milam joined the Company in 1971. Mr. Milam has been Vice
President, Sales and Product Management since 1991, and prior thereto, held
various regional sales management positions.

Geoffrey A. Nelson joined the Company in October 1998 as Vice President,
Human Resources. From March 1997 to October 1998, he served as Head of Labor
Relations for AMP Incorporated, a producer of electrical devices and
connections, and from September 1993 to March 1997, he was Vice President, Human

41
<PAGE>

Resources for Joyce International, an office products business. Mr. Nelson has
27 years of human resource and labor relations experience.

David J. Raymonda joined the Company in 1982. Mr. Raymonda has been
Controller and Secretary of the Company since February 1989 and Treasurer since
September 1993.

Elizabeth Varley Camp has been a Vice President at Goldman, Sachs & Co.
since August 1997 and has served a director of the Company since July 1987. Ms.
Varley Camp joined GGvA in 1986 and was a Partner of GGvA from 1992 until July
1997.

Todd Goodwin has been a Partner of GGvA since 1984 and has served as a
director of the Company since July 1987. Mr. Goodwin is a director of Schult
Homes Corporation, The Rival Company, Inc., Johns Manville Corporation and U. S.
Energy Systems, Inc.

Edward R. Heiser retired as President and Chief Executive Officer of the
Company in April 1996, a position which he had held since 1991. Mr. Heiser has
been a director of the Company since 1991.

Leo A. McCafferty retired as Vice President, Operations in May 1999,a
position which he had held since July 1996. From October 1995 to July 1996, he
served as Vice President, Manufacturing. From May 1993 to October 1995, Mr.
McCafferty was President of Solutions Et Al, a consulting company engaged in
strategic planning and operations control. Mr. McCafferty has been a director of
the Company since December 1997.

Lewis A. van Amerongen has been a Partner of GGvA since 1970 and has served
as a director of the Company since July 1987. Mr. van Amerongen is also a
director of Agrifos LLC and Erickson Air-Cranes Co., LLC, two privately held
companies.

Effective as of February 23, 2000, pursuant to the Stock Purchase Agreement
among Norsk Hydro, Norsk Hydro USA L.P. and the stockholders of the Company, Ms.
Varley Camp and Messrs. Goodwin, Heiser, McCafferty and van Amerongen resigned
from their positions as directors. The remaining members of the board of
directors then elected Ivar Hafsett, President of Hydro Aluminium S.A., Odd S.
Gullberg, President and Chief Executive Officer of Norsk Hydro, and Kendrick T.
Wallace, General Counsel of Norsk Hydro, as new directors.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation earned, whether paid or
deferred, to Wells's Chief Executive Officer and its other four most highly
compensated executive officers (collectively, the "Named Officers") for services
rendered in all capacities to the Company during the years ended December 31,
1999, 1998 and 1997.

42
<PAGE>

<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------

Long-Term
Compensation
Awards
Securities
Annual Compensation Underlying
Name and Principal Position Year Salary Bonus Options
--------------------------- ---- ------ ----- -------
<S> <C> <C> <C> <C>
Russell W. Kupiec ............................. 1999 $ 233,750 -- --
President and 1998 $ 233,750 $ 132,000 --
Chief Executive Officer 1997 $ 233,750 $1,434,955 15,000

W. Russell Asher .............................. 1999 $ 150,451 -- --
Senior Vice President and 1998 $ 144,664 $ 75,000 --
Chief Financial Officer 1997 $ 140,000 $ 991,042 10,000

Lynn F. Brown ................................ 1999 $ 146,232 $ 50,000 --
Senior Vice President, 1998 $ 140,608 $ 50,000 --
Sales and Marketing 1997 $ 136,100 $ 167,210 5,000

William J. Milam .............................. 1999 $ 117,125 -- --
Vice President, Business Selection and 1998 $ 113,000 $ 22,000 --
Capacity Management 1997 $ 112,067 $ 487,571 1,500

Geoffrey A. Nelson ........................... 1999 $ 112,279 -- --
Vice President, 1998 $ 31,726 $ 14,000 --
Human Resources 1997 -- -- --
</TABLE>

OPTION GRANTS IN LAST FISCAL YEAR

There were no grants of options made to the Named Officers during fiscal
year 1999.

