<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
Commission file number 0-27918
Century Aluminum Company
(Exact name of Registrant as specified in its Charter)
Delaware 13-3070826
(State of Incorporation) (IRS Employer Identification No.)
2511 Garden Road
Bldg. A, Suite 200
Monterey, California 93940
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (408) 642-9300
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 |_|
The registrant had 20,000,000 shares of common stock outstanding at July 31,
1997.
<PAGE> 2
CENTURY ALUMINUM COMPANY
Index to Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1997
Part I - Financial Information
Item 1 - Financial Statements Page Number
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 ..................................... 1
Consolidated Statements of Operations for the
three months and six months ended June 30, 1997
and 1996 .................................................. 2
Consolidated Statements of Shareholders' Equity
for the six months ended June 30, 1997 and 1996 ........... 3
Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 ....................... 4
Notes to the Consolidated Financial Statements ............ 5-13
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 14-19
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K .......................... 20
Signatures ......................................................... 21
Exhibit Index ...................................................... 22
Exhibit 11.1 - Calculation of Earnings per Common
Share and Common Share Equivalent .......... 23
Exhibit 99.1 - Century Aluminum Company Press
Release, dated July 1, 1997 ................ 24-25
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
CENTURY ALUMINUM COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash .................................................. $ 4,176 $ 112
Restricted cash equivalents ........................... 5,801 5,801
Accounts receivable, trade - net ...................... 120,167 89,283
Due from affiliates ................................... 13,532 12,681
Inventories ........................................... 162,313 176,149
Prepaid and other assets .............................. 6,113 3,172
-------- --------
Total current assets ............................. 312,102 287,198
PROPERTY, PLANT AND EQUIPMENT - NET ........................ 177,823 176,135
OTHER ASSETS ............................................... 13,629 10,398
-------- --------
TOTAL ............................................ $503,554 $473,731
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade ............................... $ 45,461 $ 31,341
Due to affiliates ..................................... 15,843 22,666
Accrued and other current liabilities ................. 28,711 27,429
Accrued employee benefits costs - current
portion .............................................. 39,055 39,491
-------- --------
Total current liabilities ........................ 129,070 120,927
-------- --------
REVOLVING TERM LOAN ........................................ 46,332 24,356
ACCRUED PENSION BENEFITS COSTS - Less current portion ...... 20,076 26,616
ACCRUED POSTRETIREMENT BENEFITS COSTS - Less current
portion ................................................... 115,714 112,551
OTHER LIABILITIES .......................................... 23,375 22,803
-------- --------
Total noncurrent liabilities ..................... 205,497 186,326
-------- --------
CONTINGENCIES AND COMMITMENTS (Note 5)
SHAREHOLDERS' EQUITY:
Common Stock (one cent par value, 50,000,000
shares authorized; 20,000,000 shares
outstanding at June 30, 1997 and December
31, 1996) ............................................ 200 200
Additional paid-in capital ............................ 161,953 161,953
Retained earnings ..................................... 6,834 4,325
-------- --------
Total shareholders' equity ....................... 168,987 166,478
-------- --------
TOTAL ............................................ $503,554 $473,731
======== ========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES:
Third-party customers ............... $ 165,024 $ 143,509 $ 330,728 $ 288,928
Related parties ..................... 26,453 22,531 52,280 58,516
--------- --------- --------- ---------
191,477 166,040 383,008 347,444
COST OF GOODS SOLD ....................... 180,362 151,199 363,974 315,182
--------- --------- --------- ---------
GROSS PROFIT ............................. 11,115 14,841 19,034 32,262
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ............. 5,605 4,198 9,907 7,327
--------- --------- --------- ---------
OPERATING INCOME ......................... 5,510 10,643 9,127 24,935
INTEREST INCOME (EXPENSE) - Net .......... (953) (307) (1,694) (220)
OTHER EXPENSE ............................ (157) -- (336) --
--------- --------- --------- ---------
INCOME FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES ................. 4,400 10,336 7,097 24,715
INCOME TAX EXPENSE ....................... 1,617 3,946 2,588 9,410
--------- --------- --------- ---------
INCOME FROM
CONTINUING OPERATIONS ............... 2,783 6,390 4,509 15,305
INCOME FROM
DISCONTINUED OPERATIONS -
Net of income taxes ................. -- -- -- 264
--------- --------- --------- ---------
NET INCOME ............................... $ 2,783 $ 6,390 $ 4,509 $ 15,569
========= ========= ========= =========
EARNINGS PER COMMON SHARE AND COMMON
SHARE EQUIVALENT:
Income from continuing operations ... $ 0.14 $ 0.32 $ 0.22 $ 0.71
Income from discontinued operations . -- -- -- 0.01
--------- --------- --------- ---------
Net income .......................... $ 0.14 $ 0.32 $ 0.22 $ 0.72
========= ========= ========= =========
WEIGHTED AVERAGE COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING ...... 20,233 20,082 20,228 21,601
CASH DIVIDENDS PAID PER
COMMON SHARE ........................ $ 0.05 $ 0.05 $ 0.10 $ 0.05
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Shareholders'
Stock Capital Earnings Equity
------ --------- -------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 ... $ 231 $ 232,257 $ (6,979) $ 225,509
Net Income .............. -- -- 15,569 15,569
Dividends ............... -- -- (1,000) (1,000)
Special distribution of
discontinued operations (31) (70,303) (2,200) (72,534)
----- --------- -------- ---------
BALANCE, JUNE 30, 1996 ....... $ 200 $ 161,954 $ 5,390 $ 167,544
===== ========= ======== =========
BALANCE, DECEMBER 31, 1996 ... $ 200 $ 161,953 $ 4,325 $ 166,478
Net Income .............. -- -- 4,509 4,509
Dividends ............... -- -- (2,000) (2,000)
----- --------- -------- ---------
BALANCE, JUNE 30, 1997 ....... $ 200 $ 161,953 $ 6,834 $ 168,987
===== ========= ======== =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income ................................................... $ 4,509 $ 15,569
Adjustments to reconcile net income to net cash from (used in)
operating activities:
Depreciation and amortization ......................... 9,630 9,148
Deferred income taxes ................................. (3,374) (6,510)
