<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, 1999.
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
BUILDING A, SUITE 200
MONTEREY, CALIFORNIA 93940
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (831) 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 20,202,205 shares of common stock outstanding at
July 31, 1999.
<PAGE> 2
CENTURY ALUMINUM COMPANY
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
Part I - Financial Information
<TABLE>
<CAPTION>
Item 1 - Financial Statements Page Number
<S> <C>
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998.......................................................... 1
Consolidated Statements of Operations for the three months
and six months ended June 30, 1999 and 1998.................................... 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998................................................... 3
Notes to the Consolidated Financial Statements................................. 4-11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................. 12-19
Item 3 - Quantitative and Qualitative Disclosures About Market Risk....................... 20-21
Part II - Other Information
Item 1 - Legal Proceedings................................................................ 22
Item 4 - Submission of Matters to a Vote of Stockholders.................................. 22
Item 6 - Exhibits and Reports on Form 8-K................................................. 22
Signatures................................................................................ 23
Exhibit Index............................................................................. 24
</TABLE>
<PAGE> 3
CENTURY ALUMINUM COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ..................................................................... $ 627 $ 12
Restricted cash equivalents .............................................. 5,817 5,814
Accounts receivable, trade - net ......................................... 87,624 74,948
Due from affiliates ...................................................... 7,818 16,036
Inventories .............................................................. 182,875 197,705
Prepaid and other assets ................................................. 9,620 9,006
-------- --------
Total current assets ................................................ 294,381 303,521
PROPERTY, PLANT AND EQUIPMENT - NET ........................................... 228,784 227,320
OTHER ASSETS .................................................................. 18,261 14,789
-------- --------
TOTAL ............................................................... $541,426 $545,630
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade .................................................. $ 37,916 $ 37,450
Due to affiliates ........................................................ 13,711 15,146
Accrued and other current liabilities .................................... 31,755 36,733
Accrued employee benefits costs - current portion ........................ 15,565 26,036
-------- --------
Total current liabilities ........................................... 98,947 115,365
-------- --------
REVOLVING TERM LOAN ........................................................... 112,000 89,389
ACCRUED PENSION BENEFITS COSTS - Less current portion ......................... 10,496 9,792
ACCRUED POSTRETIREMENT BENEFITS COSTS - Less current portion .................. 129,015 129,318
OTHER LIABILITIES ............................................................. 20,981 24,283
-------- --------
Total noncurrent liabilities ........................................ 272,492 252,782
-------- --------
SHAREHOLDERS' EQUITY:
Common Stock (one cent par value, 50,000,000 shares authorized; 20,202,205
shares outstanding at June 30, 1999 and 20,000,000 at December 31, 1998) 202 200
Additional paid-in capital ............................................... 164,406 161,953
Retained earnings ........................................................ 5,379 15,330
-------- --------
Total shareholders' equity .......................................... 169,987 177,483
-------- --------
TOTAL ............................................................... $541,426 $545,630
======== ========
</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,
------------------------------- -------------------------------
1999 1998 1999 1998
------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES:
Third-party customers ......... $ 145,893 $ 139,070 $ 294,623 $ 292,427
Related parties ............... 23,113 17,692 37,742 40,725
--------- --------- --------- ---------
169,006 156,762 332,365 333,152
COST OF GOODS SOLD ................ 169,833 144,936 331,633 307,814
--------- --------- --------- ---------
GROSS PROFIT (LOSS) ................ (827) 11,826 732 25,338
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES........ 4,329 4,338 8,601 8,795
--------- --------- --------- ---------
OPERATING INCOME (LOSS) ............ (5,156) 7,488 (7,869) 16,543
INTEREST EXPENSE - Net ............. (2,022) (454) (3,552) (1,142)
NET GAIN (LOSS) ON FORWARD CONTRACTS (2,451) 5,497 (2,501) 6,524
OTHER INCOME (EXPENSE) ............. (651) 140 (669) (147)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES .. (10,280) 12,671 (14,591) 21,778
INCOME TAX (EXPENSE) BENEFIT ....... 5,200 (4,561) 6,752 (7,840)
--------- --------- --------- ---------
NET INCOME (LOSS) .................. $ (5,080) $ 8,110 $ (7,839) $ 13,938
========= ========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE
Basic ......................... $ (0.25) $ 0.41 $ (0.39) $ 0.70
========= ========= ========= =========
Diluted ....................... $ (0.25) $ 0.40 $ (0.39) $ 0.69
========= ========= ========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic......................... 20,202 20,000 20,202 20,000
========= ========= ========= =========
Diluted ....................... 20,333 20,275 20,323 20,267
========= ========= ========= =========
DIVIDENDS PER COMMON SHARE ......... $ 0.05 $ 0.05 $ 0.10 $ 0.10
========= ========= ========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE> 5
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1999 1998
--------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................. $ (7,839) $ 13,938