The following table provides information on the valuation of options held
by the Named Officers. Twenty five percent of the options granted to the Named
Officers in 1997 will vest and become exercisable on each of the first through
fourth anniversaries of the date of the grant. Fifty percent of the options held
by the Named Officers were eligible for exercise during fiscal 1999.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End At Fiscal Year End (1)
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C>
Russell W. Kupiec ................... 0/7,500 $0/$525,937.50

W. Russell Asher .................... 0/5,000 $0/$350,625.00

Lynn F. Brown ....................... 2,500/2,500 $175,312.50/$175,312.50

Geoffrey A. Nelson ................. 475/1,425 $29,034.38/$87,103.12

William J. Milam .................... 750/750 $52,593.75/$52,593.75
</TABLE>

(1) The value of the in-the-money options is based upon a market value of
$78.125 per share at December 31, 1999. On February 23, 2000, Norsk Hydro
acquired all of the outstanding Class A common shares of the Company for a
purchase price of $78.125 per share.

43
<PAGE>

PENSION BENEFITS

In 1998, the Company terminated the Retirement Plan for Salaried Employees,
including the Named Officers, effective December 31, 1998. The Retirement Plan
for Salaried Employees was a defined benefit pension plan. In 1999, the Company
amended the Wells Aluminum 401(k) Retirement Plan to provide for a profit
sharing feature for salaried employees, including the Named Officers, funded at
the discretion of the Board of Directors. The Wells Aluminum 401(k) Retirement
Plan is a defined contribution pension plan.

EMPLOYMENT AGREEMENTS

Each of the Named Officers has an employment agreement with the Company.
Among other things, each arrangement provides for a term of employment in a
specific executive position, a specified annual base salary and participation in
any additional incentive compensation or bonus programs of the Company. The
employment agreements with Messrs. Kupiec and Asher continue until December 31,
1999 and annually thereafter unless otherwise terminated. If either Mr. Kupiec
or Mr. Asher is terminated other than for cause or disability, the Company is
obligated to continue paying the base salary amount through the end of the
contract term, subject to an offset for earnings from other full-time
employment, and to maintain benefits for such executive through the end of the
contract term. If certain Change in Ownership (as defined in such agreements)
events occur during the term of these agreements, the term of employment is
automatically extended for three years from the date the executive is notified
of the Change in Ownership. In the event of a Change in Ownership, the executive
is given the right to terminate his agreement if he is dissatisfied with his
salary or performance review to be given approximately 18 months after the
Change in Ownership. If, after a Change in Ownership, the executive terminates
his employment due to such dissatisfaction or is discharged other than for cause
or disability, the Company's obligation to continue paying his base salary
through the end of the contract term is not subject to any offset and the
Company is obligated to maintain benefits for such executive through the end of
the contract term.

The employment agreements with Messrs. Brown, Nelson and Milam continue
until March 22, 2001, March 22, 2000 and September 22, 2000, respectively, and
are subject to automatic extensions of two years, one year and eighteen months,
respectively, if certain Change in Ownership (as defined in such agreements)
events occur. If either of such executives is terminated other than for cause or
disability, the Company is obligated to continue paying the base salary amount
through the end of the contract term, subject to an offset for earnings from
other full-time employment, and to maintain benefits for such executive for six
months after such termination.

STOCK OPTION PLAN

In June 1997, the Company adopted and the stockholders of the Company
subsequently approved the 1997 Stock Incentive Plan (the "Plan") pursuant to
which officers, directors and other key employees of the Company will be granted
stock options to purchase shares of Class A common stock. The Plan is
administered by either the Stock Option Committee (the "Committee") of the Board
of Directors or the Board of Directors (the "Board"). The Committee or the Board
will have the discretion to determine the exercise price, the duration and other
terms and conditions of such options. The Committee or the Board will have the
authority to interpret and construe the Plan, and any interpretation or
construction of the Plan by the Committee or the Board will be final and
conclusive. Twenty five percent of such outstanding options will vest and become
exercisable on each of the first through fourth anniversaries of the date of the
grant. In November 1998, the Company adopted and the stockholders of the Company
subsequently approved an amendment to the Plan, whereby the number of options
available for grant was increased from 65,000 options to 75,650 options. During
the year ended December 31, 1999, 4,150 stock options were granted and 15,750
stock options were exercised, both pursuant to the Plan. As of December 31,
1999, there were 48,850 options outstanding, none of which had been exercised.
All stock options granted under the 1997 Stock Incentive Plan were settled as of
February 23, 2000.

