<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CommonWealth Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[COMMONWEALTH INDUSTRIES, INC. LETTERHEAD]
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of
Commonwealth Industries, Inc. scheduled to be held at The Hyatt Regency
Louisville, 320 West Jefferson Street, Louisville, Kentucky, on Friday, April
24, 1998, commencing at 10:00 A.M., Eastern time. Your Board of Directors and
management look forward to greeting those of you who are able to attend in
person.
At the meeting, you will be asked to consider and elect two directors
to serve until the Annual Meeting of Stockholders in 2001. You are also being
asked to ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors for 1998. Information concerning those matters, as well as
other important information, is contained in the accompanying proxy statement
which you are urged to read carefully.
Whether or not you plan to attend in person and regardless of the
number of shares you own, it is important that your shares be represented and
voted at the meeting. Accordingly, you are requested to sign, date and mail the
enclosed proxy at your earliest convenience. Your shares will then be
represented at the meeting, and the Company will be able to avoid the expense of
further solicitation.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Sincerely,
/s/ MARK V. KAMINSKI
--------------------------------
Mark V. Kaminski
President and Chief
Executive Officer
<PAGE> 3
COMMONWEALTH INDUSTRIES, INC.
500 West Jefferson Street
Citizens Plaza, Suite 1900
Louisville, Kentucky 40202-2823
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1998 Annual Meeting of Stockholders of Commonwealth
Industries, Inc. (the "Company") will be held at The Hyatt Regency Louisville,
Kentucky, at 10:00 A.M., Eastern time on April 24, 1998, to consider and take
action with respect to the following matters:
(1) The election of two directors;
(2) Approval of the selection of Coopers & Lybrand L.L.P. as
the Company's independent auditors for 1998; and
(3) Such other business as may properly be brought before the
meeting or any adjournment thereof;
all as set forth in the Proxy Statement accompanying this Notice.
The close of business on February 23, 1998 has been fixed as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting or any adjournment thereof.
Stockholders who do not expect to attend the meeting are
requested to sign and return the enclosed proxy in the enclosed postage-paid
return envelope.
By order of the Board of Directors,
/s/ DONALD L. MARSH, JR.
---------------------------------------
Donald L. Marsh, Jr.
Secretary
March 16, 1998
<PAGE> 4
COMMONWEALTH INDUSTRIES, INC.
PROXY STATEMENT
This Proxy Statement is furnished to you in connection with
the solicitation of proxies by the Board of Directors of Commonwealth
Industries, Inc., a Delaware corporation (the "Company"), to be used at the
Annual Meeting of Stockholders (the "Meeting") to be held in Louisville,
Kentucky, on April 24, 1998.
If the accompanying form of proxy is properly completed and
returned, the shares to which it relates will be voted at the Meeting. If you
give instructions, the shares will be voted in accordance with your
instructions. If you give no instructions, your shares will be voted for the
election of the nominees for director set forth in this Proxy Statement, for
ratification of the selection of independent auditors made by the Audit
Committee of the Board of Directors, and, as to any other business that may
properly be brought before the Meeting or any adjournment thereof, in the
discretion of the proxy holders. You may revoke your proxy by attending the
Meeting and voting in person or by filing a written notice or a later-dated
proxy with the Secretary of the Company.
The Proxy Statement and the enclosed proxy are first being
mailed to stockholders on or about March 16, 1998 in connection with this
solicitation.
On the record date for the Meeting there were 15,946,500
shares of Common Stock of the Company outstanding and entitled to vote. Each
share of Common Stock is entitled to one vote. The presence, in person or by
proxy, of a majority of the outstanding shares will constitute a quorum. A
plurality of votes of the shares of Common Stock represented at the Meeting is
required for the election of a director. The affirmative vote of a majority of
the shares of Common Stock represented at the Meeting is required for all other
matters. Abstentions will be treated as equivalent to negative votes, while
proxies returned by brokers as non-votes will not be counted as voting, but will
be treated as present for purposes of determining the presence of a quorum on
all matters.
ELECTION OF DIRECTORS
There are six directors currently in office. The Board is
divided into three classes, and the members of each class hold office for a term
of three years. The term of one class expires each year.
At the Meeting, two directors are to be elected. The terms of
Paul E. Lego and John E. Merow expire at the Meeting. The Nominating Committee
of the Board of Directors has nominated Mr. Lego and Mr. Merow for election in
the class whose term expires in 2001. Each has agreed to serve if elected. If
either should unexpectedly become unable or unwilling to serve, the proxy
holders may vote for such other person as the Nominating Committee may recommend
in his or her place.
Information concerning Mr. Lego, Mr. Merow and each of the
other directors of the Company is set forth below.