Pension and other postretirement benefits ............. (3,840) (22,634)
Income from discontinued operations ................... -- (264)
Change in working capital items:
Accounts receivable, trade - net ................. (30,884) 5,254
Due from affiliates .............................. (851) 6,617
Inventories ...................................... 13,836 (25,637)
Prepaids and other assets ........................ (2,941) (757)
Accounts payable, trade .......................... 14,120 9,700
Due to affiliates ................................ (6,823) (5,610)
Accrued and other current liabilities ............ 1,282 (4,778)
Other - net ........................................... 417 1,431
--------- --------
Net cash from (used in) operating activities ................. (4,919) (18,471)
--------- --------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of accounts receivables ...................... -- (50,000)
Purchase of property, plant and equipment ............. (10,993) (6,422)
Disposal of fixed assets .............................. -- 203
Restricted cash deposits .............................. -- 784
--------- --------
Net cash from (used in) investing activities ................. (10,993) (55,435)
--------- --------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Borrowings ............................................ 120,258 61,614
Repayment of borrowings ............................... (98,282) (29,472)
Dividends ............................................. (2,000) (1,000)
--------- --------
Net cash from (used in) financing activities ................. 19,976 31,142
--------- --------
NET INCREASE (DECREASE) IN CASH ................................. 4,064 (42,764)
CASH, BEGINNING OF PERIOD ....................................... 112 42,910
--------- --------
CASH, END OF PERIOD ............................................. $ 4,176 $ 146
========= ========
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 7
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1997 AND 1996
(Dollars in Thousands Except as Otherwise Noted)
(Unaudited)
1. General
Century Aluminum Company ("Century" or the "Company") is a holding company whose
principal subsidiary is Century Aluminum of West Virginia, Inc., ("Century of
West Virginia"), formerly known as Ravenswood Aluminum Corporation, which
operates a primary aluminum reduction facility and an aluminum fabrication
facility in Ravenswood, West Virginia. Century of West Virginia, through its
wholly-owned subsidiary Berkeley Aluminum, Inc. ("Berkeley"), holds a 26.67%
interest in a partnership which operates a primary aluminum reduction facility
in Mt. Holly, South Carolina. As of June 30, 1997, the remaining interest in the
partnership and the remaining undivided interest in the Mt. Holly Facility are
owned 50.33% by Alumax of South Carolina, Inc. ("ASC") and 23.00% by a
subsidiary of Sudelektra Holding AG, a publicly traded Swiss company. Glencore
International AG (and together with its subsidiaries, the "Glencore Group") is a
major shareholder of Sudelektra Holding AG.
Glencore AG and Vialco Holdings Ltd., which are wholly-owned subsidiaries of
Glencore International AG own 7,925,000 common shares, or 39.6% of the common
shares outstanding of the Company. Century and the Glencore Group enter into
various transactions related to the purchases and sales of primary and scrap
aluminum and metals risk management.
The accompanying unaudited interim consolidated financial statements of the
Company should be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 1996. In management's opinion, the
unaudited interim consolidated financial statements reflect all adjustments,
which are of a normal and recurring nature, which are necessary for a fair
presentation, in all material respects, of financial results for the interim
periods presented. Operating results for the first six months of 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
2. Forward Contracts Accounting Policy
The Company enters into forward primary aluminum contracts, principally with the
Glencore Group, to hedge fixed-price purchase and sale commitments and inventory
positions ("specific contracts") and to cover expected future sales and to
otherwise manage the company's exposure to changing prices ("general
contracts"). A change in market value of a forward contract is recognized as a
gain or loss in the period of change unless the contract meets specific criteria
to qualify for hedge accounting. The criteria are: the item to be hedged exposes
the Company to market price risk, the forward contract reduces exposure to this
risk, the forward contract is designated as a hedge, and there is a high degree
of correlation between changes in the market value of the contract and changes
in the market value of the hedged item. Changes in the market
5
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CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
value of forward contracts that qualify for hedge accounting, including closed
forward contracts, are deferred and reflected in costs of goods sold when the
underlying physical transaction takes place. The deferred gains and losses are
reflected on the balance sheet in inventory. If a forward contract is used to
hedge an anticipated transaction and the transaction is no longer likely to
occur, any gains or losses are included in the income statement as cost of goods
sold.
Changes in the market value of specific contracts that do not meet the criteria
for hedge accounting are recognized in the income statement as cost of goods
sold in the period in which they arise. Changes in the market value of general
contracts are recognized in the income statement as gains or losses on forward
contracts in the period in which they arise.
3. Inventories
<TABLE>
<CAPTION>
Inventories consist of the following: June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Raw materials ........................... $ 65,418 $ 56,954
Work-in-process ......................... 40,854 55,040
Finished goods .......................... 24,024 35,711
Operating and other supplies ............ 19,962 20,745
Unrealized losses on forward contracts .. 12,055 7,699
-------- --------
$162,313 $176,149
======== ========
</TABLE>
At June 30, 1997 and December 31, 1996 approximately 87% and 88%, respectively,
of inventories were valued at the lower of last-in, first-out ("LIFO") cost or
market. The excess of the LIFO cost (or market, if lower) of inventory over the
first-in, first-out ("FIFO") cost was approximately $19,012 and $20,368 at June
30, 1997 and December 31, 1996, respectively.
4. Bank Revolving Credit Facility
On January 30, 1996 (and as amended through July 18, 1997) Century of West
Virginia and Berkeley entered into a Bank Revolving Credit Facility ("Facility")
with BankAmerica Business Credit, Inc. ("Bank of America"). The Facility
provides for a three-year $150,000 revolving credit facility which consists of
revolving loans and letters of credit up to $150,000 in the aggregate.