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization ........................... 11,255 9,780
Deferred income taxes ................................... (125) --
Pension and other postretirement benefits ............... (8,605) (5,530)
Change in operating assets and liabilities:
Accounts receivable, trade - net ................... (12,676) 28,914
Due from affiliates ................................ 8,218 (4,081)
Inventories ........................................ 15,307 (4,766)
Prepaids and other assets .......................... (961) (684)
Accounts payable, trade ............................ 466 (15,974)
Due to affiliates .................................. (1,435) (10,197)
Accrued and other current liabilities .............. (5,066) 10,402
Other - net ........................................ (2,344) 293
--------- ---------
Net cash provided by (used in) operating activities ..... (3,805) 22,095
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ..................... (16,372) (19,154)
Purchase price adjustment related to business acquisitions .... 296 --
Restricted cash deposits ...................................... (3) (4)
--------- ---------
Net cash used in investing activities ................... (16,079) (19,158)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings .................................................... 206,298 115,104
Repayment of borrowings ....................................... (183,687) (113,631)
Dividends ..................................................... (2,112) (2,000)
--------- ---------
Net cash provided by (used in) financing activities ..... 20,499 (527)
--------- ---------
NET INCREASE IN CASH .................................................. 615 2,410
CASH, BEGINNING OF PERIOD ............................................. 12 42
--------- ---------
CASH, END OF PERIOD ................................................... $ 627 $ 2,452
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 6
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
(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"), which operates a primary aluminum reduction facility and an
aluminum fabrication facility near 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 ("MHAC") and a 26.67%
undivided interest in the property, plant and equipment comprising MHAC. Century
Aluminum Company's other subsidiary is Century Cast Plate, Inc. ("Century Cast
Plate") which operates a cast aluminum plate business located in Vernon,
California. This business operates as a wholly-owned subsidiary of Century. See
Note 8 to Consolidated Financial Statements.
Glencore AG and Vialco Holdings Ltd., which are wholly-owned subsidiaries
of Glencore International AG (together with its subsidiaries, the "Glencore
Group") own 7,925,000 common shares, or 39.2% of the common shares outstanding
of the Company. Century and the Glencore Group enter into various transactions
such as the purchase and sale of primary aluminum, scrap aluminum, alumina 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, 1998. 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 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- ------------
<S> <C> <C>
Raw materials .............. $ 64,807 $ 81,474
Work-in-process ............ 68,322 71,045
Finished goods ............. 31,095 25,858
Operating and other supplies 18,651 19,328
-------- --------
$182,875 $197,705
======== ========
</TABLE>
At June 30, 1999 and December 31, 1998, approximately 87% and 90%,
respectively, of inventories were valued at the lower of last-in, first-out
("LIFO") cost or market. Cost of goods
4
<PAGE> 7
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
sold was increased by $3,842 for the six months ended June 30, 1999 for
inventory writedowns and LIFO adjustments. The excess of the LIFO cost (or
market, if lower) of inventory over the first-in, first-out ("FIFO") cost was
approximately $20,943 and $20,150 at June 30, 1999 and December 31, 1998,
respectively.
3. BANK REVOLVING CREDIT FACILITY
On February 24, 1999, the Company entered into an agreement with
BankBoston, N.A. and the CIT Group/Business Credit, Inc. ("Bank Agreement") to
provide up to $160,000 of revolving credit facilities to refinance indebtedness,
to finance certain capital expenditures and for other general corporate
purposes. The borrowing base for purposes of determining availability is based
upon certain eligible inventory and receivables. On March 31, 1999, the Company
closed on the revolving loan. The revolving loan is secured by Century of West
Virginia's, Berkeley's and Century Cast Plate's inventory and receivables. The
credit facilities have a variable interest rate and mature five years from the
closing date. Subject to certain limitations, the borrowers may select base rate
or LIBOR loans. The interest rate margins that the Company will pay are
dependent upon the Company's attainment of a defined coverage ratio. The
interest rate at June 30, 1999 was 7.3%. See Note 8 to Consolidated Financial
Statements.
4. 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 Environmental Protection Agency ("EPA") 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. The Company also 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 anticipates that the RFI will not be completed
before the end of 1999. 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.
5
<PAGE> 8
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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 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, 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 of soil and groundwater contamination at its
previously owned Virgin Islands Alumina Company ("Vialco") facility. The Company
believes that a substantial amount of the contamination originated from an
adjacent refinery owned by Hess Oil Virgin Islands, Inc. ("HOVIC"). The Company
further believes that the vast majority of any contamination that did not
originate from HOVIC was caused by releases on the property that predated
Vialco's ownership and will not be the legal responsibility of Vialco. Pursuant
to the Acquisition Agreement by which Vialco sold the premises to St. Croix
Alumina, L.L.C., a subsidiary of Alcoa Alumina and Chemicals L.L.S. ("St.