Mark V. Kaminski. Expiration of term 1999. Director since
1991. Age 42. President and Chief Executive Officer of the Company. Mr. Kaminski
joined the Company in 1987 as Marketing Manager. In 1989, he was promoted to
Vice President of Operations and in 1991 he became President and Chief Executive
Officer. Mr. Kaminski is a director of the Aluminum Association, Washington,
D.C., the Louisville YMCA and the Indiana University Athletics Board.
<PAGE> 5
Paul E. Lego. Expiration of term, if elected, 2001. Director
since 1995. Age 67. Chairman of the Board of the Company. From 1990 until his
retirement in 1993, Mr. Lego was Chairman of the Board of Directors and Chief
Executive Officer of Westinghouse Electric Corporation. He is a director of PNC
Bank Realty Holding Company, USX Corp., Lincoln Electric Company and
Consolidated Natural Gas Company. Mr. Lego is a trustee of the University of
Pittsburgh and a member of the Business Council and the Board of Overseers of
the New Jersey Institute of Technology.
Catherine G. Burke. Expiration of term 2000. Director since
1995. Age 58. Dr. Burke has been a member of the faculty of the School of Public
Administration at the University of Southern California since 1973. She has been
a panelist and consultant to the Office of Technology Assessment of the U.S.
Congress and a member of the Los Angeles County Economy and Efficiency
Commission. Dr. Burke has provided management consultations to public and
private sector organizations in the United States, Canada, Australia, England
and Denmark.
C. Frederick Fetterolf. Expiration of term 1999. Director
since January 1, 1997. Age 69. Mr. Fetterolf was President and Chief Operating
Officer of Aluminum Company of America (Alcoa) from 1985 to 1991, and served as
President of Alcoa from 1983 to 1985. He is a director of Allegheny Teledyne
Corporation, Mellon National Bank, Union Carbide Corporation, Quaker State
Corporation, Praxair, Inc. and Dentsply International.
John E. Merow. Expiration of term, if elected, 2001. Director
since 1995. Age 68. Mr. Merow was a partner in the law firm of Sullivan &
Cromwell from 1965 through 1996 and Chairman and Senior Partner during the
period 1987-1994. Mr. Merow is a director of each of the investment companies
(18) in the Seligman Group of Investment Companies. He also is a director of the
Foreign Policy Association, the Municipal Art Society of New York and the United
States Council for International Business, Chairman of the American Australian
Association, Chairman of the New York and Presbyterian Hospital Care Network,
Inc. and a director of The New York and Presbyterian Hospital, and Vice-Chairman
of the United States-New Zealand Council.
Victor Torasso. Expiration of term 2000. Director since 1995.
Age 69. Mr. Torasso was President of Wheeltek, Inc., an automotive aluminum
wheel manufacturing plant in Freemont, Indiana from 1986 to 1989. From 1958
until 1985, Mr. Torasso was employed by Anaconda and ARCO Aluminum during which
time he was Vice President and General Manager of the Mill Products Group. Mr.
Torasso supervised the design and start-up of a new $600 million single purpose
aluminum rolling mill in Logan County, Kentucky, was the works manager of an
aluminum smelter in Sebree, Kentucky, and was plant manager of an aluminum
rolling mill in Terre Haute, Indiana.
BOARD AND COMMITTEE MEETINGS
The standing committees of the Board of Directors are an Audit
Committee, the members of which are Mr. Fetterolf (Chairman), Dr. Burke, Mr.
Lego and Mr. Torasso; a Management Development and Compensation Committee, the
members of which are Dr. Burke (Chairman), Mr. Fetterolf, Mr. Lego and Mr.
Torasso; and a Nominating Committee, the members of which are Mr. Merow
(Chairman), Dr. Burke, Mr. Fetterolf, Mr. Lego and Mr. Torasso.
The Audit Committee, which met five times during 1997,
recommends the engagement of independent auditors, reviews with the independent
auditors the plans for and results of the audit engagement, approves
professional services rendered by the independent auditors, reviews the
independence of the independent auditors, considers the range of audit and
non-audit fees and reviews the adequacy of the Company's internal accounting
controls.
The Nominating Committee, which met two times during 1997,
recommends candidates for election as directors. The Nominating Committee will
consider recommendations made by stockholders. Such stockholder recommendations
should be made in writing, addressed to the Nominating Committee, attention of
the Secretary of the Company.
2
<PAGE> 6
The Management Development and Compensation Committee, which
met five times during 1997, provides oversight of the management, development
and compensation and human resources policies of the Company, reviews and
recommends to the Board or determines the compensation and other benefits of the
executives and administers the Company's stock incentive plans.
During 1997, there were seven meetings of the Board of
Directors of the Company. Each director of the Company attended 100% of the
meetings of the Board held during the period for which he or she was a director
as well as the Board Committees of which that director was a member.