The interest rate is, at the Company's election, (i) The Bank of America base
rate plus .75% or (ii) the one-, two-, three- or six-month LIBOR plus 2.00%. The
interest rate margins of .75% and 2.00% may remain constant, or may be increased
by up to .50%, depending upon the results of certain financial ratios.
Borrowings of $46.3 million as of June 30, 1997 under the Facility are
6
<PAGE> 9
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
collateralized by all of Century of West Virginia's and Berkeley's inventory and
receivables and are guaranteed by the Company.
Under the terms of the Facility, the Company is required to meet certain
financial covenants. At June 30, 1997, the Company was in compliance with these
covenants.
5. Contingencies and Commitments
Environmental Contingencies
The Company's operations are subject to various environmental laws and
regulations. The Company has spent, and expects to spend in the future,
significant amounts for compliance with those laws and regulations.
Pursuant to an order issued in September 1994 under Section 3008(h) (the
"3008(h) order") of the Resource Conservation and Recovery Act ("RCRA"), Century
of West Virginia is performing remediation measures at a former oil pond area
and in connection with cyanide contamination in the groundwater, and is
conducting a RCRA facility investigation ("RFI") and a corrective measures study
("CMS") to evaluate and develop corrective alternatives for any areas that have
contamination exceeding certain levels. The Company has completed initial
sampling and analysis and has submitted its initial findings to the
Environmental Protection Agency ("EPA"). The Company will conduct further field
work in the third quarter of 1997. The Company anticipates that the RFI will not
be completed before late 1997 or early 1998. Once the RFI and CMS are complete,
the EPA will assess the need for clean-up, and if any clean-up is required, a
subsequent order will be issued. At this time, the Company is unable to
determine the extent of clean-up measures, if any, that may be required.
However, the Company is aware of some environmental contamination at Century of
West Virginia, and it is likely that clean-up activities will be required in at
least some areas of the facility. The Company believes a significant portion of
this contamination is attributable to the operations of a prior owner and will
be the financial responsibility of that owner, as discussed below.
The West Virginia Department of Environmental Protection ("DEP") ordered Century
of West Virginia to investigate treatment technology to replace the current
wastewater sprayfield and to install such technology by September 1, 1997. The
Company anticipates that the replacement system will be operational by that
date.
Prior to the Company's acquisition of the Century of West Virginia facility,
Kaiser Aluminum & Chemical Corporation ("Kaiser") owned and operated the
facility for approximately thirty years. Many of the conditions which the
Company is required to investigate under the 3008(h) order arise out of
activities which occurred during Kaiser's ownership and operation, and with
respect to those conditions, Kaiser will be responsible for the costs of the RFI
and required cleanup under
7
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CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
the terms of the purchase agreement ("Kaiser Purchase Agreement"). In addition,
Kaiser retained title to certain land within the Century of West Virginia
premises and retains full responsibility for those areas. Under current
environmental laws and regulations, the Company may be required to remediate any
contamination discovered during or after completion of the RFI, which
contamination was discharged from areas which Kaiser previously owned or
operated, or for which Kaiser has retained ownership or responsibility. However,
if such remediation is required, the Company believes that Kaiser will be liable
for some or all of the costs thereof pursuant to the Kaiser Purchase Agreement.
The Company is aware there has been contamination in the soil and groundwater at
the previously owned Vialco facility. The Company believes that a substantial
amount of the contamination migrated from an adjacent facility, Hess Oil Virgin
Islands, Inc. ("HOVIC"). HOVIC is currently investigating the contamination and
has installed monitoring wells at the Vialco facility. HOVIC has advised the EPA
that it does not believe it is the source of the contamination, a conclusion the
Company disputes. The Company has begun its own technical investigation. At
another area of the plant,the Company has removed quantities of contaminated
soils from Vialco and transported and disposed of such soils in approved
facilities. In addition, it has instituted a bioremediation program which it
believes will address the remaining legal requirements with respect to such
soils. Pursuant to the contract for sale of the Vialco facility to St. Croix
Alumina, L.L.C. ("St. Croix Alumina") a subsidiary of Alcoa Alumina and
Chemicals L.L.C., the Company has retained liability for environmental
conditions existing at the time of sale only to the extent such conditions
require remedial action, or give rise to claims, under laws in effect at the
time of sale. The Company will not have liability if remediation is required or
claims are made due to changes in law after the time of sale. The Company has
agreed to indemnify St. Croix Alumina against claims arising from environmental
conditions for which the Company has retained liability. The indemnity is capped
at $18,000, and any claims under the indemnity must be brought by July 24, 2001.
Management of the Company does not believe that the ultimate amount of the
retained liability, if any, will have a material adverse effect on the Company's
financial condition, results of operations or liquidity.
It is the Company's policy to accrue for costs associated with environmental
assessments and remedial efforts when it becomes probable that a liability has
been incurred and the costs can be reasonably estimated. The aggregate
environmental related accrued liabilities were $800 at June 30, 1997 and
December 31, 1996. All accruals have been recorded without giving effect to any
possible future insurance or Kaiser indemnity proceeds. With respect to ongoing
environmental compliance costs, including maintenance and monitoring, such costs
are expensed as incurred.
Because of the uncertainties concerning the extent of required cleanup, the
complexity of applicable government laws and regulations and their
interpretation, the varying costs and effectiveness of alternative cleanup
technologies and methods, and the uncertain level of recoveries from insurance,
the Kaiser indemnity or other types of recovery, there can be no
8
<PAGE> 11
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
assurance that future capital expenditures and costs for environmental
compliance will not have a material adverse effect on the Company's future
financial condition, results of operations or liquidity. However, based upon all
available information and after consultation with counsel, management does not
believe that the outcome of these environmental matters will have a material
adverse effect on the Company's financial condition, results of operations or
liquidity.