44
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Wells is authorized to issue 1,100,000.0 shares of Class A common
stock, par value $0.01 per share (the "Common Stock"). As of December 31, 1999,
744,392.5 shares of common stock were issued and outstanding.

The following table sets forth certain information as of December 31,
1999, with respect to the shares of the Common Stock of the Company beneficially
owned by each person or group that is known by the Company to be a beneficial
owner of more than 5% of the outstanding Common Stock and by all directors and
executive officers of the Company (see footnotes below).

<TABLE>
<CAPTION>
Beneficial Ownership
Security Ownership Number of Shares Percentage of Total
------------------ ---------------- -------------------
<S> <C> <C>
Wells Holdings Limited Partnership (a)
600 Madison Avenue, New York, New York 10022 ....... 560,000.0 75.23%
Russell W. Kupiec (b) ................................. 42,310.0 5.68%
W. Russell Asher (c) .................................. 46,125.0 6.20%
Lynn F. Brown (d) ..................................... 5,437.5 *
William J. Milam (e) .................................. 13,350.0 1.79%
David J. Raymonda (f) ................................. 30,125.0 4.05%
Todd Goodwin (a) ...................................... 560,000.0 75.23%
Edward R. Heiser (g) .................................. 16,000.0 2.15%
Leo A. McCafferty (h) ................................. 2,500.0 *
Lewis W. van Amerongen (a) ............................ 560,000.0 75.23%
All Executive Officers and Directors
as a Group (11 Persons) ........................... 715,847.5 96.17%
</TABLE>

- ------------------
* Denotes less than 1%.

(a) Wells Holdings Limited Partnership ("Wells Holdings") is a limited
partnership of which GGvA is the general partner. As such, GGvA
exercises sole voting and investment power with respect to the shares
owned by Wells Holdings. Messrs. Goodwin and van Amerongen, directors
of the Company, are partners in GGvA, with the shared power to direct
the actions of GGvA, and may be deemed to beneficially own the shares
owned by Wells Holdings by virtue of their status and rights such as
partners. The address for Messrs. Goodwin and van Amerongen is c/o
Wells Holdings. Wells Holdings is the successor limited partnership to
The Fulcrum III Limited Partnership and The Second Fulcrum III Limited
Partnership (collectively, "Fulcrum III"). Fulcrum III was a limited
partnership of which GGvA was the sole general partner. GGvA has
informed the Company that all of the shares owned by Fulcrum III have
been transferred to Wells Holdings.

(b) The address for Mr. Kupiec is c/o the Company.

(d) The address for Mr. Brown is c/o the Company. The number of shares
held by Mr. Brown includes 2,500 shares issuable upon exercise of
outstanding options.

(e) The address for Mr. Milam is c/o the Company. The number of shares
held by Mr. Milam includes 750 shares issuable upon exercise of
outstanding options.

(f) The address for Mr. Raymonda is c/o the Company.

(g) The address for Mr. Heiser is 33 Gray Heron Retreat, Savannah, GA
31411.

(h) The address for Mr. McCafferty is 13406 Bottom Road, Hydes, MD 21082.

45
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS

In connection with the acquisition of the Company in 1987, the Company
entered into a Stock Purchase Agreement with Fulcrum III. Subject to certain
restrictions, Fulcrum III had certain demand and "piggyback" rights to have its
shares of Class A common stock registered under the Securities Act. The Company
had agreed to pay the costs and expenses associated with two such registrations,
except for discounts and commissions. As successor to Fulcrum III, Wells
Holdings has succeeded to these rights. This Agreement was terminated as of
February 23, 2000.