COMPENSATION AND OTHER TRANSACTIONS WITH DIRECTORS; MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors who are not employees of the Company are paid an
annual retainer of $8,000 ($20,000 for the Chairman of the Board) and an
attendance fee of $1,000 for each day on which a meeting of the Board or of a
Board committee occurs, plus expenses. In addition, each director of the Company
who is not an employee of the Company is granted automatically 1,000 shares of
Common Stock and a nonqualified 10-year option to purchase 1,000 shares of
Common Stock (2,500 option shares in the case of a non-employee Chairman of the
Board) on the date the director becomes a non-employee director and on each
succeeding January 1. The option price is the mean between the highest and
lowest sales price of the Common Stock on the date of grant.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and officers and persons who beneficially own more than
10% of its Common Stock ("reporting persons") to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and furnish a
copy thereof to the Company. Based solely upon a review of the copies of such
forms furnished to the Company and written representations from certain
reporting persons, the Company believes that all of the reporting persons
complied with all filing requirements applicable to them with respect to 1997.
APPROVAL OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit
Committee, has selected Coopers & Lybrand L.L.P. as independent auditors to
audit the financial statements of the Company for 1998 and to perform other
appropriate accounting services. The Board of Directors is submitting the
selection to the stockholders for approval. It is expected that representatives
of Coopers & Lybrand L.L.P. will be present at the Meeting to respond to
appropriate questions and to make a statement if they desire to do so.
The Board of Directors recommends a vote FOR this proposal.
3
<PAGE> 7
OTHER BUSINESS
The Company has no knowledge of any business other than that
described above that will be presented at the Meeting. If any other business
should properly be brought before the Meeting, the persons named in the
accompanying form of proxy and acting thereunder will vote in accordance with
their judgment on such matters.
BENEFICIAL OWNERSHIP OF COMMON STOCK
OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of February 23, 1998, the
number of shares of Common Stock of the Company beneficially owned by each
director, each executive officer named in the Summary Compensation Table
appearing on page 6 and all directors and executive officers as a group. Each
person has sole investment and voting power with respect to the shares set forth
below unless otherwise noted.
<TABLE>
<CAPTION>
Name of No. of Shares Percent
Beneficial Owner Owned(a) of Class
- ---------------- ----- --------
<S> <C> <C>
Catherine G. Burke 9,000 *
C. Frederick Fetterolf 4,000 *
Mark V. Kaminski 141,745 *
Paul E. Lego 10,500 *
John E. Merow 17,000 *
Victor Torasso 6,000 *
Roderick Macdonald 22,493 *
Donald L. Marsh, Jr. 16,495 *
Fred N. Mudge 2,030 *
John J. Wasz 17,424 *
Robert Lloyd (b) -0- *
All directors and executive 269,248 1.7%
officers as a group (14 persons)
</TABLE>
* Less than 1%
(a) Includes the following shares of Common Stock which the individual(s)
had the right to acquire within 60 days of February 23, 1998 through
the exercise of options: Dr. Burke--3,000 shares; Mr. Fetterolf--1,000
shares; Mr. Kaminski--20,000 shares; Mr. Lego--7,500 shares; Mr.
Merow--3,000 shares; Mr. Torasso--3,000 shares; and all directors and
executive officers as a group--42,500 shares. Also includes shares held
in the Company's Performance Sharing Plan for Salaried Employees for
the accounts of individuals as follows: Mr. Kaminski--15,601 shares;
Mr. Macdonald--563 shares; Mr. Marsh--547 shares; Mr. Mudge--130
shares; Mr. Wasz--1,500 shares; Mr. Lloyd---0- shares; and all
directors and executive officers as a group -- 22,453 shares.
(b) Mr. Lloyd resigned his position with the Company in October 1997.
4
<PAGE> 8
OWNERSHIP BY OTHERS
The following table sets forth information with respect to each person
believed by the Company to be the beneficial owner of more than five percent of
the Company's Common Stock on the dates noted.
<TABLE>
<CAPTION>
Name and Address of No. of Shares Percent
Beneficial Owner Owned of Class
- ---------------- ----- --------
<S> <C> <C>
Merrill Lynch & Company, Inc. 1,878,800(a) 11.7%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
Franklin Resources, Inc. 1,418,500(b) 8.9%
777 Mariners Island Blvd.
San Mateo, CA 94404
Brinson Partners, Inc. 831,400(c) 5.2%
209 South LaSalle
Chicago, IL 60604-1295
American Express Company 827,400(d) 5.2%
American Express Tower
200 Vesey Street
New York, NY 10285
</TABLE>
(a) Based solely on an amended Schedule 13G dated March 4, 1998 filed with
the SEC by Merrill Lynch & Company, Inc., Merrill Lynch Group, Inc. and
Princeton Services, Inc. The Schedule 13G further reports that Merrill
Lynch & Company, Inc. has (1) shared power to dispose of the 1,878,800
shares; and (2) shared power to vote the 1,878,800 shares.