Legal contingencies
On February 14, 1995, a suit was brought in the Territorial Court in St. Croix,
U.S. Virgin Islands against Vialco, Bechtel Corporation and Mitsubishi Heavy
Industries, Ltd., by three plantiffs, purportedly on behalf of a class
consisting of more than 1,000 persons. The proposed class is comprised of
residents of Harvey Project, Bethlehem Village, and Estate Profit (residential
areas in the vicinity of the Vialco facility) who claim personal injury,
property damage and nuisance from pollutants, toxins, dusts and deleterious
fumes, mists, vapors, particulates and/or gases allegedly discharged into the
atmosphere since Vialco restarted operations at the Vialco facility in 1989.
Plantiffs also sought a monetary award in an unspecified amount which would
create a fund to cover the costs of permanent medical monitoring for members of
the proposed plaintiff class. Without admitting to any liability, and in order
to put an end to growing defense costs and protracted litigation, Vialco and the
plaintiffs have agreed to settle this case, subject to Court approval. The
Company accrued the expense of settlement in 1996.
Century of West Virginia is a named defendant (along with other companies) in
approximately 3,777 civil actions brought by individuals seeking to recover
significant compensatory and/or punitive damages in connection with various
asbestos-related diseases. However, counsel for the plaintiffs have represented
that Century of West Virginia will be dismissed from 2,412 cases because the
plaintiffs in these cases had no contact with the Century of West Virginia
facility. All of the remaining 1,365 plaintiffs have been employees of
independent contractors who claim to have been exposed to asbestos in the course
of performing services at various facilities, including the Century of West
Virginia facility. The cases are typically resolved based upon factual
determinations as to the facilities at which the plaintiffs worked, the periods
of time during which work was performed, the type of work performed and the
conditions in which work was performed. In Century of West Virginia's case, if
the plaintiffs' work was performed during the period when Kaiser owned the
Century of West Virginia facility, Kaiser has retained responsibility, pursuant
to the terms of the Kaiser Purchase Agreement. In a typical case or consolidated
group of cases, Century of West Virginia turns the complaint over to Kaiser with
a demand for defense and indemnity. Kaiser assumes the defense and liability,
subject to a reservation of rights against Century of West Virginia in the event
that a plaintiff is shown to have worked at the Century of West Virginia
facility after the time Century of West Virginia purchased the facility from
Kaiser. The Company believes it is unlikely that existing or potential
plaintiffs were exposed to asbestos at the Century of West Virginia facility
after Century of West Virginia purchased the facility from Kaiser, although
eight plaintiffs have claimed they were exposed
9
<PAGE> 12
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
during this period of time. Claims with six of these eight plaintiffs have been
settled for nominal amounts. Therefore, while the impact of the asbestos
proceedings is impossible to predict, the Company believes it has meritorious
defenses to the actions and that the ultimate resolution will not have a
material adverse effect on the Company's financial condition, results of
operation or liquidity.
On November 17, 1996, a suit was brought in the United States District Court for
the Southern District of West Virginia against Century of West Virginia and
Kaiser purportedly on behalf of a proposed class believed to consist of
approximately 150 salaried employees and retirees of Century of West Virginia.
Plaintiffs claim that in 1989 defendants misrepresented the terms of the
salaried employee pension plan and/or benefits. The proposed class has not yet
been certified and damages have not been specified. Century of West Virginia has
denied liability and will defend the matter vigorously. While it is impossible
to predict the outcome of this litigation, the Company believes the outcome will
not have a material adverse effect on its financial condition or liquidity,
although it is possible that an adverse outcome could materially affect its
results of operations in a given period.
The Company has pending against it or may be subject to various other lawsuits,
claims and proceedings related primarily to employment, commercial,
environmental and safety and health matters. Although it is not presently
possible to determine the outcome of these matters, management believes their
ultimate disposition will not have a material adverse effect on the Company's
financial condition, results of operations or liquidity.
Commitments
Century of West Virginia and a public utility have signed a power supply
agreement, covering the period from July 1, 1996 through July 31, 2003. This
agreement replaces a power supply agreement with the same utility that was due
to expire in 1998. Billings under the old agreement were computed using a
formula based principally upon the utility's operating costs. Such billings were
decreased if the London Metals Exchange ("LME") primary ingot price was less
than certain specified levels, and increased, limited to the extent of
cumulative net decreases, if the LME primary ingot price was greater than
certain specified levels. Under the new agreement, Century of West Virginia will
pay a fixed price for electricity used. However, for the period from July 1,
1996 through July 31, 1998, if the LME primary ingot price were to exceed
certain specified levels, the price for electricity used would increase, to the
extent of cumulative net price decreases under the previous contract with the
same utility. The Public Utilities Commission of Ohio has approved the
agreement.
The Company's wholly-owned subsidiary, Berkeley Aluminum, Inc., has consented to
ASC entering into a new power agreement on behalf of the owners of the Mt. Holly
facility with the South Carolina Public Service Authority ("the Authority"). The
terms of that contract obligate
10
<PAGE> 13
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
the Mt. Holly owners to purchase power from the Authority through December 31,
2005. Pursuant to a separate agreement among the owners, ASC is to "guarantee"
pricing to Berkeley based upon a schedule, but subject to adjustment based upon
demand and energy charges imposed by the Authority or sales credits given by the
Authority. The new agreement with the Authority supersedes an agreement which
would have expired on March 31, 2000, and it provides a material reduction in
power costs as compared to the costs under the previous agreement.