Prior to 1998, the Company was party to an agreement (the "Supply
Agreement") with Venalum pursuant to which Venalum supplied primary aluminum and
aluminum billet to the Company. This contract accounted for approximately 60-65%
of the aluminum purchased by the Company from outside suppliers. Prices were
based on the MWTP from the prior month. The Company believed that the terms of
the Venalum Agreement were no less favorable to the Company than would have been
obtained in an arms' length transaction.

The Supply Agreement commenced in 1988 and was renewed on numerous
occasions. During 1997, negotiations to extend the Venalum Agreement or enter
into a new supply agreement were not successful. The Supply Agreement expired on
December 31, 1997, although the last scheduled delivery of primary aluminum and
aluminum billet under the Supply Agreement was received in January 1998.
Pursuant to the Venalum Agreement, the Company purchased $5.4 million and $69.6
million of primary aluminum and aluminum billet from Venalum in 1998 and 1997,
respectively.

In 1987, the Company entered into an agreement with GGvA, pursuant to
which GGvA provides financial advisory and other services to the Company. For
such services, GGvA was paid an annual retainer of $250,000 in 1997, and
$350,000 in 1998 and 1999, plus reimbursement for its out-of-pocket expenses. In
addition, GGvA received a fee of $500,000 for financial advisory and other
services in connection with the Recapitalization in 1997.

46
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements

1. Financial Statements

The following financial statements of the Company are included in Item 8 of
this report:

- Report of Independent Auditors
- Balance Sheets as of December 31, 1999 and 1998
- Statements of Operations for the years ended December 31, 1999,
1998 and 1997
- Statements of Stockholders' Equity for the years ended December
31, 1999, 1998 and 1997
- Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997
- Notes to the Financial Statements

2. Financial Statement Schedules

The following financial statement schedule of the Company is included in
Item 8 of this report:

- Valuation and Qualifying Accounts and Reserves

Other schedules for which provision is made in the applicable
accounting regulations of the SEC are not required under the related
instruction or are not applicable and, therefore, have been omitted.

(b) Exhibits

27.1 Financial Data Schedule.

The Company did not file any reports on Form 8-K during the year ended
December 31, 1999.

47
<PAGE>

SIGNATURES

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, in the City of Baltimore, State of
Maryland, on March 24, 2000.

Wells Aluminum Corporation

By: /s/ Russell W. Kupiec
---------------------------
Russell W. Kupiec
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Russell W. Kupiec Principal Executive Officer March 24, 2000
- --------------------------- and Director
Russell W. Kupiec

/s/ W. Russell Asher Chief Financial Officer and March 24, 2000
- --------------------------- Director
W. Russell Asher

/s/ David J. Raymonda Principal Accounting Officer March 24, 2000
- ---------------------------
David J. Raymonda

/s/ Lynn F. Brown Director March 24, 2000
- ---------------------------
Lynn F. Brown

Director March __, 2000
- ---------------------------
Odd S. Gullberg

/s/ Kendrick T. Wallace Director March 24, 2000
- ---------------------------
Kendrick T. Wallace

/s/ Ivar Hafsett Director March 24, 2000
- ---------------------------
Ivar Hafsett

<ARTICLE> 5

<CIK> 0000828737
<NAME> WELLS ALUMINUM CORP
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,239
<SECURITIES> 0
<RECEIVABLES> 31,384
<ALLOWANCES> 469
<INVENTORY> 23,213
<CURRENT-ASSETS> 64,846
<PP&E> 66,409
<DEPRECIATION> 35,415
<TOTAL-ASSETS> 133,413
<CURRENT-LIABILITIES> 26,819
<BONDS> 105,000
0
0
<COMMON> 7
<OTHER-SE> (7,005)
<TOTAL-LIABILITY-AND-EQUITY> 133,413
<SALES> 246,194
<TOTAL-REVENUES> 246,194
<CGS> 205,816
<TOTAL-COSTS> 226,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 150
<INTEREST-EXPENSE> 10,838
<INCOME-PRETAX> 8,826
<INCOME-TAX> 3,929
<INCOME-CONTINUING> 4,897
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,897
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>