(b) Based solely on a Schedule 13G dated January 30, 1998 filed with the
SEC by Franklin Resources, Inc., Franklin Advisory Services, Inc.,
Charles B. Johnson and Rupert H. Johnson, Jr. The Schedule 13G reports
that (1) the 1,418,500 shares are beneficially owned by investment
companies or other managed accounts which are advised by investment
advisory subsidiaries of Franklin Resources, Inc.; (2) advisory
contracts grant to such advisory subsidiaries all voting and investment
power over the 1,418,500 shares; and (3) Charles B. Johnson and Rupert
H. Johnson, Jr. are principal stockholders of Franklin Resources, Inc.
(c) Based solely on a Schedule 13G dated February 11, 1998 filed with the
SEC by Brinson Partners, Inc., Brinson Holdings, Inc., SBC Holding
(USA), Inc. and Swiss Bank Corporation. The Schedule 13G Reports that
Brinson Partners, Inc. has (1) shared power to dispose of the 831,400
shares; and (2) shared power to vote the 831,400 shares.
(d) Based solely on a Schedule 13G dated February 9, 1998 filed with the
SEC by the American Express Company, American Express Financial
Corporation and IDS Discovery Fund, Inc. The Schedule 13G further
reports that the American Express Company has (1) shared dispositive
power 827,400 shares; (2) IDS has sole power to vote 800,000 shares.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth for the years 1995, 1996 and 1997 the annual and
long-term compensation paid or accrued for those years by the Company to the
chief executive officer, the four most highly compensated executives of the
Company during 1997 other than the chief executive officer, and Mr. Robert
Lloyd, who resigned his position with the Company in October 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation Awards
-----------------------------
No. of
Shares
Annual Compensation Restricted Underlying
Name and -------------------- Stock Stock LTIP All Other
Principal Position Year Salary Bonus(a) Awards(b) Options Payouts Compensation(c)
- ------------------ ---- ------ -------- --------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark V. Kaminski 1997 $500,000 $250,000 -- 40,000 $106,658 $37,986
President and Chief 1996 $380,004 $325,314 -- 40,000 $111,291 $36,753
Executive Officer (d) 1995 $315,000 $168,690 $560,000 20,000 $ 81,543 $ 4,500
Roderick Macdonald 1997 $190,008 $ 60,803 -- 10,000 $ 30,231 $ 7,994
Executive Vice 1996 $145,600 $ 60,682 -- 5,000 $ 34,469 $ 5,614
President - Alflex 1995 $127,200 $ 63,315 $175,000 3,000 -- $ 3,915
Donald L. Marsh, Jr.
Executive Vice
President, Chief 1997 $250,008 $121,254 -- 10,000 -- $11,718
Financial Officer and 1996 $186,635 $153,908 $210,938 10,000 -- $65,513
Secretary 1995 -- -- -- -- -- --
Fred N. Mudge
Executive Vice
President - 1997 $225,000 $ 63,563 -- 10,000 -- $ 4,800
Commonwealth Aluminum 1996 $ 37,500 $ 9,844 -- 10,000 -- --
1995 -- -- -- -- -- --
John J. Wasz 1997 $170,004 $ 37,500 -- 5,000 $25,936 $ 6,914
Vice President 1996 $133,832 $ 40,767 -- 5,000 $31,472 $ 5,042
Materials 1995 $116,488 $ 55,959 $175,000 3,000 $23,342 $ 3,594
Robert Lloyd 1997 $215,000 $150,000 -- -- -- $ 4,800
Executive Vice 1996 -- -- -- -- -- --
President-Alflex 1995 -- -- -- -- -- --
</TABLE>
(a) The amounts reported in this column represent payments made in 1998,
1997, and 1996 with respect to 1997, 1996 and 1995 under the Company's
incentive compensation plan.
6
<PAGE> 10
(b) The amounts reported in this column represent the dollar value of the
award of restricted stock, calculated by multiplying the fair market
value of the Common Stock on the date of award by the number of shares
awarded. The restricted stock vests five years after the date of the
award thereof. Holders of restricted stock are entitled to receive
regular dividends. The named officers had non-vested restricted stock
award balances outstanding as of December 31, 1997 as follows: Mr.
Kaminski--40,000 shares ($575,000) and each of Messrs. Marsh, Macdonald
and Wasz--12,500 shares ($179,688). These dollar values are based upon
the closing price of the Common Stock on the NASDAQ National Market on
December 31, 1997 ($14.375 per share).
(c) The amounts reported in this column include matching contributions to
the Company's Performance Sharing Plan, relocation expenses in 1997 for
Mr. Macdonald ($11,601), relocation expenses for Mr. Marsh in 1996
($65,513) and contributions made by the Company to its Deferred
Compensation Plan.