On January 23, 1996 the Company and the Pension Benefit Guaranty Corporation
("PBGC") entered into an agreement (the "PBGC Agreement") which provided that
the Company make additional cash contributions to its pension plan for hourly
employees in the years 1996 through 1999. To date, the Company has made all
required contributions. The Company estimates that the contributions in 1997,
1998 and 1999 will be approximately $6,000, $7,000 and $7,000, respectively,
above the minimum required contributions under Section 412 of the Code for such
years. The Company has granted the PBGC a first priority security interest in
(i) the property, plant and equipment at Century of West Virginia's facility and
(ii) all of the outstanding shares of Berkeley. In addition, Century must grant
the PBGC a first priority security interest in the first $50,000 of the
property, plant and equipment of any business or businesses that the Company
acquires after the consummation of the offering. The Company, in its discretion,
may, however, substitute Berkeley's undivided interest in the Mt. Holly Facility
in lieu of any such after-acquired property, plant and equipment as well as the
shares of Berkeley.
The Company has provided a $27,500 letter of credit to ensure its performance
under the Owners Agreement governing the Mt. Holly facility. The Company's
obligation to maintain the letter of credit will terminate at such time as the
Company achieves certain financial measurements.
On July 1, 1997, Century announced a new operating plan that will affect its
Century of West Virginia operations. The plan features a continuation of the
shift to the production of high-value rolled aluminum products, a 20 percent
reduction in the production of certain low margin rolled aluminum products, a
streamlining of the rolled products organization to attain higher levels of
operating efficiency, and a voluntary early retirement program. Incentives will
be offered such as supplemental payments and medical and life insurance coverage
to bridge the period to normal retirement age. Costs associated with the
voluntary retirement incentives, training and other related activities are
expected to total between $4,000 and $5,000.
The Company will begin implementation of the new operating plan in the fourth
quarter of 1997 and expects to complete implementation of the plan by the end of
1998.
11
<PAGE> 14
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
6. Fixed-Price Commitments and Forward Contracts
The Company had fixed price commitments to sell 298.4 million pounds and 192.8
million pounds of primary and scrap aluminum and aluminum sheet and plate
products at June 30, 1997 and June 30, 1996, respectively. Forward purchase
contracts for approximately 7.7 million pounds and 49.9 million pounds of
primary aluminum at June 30, 1997 and June 30, 1996, respectively, did not
qualify for hedge accounting treatment because the Company's aggregate metals
position exceeded its fixed-price sales commitments at such dates. Cost of goods
sold includes either a net credit or a net charge relating to the unrealized
gains or losses on these contracts that did not satisfy the technical
requirements for hedge accounting, realized gains or losses from the cash
settlement of forward contracts, unrealized losses on purchase and sales
commitments, and reversals of prior period unrealized losses; the Company
recorded credits of $506 and charges of $1,599 for the six months ended June 30,
1997 and June 30, 1996, respectively.
During 1996, the Company entered into forward sales contracts with the Glencore
Group for 116 million pounds of primary aluminum to hedge 1997 and 1998
production. Accounting standards require such contracts be marked to market. As
of December 31, 1996, the Company deferred unrealized losses of $7,699 on such
contracts. At June 30, 1997, the Company had forward sales contracts with the
Glencore Group for 163.2 million pounds of primary aluminum to hedge 1997, 1998
and 1999 production. As of June 30, 1997, the Company deferred unrealized losses
of $12,055 on such contracts.
As of June 30, 1997, the Glencore Group had forward option contracts to purchase
30 million pounds of primary aluminum from the Company during the second half of
1997.
The Company entered into a long-term supply agreement for 936 million pounds of
alumina annually, beginning January 1, 1996. The Company will pay a fixed price
for alumina with fixed annual price increases of approximately 2.5% through
2001. Pricing for the years 2002 through 2006 will be subject to agreement
between the parties.
7. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Six Months Ended
Cash paid for: June 30,
--------
1997 1996
---- ----
<S> <C> <C>
Interest ................ $2,164 $469
Income taxes ............ 5,598 17,216
</TABLE>
12
<PAGE> 15
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contd.)
Non-Cash Investing Activities
Effective March 28, 1996 the Company made a non-cash special distribution of
certain holdings of the Company in the form of a pro rata redemption of shares.
The distribution consisted of businesses unrelated to the continuing operations
of the Company. The Company redeemed and retired 3,120,000 shares of stock and
distributed assets with a book value of $72,534.
8. New Accounting Standards
SFAS No. 128, "Accounting for Earnings per Share" is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
This standard, among other things, specifies the computation, presentation and
disclosure requirements for earnings per share for entities with publicly held
common stock or potential common stock. Based upon current facts and
circumstances, adoption of this standard will not have a material effect upon
the Company's resultant earnings per share.
13
<PAGE> 16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company is an integrated manufacturer of primary aluminum and a broad range
of value-added and specialized flat-rolled sheet and plate aluminum products.
The aluminum industry is highly cyclical and the market price of aluminum (which
trades as a commodity) has been volatile from time to time. In turn, prices of
flat-rolled sheet and plate aluminum products have reflected this volatility as
well as fluctuations attributable to general and industry-specific economic
conditions. However, there is less price volatility in the higher value-added
products such as plate. The principal elements comprising the Company's cost of
goods sold are raw materials, energy and labor. The major raw materials and
energy sources used by the Company in its production process are alumina,
aluminum scrap, coal tar, pitch, petroleum coke, aluminum fluoride and
electricity.
Demand in the United States remained relatively flat in the first half of 1997,
relative to the first half of 1996, with strong demand in the automotive sector
and improving demand in the aerospace and construction sectors. Drawdowns of
primary inventory occurred in the first half of 1997, but liquidations by
commodity fund investors put pressure on prices. The cash price for primary
aluminum on the London Metals Exchange averaged $1,584, $1,596 and $1,422 per
tonne for the three months ended June 30, 1997, March 31, 1997 and December 31,
1996, respectively.
Results of Operations
The following table sets forth, for the three and six months ended June 30, 1997
and 1996, the percentage relationship to net sales of certain items included in
the Company's consolidated statements of operations.