(d) In addition, Mr. Kaminski received in 1995 after the completion of the
initial public offering of the Common Stock of the Company a one-time
payment of $500,000 from Comalco Limited, the former owner of the
Company. This payment was made pursuant to his 1991 agreement with
Comalco designed to encourage continuity of leadership by Mr. Kaminski
in creating a turnaround of the Company and providing for a payment in
this amount at such time as the Company was sold.
The tables below show, for the named executive officers, information
regarding stock options granted during, or held at the end of, 1997 pursuant to
the Company's Stock Incentive Plans.
OPTIONS GRANTED IN 1997
<TABLE>
<CAPTION>
Potential Realizable
% of Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Price Appreciation
Underlying Employees Exercise for Option Term(b)
Options in Fiscal Price Expiration ---------------------
Name Granted(a) Year Per Share Date 5% 10%
- ---- ---------- ---- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Mark V. Kaminski 40,000 19.7% $15.375 1/1/07 $386,770 $980,152
Roderick Macdonald 10,000 4.9% $15.375 1/1/07 $ 96,693 $245,038
Donald L. Marsh, Jr. 10,000 4.9% $15.375 1/1/07 $ 96,693 $245,038
Fred N. Mudge 10,000 4.9% $15.375 1/1/07 $ 96,693 $245,038
John J. Wasz 5,000 2.5% $15.375 1/1/07 $ 48,346 $122,519
Robert Lloyd 10,000 4.9% $15.375 1/1/07 $ 96,693 $245,038
</TABLE>
(a) These options become exercisable three years from the date of grant.
(b) The amounts represent hypothetical realizable values of stock options
granted in 1997 at assumed rates of cumulative stock price appreciation
over the 10 year life of the options. These assumed rates of
appreciation are set by the proxy rules of the Securities and Exchange
Commission and are not intended to forecast appreciation of the price
of the Company's Common Stock. Actual gains, if any, realized upon the
exercise of stock options will depend upon the price of the Company's
Common Stock at the date of exercise.
7
<PAGE> 11
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year-End at Year-End
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ---- ------------- -------------
<S> <C> <C>
Mark V. Kaminski 0/100,000 0/$10,000
Roderick Macdonald 0/18,000 0/1,500
Donald L. Marsh, Jr. 0/20,000 0/$0
Fred N. Mudge 0/10,000 0/$0
John J. Wasz 0/13,000 0/$1,500
</TABLE>
The Company has defined benefit pension plans covering
substantially all salaried and hourly employees. Benefits are based primarily
upon years of service and employees' compensation during the last five years of
employment for salaried employees and stated amounts based upon job grade prior
to retirement for hourly employees.
The following table shows estimated annual benefits payable
upon retirement in specified compensation and years of service classifications.
<TABLE>
<CAPTION>
Years of Service
----------------
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 $28,139 $37,518 $46,896 $56,227 $65,657
$150,000 or more $34,139 $45,518 $56,898 $68,227 $79,657
</TABLE>
Compensation covered by the plans includes all bonuses. The
covered compensation for executive officers does not differ materially from the
Annual Compensation shown in the Summary Compensation Table. Benefits are
computed on a straight life annuity basis and are subject to deductions for
social security offset amounts.
The estimated credited years of service for Messrs. Kaminski,
Macdonald, Marsh, Mudge and Wasz at December 31, 1997 were 10.6, 4.0, 1.8, 1.3
and 12.5, respectively.
DEFERRED COMPENSATION PLAN
Key employees designated by the Management Development and
Compensation Committee of the Board of Directors may elect to defer a portion of
their compensation pursuant to the Company's non-qualified unfunded Deferred
Compensation Plan. Deferred amounts are credited or debited with the equivalent
of the investment experience of one or more investment vehicles identified
pursuant to the plan and selected by the participant and are paid out upon
retirement or under specified other circumstances. The Company intends, but is
not obligated, to make contributions to the accounts of participants in the plan
(a) designed to provide supplemental retirement benefits in excess of the
limitations contained in the Internal Revenue Code of 1986, as amended (the
"Code") on benefit accruals under the Company's pension plan and (b) based on
the application of the Company's
8
<PAGE> 12
defined benefit pension plan contribution rate to each participant's
compensation in excess of that covered by the Company's defined benefit pension
plans. The actual amounts to be paid out will depend upon the amount of the
deferral, the amount of the Company's contribution and the investment
experience.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into Severance Agreements with Messrs.
Kaminski, Macdonald, Marsh, Mudge and Wasz and certain other executive officers
of the Company. The purpose of the agreements is to secure the executives'
continued service and dedication in the event of an actual or threatened Change
in Control. They provide severance pay and continuation of certain benefits if a
Change in Control occurs and the executive's employment is terminated (a) in
anticipation of or during the two-year period following the Change in Control
(i) by the Company without cause or (ii) by the executive for good reason or (b)
by the executive for any reason during a 30-day window period commencing one
year after the Change in Control.