Percentage of net sales
Three months ended Six months ended
June 30 June 30
------- -------
1997 1996 1997 1996
----- ----- ----- -----
Net sales ............................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ...................... 94.2% 91.1% 95.0% 90.7%
----- ----- ----- -----
Gross profit ........................ 5.8% 8.9% 5.0% 9.3%
Selling, general and administrative
expenses .............................. 2.9% 2.5% 2.6% 2.1%
----- ----- ----- -----
Operating income .................... 2.9% 6.4% 2.4% 7.2%
Interest and other expense .............. 0.6% 0.2% 0.5% 0.1%
----- ----- ----- -----
Income from continuing operations before
income taxes ....................... 2.3% 6.2% 1.9% 7.1%
Income tax expense ...................... 0.8% 2.4% 0.7% 2.7%
----- ----- ----- -----
Income from continuing operations ....... 1.5% 3.8% 1.2% 4.4%
===== ===== ===== =====
14
<PAGE> 17
The following table sets forth, for the periods indicated, the pounds and the
average sales price per pound for certain of the Company's products (pounds in
thousands):
<TABLE>
<CAPTION>
Flat-Rolled Sheet and Plate Products Primary Aluminum
Direct (1) Toll Direct (1)
---------------------------------------- ------------------
1997 Pounds $/Pound Pounds $/Pound Pounds $/Pound
------- ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 138,916 $1.10 12,017 $0.32 47,666 $0.74
2nd Quarter 134,411 $1.14 13,130 $0.29 46,059 $0.76
------- ------- ------ ------- ------ -------
Total 273,327 $1.12 25,147 $0.31 93,725 $0.75
======= ======= ====== ======= ====== =======
<CAPTION>
1996 Pounds $/Pound Pounds $/Pound Pounds $/Pound
------- ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 115,708 $1.17 20,936 $0.32 46,774 $0.79
2nd Quarter 113,333 $1.15 34,887 $0.29 31,349 $0.80
------- ------- ------ ------- ------ -------
Total 229,041 $1.16 55,823 $0.30 78,123 $0.79
======= ======= ====== ======= ====== =======
</TABLE>
(1) Does not include forward sales contracts without physical
delivery.
Net Sales. Net sales in the three and six months ended June 30, 1997 were $191.5
million and $383.0 million, respectively, an increase of $25.5 million and $35.6
million from comparable 1996 periods. Shipments of flat-rolled sheet and plate
products in the three and six months ended June 30, 1997 were 147.5 million and
298.5 million pounds, respectively. Second quarter shipments were down 0.5% from
the second quarter 1996 totals, while year-to-date shipments were up 4.8% from
the comparable 1996 period. A shift from tolling of flat-rolled sheet and plate
products to direct sales of flat-rolled sheet and plate products increased
revenue for the three and six months ended June 30, 1997 by $12.2 million and
$19.5 million over revenue during comparable periods in 1996. Other shifts in
the volume of flat-rolled sheet and plate products sold increased revenue for
the three and six months ended June 30, 1997 by $5.8 million and $22.7 million,
respectively. Average realized prices from flat-rolled sheet and plate product
sales in the second quarter of 1997 improved considerably over first quarter
1997 prices, but for the first six months of 1997 were below 1996 price levels.
This caused revenues to be lower in the three and six months ended June 30, 1997
by $2.2 million and $12.5 million, respectively.
Shipments of primary aluminum in the three and six months ended June 30, 1997
were 46.1 million pounds and 93.7 million pounds, respectively, up 46.9% and
20.0% from comparable 1996 periods. The increased volume of primary product
shipments in the three and six months ended June 30, 1997 increased revenue by
$10.9 million and $11.7 million, respectively over revenue during comparable
periods in 1996. Lower realized prices for primary product sales in both the
three and six months ended June 30, 1997 decreased revenue by $1.0 million and
$3.2 million, respectively, from comparable periods in 1996.
Gross Profit. Gross profit for the three and six months ended June 30, 1997 was
$11.1 million and $19.0 million, respectively, down $3.7 million and $13.2
million from comparable 1996 periods. Lower realized prices on both flat-rolled
sheet and plate products and primary products,
15
<PAGE> 18
along with operating difficulties experienced as a result of maintaining high
operating rates, caused gross profit to decline during the six months ended June
30, 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses during the three and six months ended June 30, 1997
increased $1.4 million and $2.6 million from the comparable 1996 periods
primarily due to legal costs and the administrative costs Century experienced as
a public company.
Interest Expense. Interest expense during the three and six months ended June
30, 1997 increased $0.6 million and $1.5 million from comparable periods in 1996
due to the amounts borrowed under the Facility. During the first quarter of
1996, none of the amounts available under the Facility were outstanding.
Liquidity and Capital Resources
Working capital at June 30, 1997 and 1996 was $183.0 million and $189.4 million,
respectively. The Company's liquidity requirements arise from working capital
needs, capital investments, and debt service.
The Company's statements of cash flows for the periods indicated are summarized
below (dollars in thousands):
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
--------
1997 1996
---- ----
<S> <C> <C>
Net cash used in operating activities ...... $ (4,919) $(18,471)
Net cash used in investing activities ...... (10,993) (55,435)
Net cash from financing activities ......... 19,976 31,142
-------- --------
Increase (decrease) in cash ................ $ 4,064 $(42,764)
======== ========
</TABLE>
Net cash used in operating activities was $4.9 million during the first of 1997
compared to net cash of $18.5 million used in operations during the first of
1996. Increased sales and a shift in sales away from affiliates to third parties
in 1997 have resulted in the growth in accounts receivable by $30.9 million
since December 31, 1996. During the six months ended June 30, 1996, the Company
made additional cash contributions of $20.0 million to its pension plan for
hourly employees, as discussed below.
Capital expenditures were $11.0 million and $6.4 million for the six months
ended June 30, 1997 and 1996, respectively. The Company used these expenditures
to purchase, modernize or upgrade production equipment, maintain facilities and
comply with environmental regulations. In the first quarter of 1996, the Company
purchased $50.0 million of its accounts receivable concurrent with the
refinancing of the Company's credit facilities as discussed below.
16
<PAGE> 19
On January 30, 1996, Century of West Virginia, Berkeley and Bank America
Business Credit, Inc. ("Bank of America") entered into an agreement, as amended
through July 18, 1997, pursuant to which Bank of America is providing Century of
West Virginia and Berkeley a three-year, $150 million Bank Revolving Credit
Facility ("Facility"). The interest rate is, at the Company's election, (i) the
Bank of America base rate plus .75% or (ii) the one-, two-, three- or six-month
LIBOR plus 2.00%. The interest rate margins of .75% and 2.00% may remain
constant, or may be increased by up to .50%, depending upon the results of
certain financial ratios. Borrowings of $46.3 million as of June 30, 1997 under
the Facility are collateralized by all of Century of West Virginia's and
Berkeley's inventory and receivables and are guaranteed by the Company.
Under the terms of the Facility, as amended, the Company is required to meet
certain financial covenants. Based on its current financial condition and
internal forecasts through the end of 1997, the Company believes that it will be
in compliance with all covenants.
Pursuant to an agreement with the Pension Benefit Guaranty Corporation ("the
PBGC Agreement") the Company made additional cash contributions of $20.0 million
to its pension plan for hourly employees in 1996. The PBGC Agreement also
provides for scheduled contributions to be made to the Company's pension plan
for hourly employees with respect to 1996, 1997, 1998 and 1999. The Company
estimates that these contributions will be approximately $6.0 million, $7.0
million and $7.0 million, respectively, above the minimum required contributions
under Section 412 of the Code for such years.
The Company believes that cash flow from operations and funds available under
the Facility will be sufficient to fund its working capital requirements,
capital expenditures and debt service requirements in the near term and for the
foreseeable future.
Metals Risk Management
The Company produces primary aluminum products and manufactures aluminum sheet
and plate products and manages the risks of each accordingly. With respect to
its primary aluminum products, the Company attempts to assure itself a fixed
margin over its primary aluminum production costs through the use of forward
sales contracts. With respect to its aluminum sheet and plate sales, the Company
attempts to assure itself a fixed margin over its aluminum raw material costs
through the use of forward purchase contracts.
The Company had fixed-price commitments to sell 298.4 million pounds and 192.8
million pounds of primary and scrap aluminum and aluminum sheet and plate
products at June 30, 1997 and June 30, 1996, respectively. Forward purchase
contracts for approximately 7.7 million pounds and 49.9 million pounds of
primary aluminum at June 30, 1997 and June 30, 1996, respectively, did not
qualify for hedge accounting treatment because the Company's aggregate metals
position exceeded it fixed-price sales commitments at such dates. Cost of goods
sold includes either a net credit or a net charge relating to the unrealized
gains on these contacts that did not satisfy the technical requirements for
hedge accounting, realized gains or losses from the cash settlement of certain
other forward contracts, unrealized losses on purchase and sales commitments,
and
17
<PAGE> 20
reversals of prior period unrealized losses; the Company recorded credits of
$0.5 million and charges of $1.6 million for the six months ended June 30, 1997
and June 30, 1996, respectively.
During 1996, the Company entered into forward sales contracts with the Glencore
Group for 116 million pounds of primary aluminum to hedge 1997 and 1998
production. Accounting standards require such contracts be marked to market. As
of December 31, 1996, the Company deferred unrealized losses of $7.7 million on
such contracts. At June 30, 1997, the Company had forward sales contracts with
the Glencore Group for 163.2 million pounds of primary aluminum to hedge 1997,
1998 and 1999 production. As of June 30, 1997, the Company deferred unrealized
losses of $12.1 million on such contracts.
As of June 30, 1997, the Glencore Group had forward option contracts to purchase
30 million pounds of primary aluminum from the Company during the second half of
1997.
Environmental Expenditures and Other Contingencies
It is the Company's policy to accrue for costs associated with environmental
assessments and remedial efforts when it becomes probable that a liability has
been incurred and the cost can be reasonably estimated. The aggregate
environmental related accrued liabilities were $800 at June 30, 1997 and
December 31, 1996. The Company has incurred and, in the future, will continue to
incur capital expenditures and operating expenses for matters relating to
environmental control, remediation, monitoring and compliance. The Company
believes that compliance with current environmental laws and regulations is not
likely to have a material adverse effect on the Company's financial condition,
results of operations or liquidity; however, environmental laws and regulations
have changed rapidly in recent years and the Company may become subject to more
stringent environmental laws and regulations in the future. In addition, the
Company may be required to conduct remediation activities in the future pursuant
to various orders issued by the EPA and DEP. There can be no assurance that
compliance with more stringent environmental laws and regulations that may be
enacted in the future, or future remediation costs, would not have a material
adverse effect on the Company's financial condition, results of operations or
liquidity.
On July 1, 1997, Century announced a new operating plan that will affect its
Century of West Virginia operations. The plan features a continuation of the
shift to the production of high-value rolled aluminum products, a 20 percent
reduction in the production of certain low margin rolled aluminum products, a
streamlining of the rolled products organization to attain higher levels of
operating efficiency, and a voluntary early retirement program. Incentives will
be offered such as supplemental payments and medical and life insurance coverage
to bridge the period to normal retirement age. Costs associated with the
voluntary retirement incentives, training and other related activities are
expected to total between $4.0 and $5.0 million.
The Company will begin implementation of the new operating plan in the fourth
quarter of 1997 and expects to complete implementation of the plan by the end of
1998.
18
<PAGE> 21
The Company is a defendant in several actions relating to various aspects of its
business. While it is impossible to predict the ultimate disposition of any
litigation, the Company does not believe that any of these lawsuits, either
individually or in the aggregate, will have a material adverse effect on the
Company's financial condition or liquidity, although it is possible that an
adverse outcome in the lawsuit by a proposed class of salaried employees and
retirees of Century of West Virginia could materially affect the results of
operations in a given period. See Note 5 to Consolidated Financial Statements:
Contingencies and Commitments.