Generally, a Change in Control will be deemed to occur in the
case of (a) an acquisition by a person or group of 20% or more of the Company's
Common Stock (with certain exceptions), (b) a change in the majority of the
Board without the requisite approval of the incumbent Board, (c) a business
combination unless Company stockholders receive 60% or more of the voting stock
of the surviving Company, no person acquires more than 20% of such voting stock
and the Company Board members remain a majority of the continuing Board or (d)
stockholder approval of a liquidation of the Company.
Under the Severance Agreements, severance pay would equal
three times the sum of (a) the executive's base pay and (b) the greatest of the
executive's largest bonus during the prior three years or target bonus for the
year of the Change in Control or year of termination and, if payment pursuant to
the agreement or otherwise would be subject to the excise tax imposed by Section
4999 of the Code for severance payments exceeding a certain amount, an
additional tax reimbursement payment such that the executive receives a net
amount equal to the amount the executive would have received if the excise tax
did not apply. Medical and other insurance benefits would be continued for three
years.
Also, upon a change of control as defined in the Company's
stock incentive plans, any stock options not then exercisable would become fully
exercisable and any shares of restricted Common Stock not then vested would
become fully vested.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Management Development and Compensation Committee of the
Board of Directors (Committee) consists entirely of non-employee directors. The
Committee approves the policies under which compensation is paid or awarded to
the Company's executive officers.
COMPENSATION PHILOSOPHY
The Company's compensation program for executive officers
consists of the following elements: base salary, annual incentive compensation
and long-term incentive compensation. As described more fully below, each
element of the Company's executive compensation program has a somewhat different
purpose.
The Committee believes this approach best serves both the
short and the long-term interests of stockholders by ensuring that executive
officers are compensated in a manner which aligns their interest with those of
stockholders. Thus, the compensation plans for the Company's executive officers
place a significant proportion of total remuneration at risk. One-half of the
annual incentive compensation is determined by the objectively measured
financial performance of the business; the other half is subjectively determined
based on individual work performance and estimated contribution of the officers
to Company performance. Stock options are also a significant portion of the
executive officers' long-term compensation, the value of which is directly
related to stock price appreciation realized by the Company's stockholders. The
Committee encourages ownership of the Company's Common Stock by its executive
officers.
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<PAGE> 13
The Committee believes total remuneration must compare
favorably to that found in the larger society in order to attract and retain
competent executives to carry out the work required to meet corporate business
objectives. The Company rewards differentially based on the complexity of work
to be performed, the scope and impact of decisions required in a role and the
work performance of the role incumbent. Individual recognition and rewards are
linked to corporate objectives.
The Committee is cognizant that the Company operates in a
cyclical market and recognizes that executive compensation must not be
excessively raised during the up cycle, nor excessively reduced during down
cycles. The Company must pay for the work performance of corporate officers,
recognizing their work in down cycles is as important, or even more important,
than their work in up cycles. For this reason part of the pay which is at risk
is decided on a subjective basis. An executive who properly prepares for a down
cycle and seizes opportunities in up cycles should be rewarded appropriately for
his or her work performance.
COMPENSATION PROGRAM
The Committee's judgments during 1997 regarding the
appropriate form and level of executive compensation payments and awards were
based upon the Committee's assessment of the Company's executive officers, the
continuing demand for superior executive talent, the Company's overall
performance and Commonwealth Industries, Inc.'s objectives and challenges.
The Committee did not rely solely upon a guideline or formula
based on any particular performance measure in 1997. However, the integration of
the September 1996 acquisition of CasTech Aluminum Group Inc. into the aluminum
business, with all that entailed in terms of organization design, systems
integration, management and staff training, was a major effort of the leadership
and was given heavy weight in our conclusion. The year over year increase in
sales of 48% to $1.1 billion indicates significant success in this endeavor.
Shipping volume also increased with 5% growth in shipments from the aluminum
rolling mills and 8% growth in shipments from the Alflex electrical products
subsidiary on a pro forma basis considering the CasTech acquisition. Earnings
before interest, taxes, depreciation and amortization increased 82% from
$41,369,000 to $75,254,000. Profits, however, declined since the acquisition of
CasTech was financed with debt, and interest payments increased from $9,875,000
in 1996 to $30,536,000 in 1997 and material margins were under market pressure
throughout the year.
The Company also improved its capital base completing a public
offering of a new issue of Common Stock and a new accounts receivable facility.
The company ended 1997 with a debt-to-capital ratio which was less than one-half
the comparable figure for the end of 1996.
The Committee also considered the compensation practices of
other similar corporations, those of similar size in similar manufacturing
industries which are most likely to compete with the Company for the services of
executive officers. The companies considered by the Committee include a larger
number and broader range of companies than are included in the Performance Graph
shown on page 13, reflecting the Committee's view that the employment market of
the Company's executive officers includes a broader range of companies than
those which are appropriate for comparison for financial performance purposes.
Base Salary. The chief executive officer (CEO) approves the
salary structure for each executive officer role taking into account the
responsibilities of the role, the criticality of the role to the achievement of
the Company's long and short-term objectives as well as information from
independent consultants as to the salary structures of firms which compete with
the Company for the services of executive officers.
The purpose of the base salary is to provide base compensation
which is market competitive in order to attract and retain superior executives
to carry out the work required to meet the Company's business objectives and
challenges.
The salaries paid to executive officers (other than the CEO)
are reviewed annually by the CEO and, in the case of vice presidents, reviewed
by executive vice presidents as well. Based on such review, the CEO recommends
the total remuneration for these executive officers, subject to approval by the
Committee. The Committee sets the total remuneration for the CEO.
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<PAGE> 14
Annual Incentive Compensation. Annual incentive compensation
programs for executive officers consist of an Executive Incentive Compensation
Plan.
Under the Executive Incentive Compensation Plan, each
executive officer can earn up to 50% of his or her base salary, or more in
exceptional cases, with one-half the award based on the performance of the
Company during the year as measured by return on capital and one-half based upon
a subjective appraisal of the executive's individual performance relative to
goals established for the year. The awards are determined by the Committee,
after receiving the recommendations of the CEO.
The Company sponsors qualified defined contribution plans
(collectively, the performance sharing plan) covering the majority of its
employees. The Company matches a percentage of a participant's voluntary
contributions to its defined contribution plans, with the percentages varying
according to the business unit and location.
Long-Term Incentive Compensation. Long-term incentives are
provided through restricted Common Stock awards and stock option grants.
Restricted stock awards and stock options are intended to provide long-term
incentives for the achievement of the Company's objectives and to align
executives' interest with those of the stockholders. Restricted stock awards
were made in 1995 at the time of the Company's initial public offering (IPO) or
at such later time as executives joined the Company. The restricted stock vests
five years from the date of award. Stock options were granted at the time of the
IPO and annually thereafter. They become exercisable three years after the grant
date. The awards and grants were made based upon recommendations by a third
party consultant, Towers Perrin, related to external competitive factors and the
level executive officers and managers had reached in the Company.
Long-term incentives also were provided through a Long-Term
Incentive Plan which was in place while the Company was not publicly owned and
which expired with the end of the 1995-1997 three-year cycle. Under the
Long-Term Incentive Plan, executive officers received payouts equal to a defined
percentage of their average annual base salary for a three-year employment
period, based upon results in relation to seven corporate performance goals.
These seven goals were sales volume, conversion cost, material margin, corporate
profit, productivity, delivery performance and safety.
CHIEF EXECUTIVE OFFICER COMPENSATION
The basis for the Committee's determination of the CEO's
compensation in 1997 included his successful handling of a follow-on public
stock offering and the reduction of the debt-to-capitalization ratio. He also
continued to seek out acquisition possibilities, and this work has been carried
out effectively and could lead to further growth and increasing profits.
The CEO continues to develop excellent relationships with the
financial community; to provide outstanding leadership on strategic issues and
to reinforce a culture of integrity, quality and differential pay for
differential performance. The Company was also able to complete the integration
of CasTech's operations and systems, optimizing the product mix among
Commonwealth's plants. This achieved the operating synergies envisioned at the
time of the acquisition. Selling, general and administrative projected savings
were realized in 1997. Margins were under pressure throughout the year,
resulting in reduced profits. Financing the acquisition of CasTech with debt
resulted in much higher interest charges.
These factors contributed to the reduction in the share value, the return on
capital employed and net profits. Although, earnings before interest, taxes,
depreciation and amortization was up 82%, and the new financing has improved the
balance sheet and reduced interest payments substantially.
All these measures weighed heavily in our decisions, especially in regard to the
annual incentive plan. Despite lower net profits and the impact on share price,
the CEO has been highly effective dealing with these, and many other, issues
confronting Commonwealth Industries, Inc. The increase in earnings before
interest, taxes, depreciation and
11
<PAGE> 15
amortization is an indicator of his work performance. Overall, the work
performance of the CEO is excellent in all elements of his role. He has the
ability and dedication to enhance the long-term value of the Company for the
share owners by providing the leadership and vision to grow the company and to
meet on-going challenges and opportunities.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code limits the tax
deduction for individual compensation paid the CEO and the four other most
highly paid executives to $1 million annually, subject to certain exceptions.
Executive compensation in 1997 did not exceed this limit. The Committee
continues to review issues relating to this compensation deduction limitation.