19
<PAGE> 22
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 4. Vote of Security Holders
At its Annual Meeting on May 13, 1997, the stockholders of the Company
took the following actions:
(a) Elected the following two directors to serve for a term of three
years expiring at the Annual Meeting of Stockholders to be held in
2000, with votes as indicated opposite each director's name:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Roman A. Brinski 17,537,997 221,900
Willy R. Strothotte 17,537,665 222,232
</TABLE>
(b) Approved the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year
ending December 31, 1997. The vote was 17,758,263 for and 469
against the proposal, with 1,165 abstentions and no broker nonvotes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11.1 - Statement Re: Calculation of Earnings per Common Share
Exhibit 99.1 - Century Aluminum Company Press Release, dated July 1, 1997
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
June 30, 1997.
20
<PAGE> 23
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.
Century Aluminum Company
Date: August 14, 1997 By: /s/Craig A. Davis
------------------- ------------------------
Craig A. Davis
Chairman/Chief Executive Officer
Date: August 14, 1997 By: /s/David W. Beckley
------------------- ------------------------
David W. Beckley
Executive Vice-President/Chief Financial Officer
21
<PAGE> 24
Exhibit Index
Exhibit Page
Number Description Number
- ------ ----------- ------
11.1 Calculation of Earnings per Common Share and
Common Share Equivalent ..................................... 23
99.1 Century Aluminum Company Press Release, dated
July 1, 1997 ................................................ 24-25
22
<PAGE> 1
EXHIBIT 11.1
CENTURY ALUMINUM COMPANY
STATEMENT RE: CALCULATION OF EARNINGS PER COMMON SHARE AND
COMMON SHARE EQUIVALENT
(in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary:
Net income $ 2,783 $ 6,390 $ 4,509 $15,569
Weighted average common shares and common
share equivalents outstanding 20,233 20,082 20,228 21,601
------- ------- ------- -------
Earnings per common share and common
share equivalent $ 0.14 $ 0.32 $ 0.22 $ 0.72
======= ======= ======= =======
Fully Diluted:
Net income $ 2,783 $ 6,390 $ 4,509 $15,569
Weighted average common shares and common
share equivalents outstanding 20,233 20,103 20,228 21,612
------- ------- ------- -------
Earnings per common share and common
share equivalent $ 0.14 $ 0.32 $ 0.22 $ 0.72
======= ======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 99.1
Century Sets New Operating Plan For Ravenswood Unit
Ravenswood, WV, July 1, 1997 - Century Aluminum Company (NASDAQ: CENX) has
announced a new operating plan to improve the financial performance of its
Ravenswood Operations in West Virginia.
The plan features:
o A continuation of the shift to the production of high-value rolled
aluminum products that take advantage of Ravenswood's unique equipment
capabilities;
o A 20 percent curtailment in the production of sheet products to reduce
participation in low-margin markets;
o A resulting 10 percent reduction in employment levels that the company
believes can be achieved through early retirement incentives;
o A streamlining of the Rolled Products organization to attain higher
levels of operating efficiency.
Announcing the plan, Gerald A. Meyers, president and chief operating
officer, said:
"This plan combines the product strategy we have been following for the
past five years with a fundamental change in our operating strategy for the
plant.
"Unchanged is our move to the production of more premium products for
which we have special technical or equipment capabilities. Changed, however, is
an operating strategy built around the traditional view that aluminum rolling
mills must always be operated at the limits of their capacity.
"The Ravenswood mills are operating at the outer limits of their capacity.
The curtailment we are announcing will accelerate our on-going withdrawal from
low-margin markets. More importantly, it enables us to devote more energy to
attaining higher levels of quality, delivery performance, and customer
satisfaction."
The centerpiece of the plan to raise the output of premium products is a
$28-million plate-expansion project announced late last year. The project,
already underway, is adding more than 25-million pounds of plate-making capacity
at the plant - doubling current output. The new capacity will come on stream in
phases beginning in the third quarter of 1998.
The cutailment in sheet production will reduce overall volume 20 percent,
or about 55,000 metric tons a year, and be focused on low-margin, commodity
products. The reduction will begin in the fourth quarter of 1997 and be
completed by the end of 1998.
24
<PAGE> 2
To bring staffing levels in line with the lower production rates, Century
is offering early retirement incentives to employees who meet certain age and
service requirements. The incentives are expected to reduce employment by 170
hourly-paid positions and 30 salaried positions, and eliminate need for layoffs.
Costs associated with the incentives, training and other related activities are
expected to total between $4 million and $5 million.
Ravenswood Operations has 2,200 employees. It includes a reduction plant
with capacity to produce 168,000-metric tons per year (mtpy) of primary
aluminum, and mills with a capacity to roll more than 270,000 mtpy of aluminum
sheet and plate products. Century also holds a 26.7 percent share in a
200,000-mtpy aluminum reduction plant at Mt. Holly, SC. Century had revenues of
$689 million in 1996 and is based in Montery, CA.
Editorial contact: A. T. Posti 408/642-9300
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Century
Aluminum Company Consolidated Financial Statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,176
<SECURITIES> 0
<RECEIVABLES> 120,167
<ALLOWANCES> 0
<INVENTORY> 162,313
<CURRENT-ASSETS> 312,102
<PP&E> 177,823
<DEPRECIATION> 0
<TOTAL-ASSETS> 503,554
<CURRENT-LIABILITIES> 129,070
<BONDS> 0
0
0
<COMMON> 200
<OTHER-SE> 161,953
<TOTAL-LIABILITY-AND-EQUITY> 503,554
<SALES> 383,008
<TOTAL-REVENUES> 383,008
<CGS> 363,974
<TOTAL-COSTS> 363,974
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,694
<INCOME-PRETAX> 7,097
<INCOME-TAX> 2,588
<INCOME-CONTINUING> 4,509
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,509
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