Catherine C. Burke, Chairman
C. Frederick Fetterolf, Member
Paul E. Lego, Member
Victor Torasso, Member
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total
shareholder return since the Common Stock became publicly traded on March 10,
1995 with that of the Standard & Poor's Small Cap 600 and a peer group index.
The graph assumes an initial investment of $100.00 and the reinvestment of
dividends (where applicable). The issuers comprising the peer group are
Birmingham Steel Corporation, Century Aluminum Company, Chaparral Steel, Easco,
Inc., Northwest Steel & Wire Company, Oregon Steel Mills, Inc. and Quanex
Corporation.
<TABLE>
<CAPTION>
3/95 12/95 12/96 12/97
---- ----- ----- -----
<S> <C> <C> <C> <C>
Commonwealth Industries, Inc. $100 $112 $112 $107
S&P SmallCap 600 $100 $124 $151 $189
Self-Determined Peer $100 $103 $109 $133
</TABLE>
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<PAGE> 16
STOCKHOLDER PROPOSALS
FOR THE 1999 ANNUAL MEETING
Proposals of stockholders to be considered for inclusion in
the Company's Proxy Statement and proxy for the 1999 Annual Meeting of
Stockholders must be received by the Secretary of the Company at its principal
executive office, 500 West Jefferson Street, Citizens Plaza Suite 1900,
Louisville, Kentucky 40202-2823, not later than November 16, 1998.
Under the Company's By-Laws, notice must be received by the
Company in advance of a stockholders' meeting to present any proposal to the
meeting or to nominate a person for election as a director. Such notice must be
delivered to the Secretary of the Company at its principal executive office not
less than 60, nor more than 90, days prior to the date of the meeting; provided,
that if the date of the meeting is first publicly announced or disclosed less
than 70 days prior to the date of the meeting, the notice must be given not more
than 10 days after the date is so announced or disclosed. A stockholder filing a
notice of a proposal must include certain information, including the text of the
proposal, the reasons therefor and any interest the stockholder has in the
proposal; any notice of nomination must include certain information about the
nominee; and all such notices must include the name and address of the
submitting stockholder and the number of shares held by the stockholder. These
By-Law requirements are separate from and in addition to the Securities and
Exchange Commission requirements that a stockholder must fulfill to have a
proposal included in the Company's proxy statement and proxy.
ADDITIONAL INFORMATION
The Company will bear the cost of soliciting proxies. In
addition to the use of the mails, directors, officers and regular employees of
the Company may solicit proxies personally or by telephone. The Company will
reimburse brokerage firms, nominees, custodians and fiduciaries for their
expenses in forwarding proxy materials to beneficial owners.
/s/ DONALD L. MARSH, JR.
-------------------------------
Dated: March 16, 1998 Donald L. Marsh, Jr.
Secretary
<PAGE> 17
Appendix A
PROXY
COMMONWEALTH INDUSTRIES, INC.
The undersigned acknowledges receipt of the Notice of Meeting and Proxy
Statement for the Annual Meeting of Stockholders of COMMONWEALTH INDUSTRIES,
INC. to be held April 24, 1998 and appoints Paul E. Lego, Mark V. Kaminski and
John E. Merow, and each of them, proxies, with power of substitution, to attend
the Meeting, and any adjournments thereof, and vote all shares the undersigned
is entitled to vote upon the matters indicated and on any other business that
may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED. IF NO INSTRUCTIONS ARE GIVEN, YOUR PROXIES WILL VOTE FOR THE
NOMINEES LISTED IN ITEM 1 AND FOR APPROVAL OF THE SELECTION OF COOPERS & LYBRAND
L.L.P.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES AND
FOR APPROVAL OF THE SELECTION OF COOPERS & LYBRAND L.L.P.
1. ELECTION OF DIRECTORS:
<TABLE>
<CAPTION>
<S> <C>
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY TO VOTE (for
(except as written on line below) nominees listed below)
</TABLE>
Nominees: Paul E. Lego, John E. Merow
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE WRITE THE NAME OF THE NOMINEE ON
THE LINE BELOW
- --------------------------------------------------------------------------------
2. Approval of selection of Coopers & Lybrand L.L.P. as independent auditors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN AND RETURN THIS CARD AS SOON AS
POSSIBLE. MARK EACH VOTE WITH AN X IN THE BOX.
, 1998
-------------------------
-------------------------------
SIGNATURE
-------------------------------
SIGNATURE (IF JOINTLY HELD)
PLEASE SIGN EXACTLY AS YOUR
NAME(S) APPEAR(S) ON THIS
PROXY. ONLY ONE SIGNATURE IS
REQUIRED IN THE CASE OF A JOINT
ACCOUNT. WHEN SIGNING IN A
REPRESENTATIVE CAPACITY, PLEASE
GIVE TITLE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