Croix"), Vialco retained liability for environmental conditions existing at the
time of the sale only to the extent such conditions arose from operation of the
facility by Vialco. In addition, indemnification arises only if the conditions
require remediation or give rise to claims under the laws in effect at the time
of sale. Finally, St. Croix may not request indemnity from Vialco until St.
Croix has spent $300 on such environmental conditions and Vialco's indemnity is
capped at $18,000. Management of the Company does not believe that 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 $1,374 at June 30, 1999
and December 31, 1998, respectively. 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 issues and uncertainties described above, and the Company's
inability to predict the requirements of future environmental laws, there can be
no 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. Based upon all
available information, management does not believe that the outcome of these
6
<PAGE> 9
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
environmental matters will have a material adverse effect on the Company's
financial condition, results of operations or liquidity.
Legal Contingencies
Century of West Virginia is a named defendant (along with other companies)
in approximately 2,247 civil actions brought by individuals seeking to recover
compensatory and/or punitive damages in connection with alleged asbestos-related
diseases. All 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. 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, for defense and
indemnity. If 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, Kaiser assumes the defense and liability, subject to a reservation
of rights against Century of West Virginia. 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. There are currently 10 actions pending by individuals who claim
exposure after Century of West Virginia's assumption of the premises. Those
matters have been settled for nominal amounts, pending completion of settlement
papers. While the impact of the asbestos proceedings is impossible to predict,
the Company believes that the ultimate resolution will not have a material
adverse effect on the Company's financial condition, results of operations or
liquidity.
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
The Company and a public utility have a fixed price power supply agreement,
covering the period from July 1, 1996 through July 31, 2003.
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 scheduled cash contributions to its pension plan
for hourly employees in 1996, 1997, 1998 and 1999. The Company made its
scheduled contributions for 1996, 1997 and 1998 and estimates that its scheduled
contribution in the remaining year will be $7,000 above the minimum required
7
<PAGE> 10
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
contribution under Section 412 of the Internal Revenue Code. The Company has
granted the PBGC a first priority security interest in (i) the property, plant
and equipment at its Century of West Virginia 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. The Company,
at 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.
5. FIXED-PRICE COMMITMENTS AND FORWARD CONTRACTS
The Company produces primary aluminum products and manufactures aluminum
sheet and plate products and manages the risks of each accordingly through the
issuance of fixed-price commitments and financial instruments.
The Company had fixed price commitments to sell 535.8 million pounds and
543.9 million pounds of primary, scrap aluminum and sheet and plate products at
June 30, 1999 and December 31, 1998, respectively. Of the total fixed-price
sales commitments, 57.9 million pounds and 34.6 million pounds at June 30, 1999
and December 31, 1998, respectively, were with the Glencore Group. In addition,
the Company had fixed price commitments to purchase 144.0 million pounds and
190.8 million pounds of aluminum and alloy raw materials at June 30, 1999 and
December 31, 1998, respectively. Of the total fixed-price purchase commitments,
121.3 million pounds and 162.1 million pounds at June 30, 1999 and December 31,
1998, respectively, were with the Glencore Group.
In order to manage the Company's exposure to fluctuating commodity prices,
the Company enters into forward sales and purchase contracts for primary
aluminum that will be settled in cash. At June 30, 1999 and December 31, 1998,
the Company had forward sales contracts, primarily with the Glencore Group, for
43.7 and 65.6 million pounds, respectively. At June 30, 1999 and December 31,
1998, the Company had forward purchase contracts, primarily with the Glencore
Group, for 15.3 million and 18.0 million pounds, respectively. Forward purchase
and sales contracts at June 30, 1999 are scheduled for settlement at various
dates in 1999. Based on market prices at June 30, 1999, these contracts could be
settled by the Company paying approximately $171. The actual settlement will be
based on market prices on the respective settlement dates.
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 annual price increases of approximately 2.5%
through 2001. Pricing for the years 2002 through 2006 will be subject to
agreement between the parties.
8
<PAGE> 11
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
6. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------------
1999 1998
-------------- ------------
<S> <C> <C>
Cash paid for:
Interest.................................................... $ 4,167 $ 2,972
Income taxes................................................ 1,979 7,279
Cash received from income tax refunds............................ 149 5,560
</TABLE>
7. BUSINESS SEGMENTS
The Company's two reportable business segments are primary aluminum and
sheet and plate products. The primary aluminum segment produces rolling ingot,
t-ingot, extrusion billet and foundry ingot for internal use and sales to
customers. The sheet and plate segment produces a wide range of products such
as: brazing sheet for sale to automobile manufacturers, heat treated and
non-heat treated plate for sale to aerospace and defense manufacturers, heavy
gauge, wide-leveled coil for sale to heavy truck, truck trailer, marine and rail
car manufacturers and sheet and coil for sale to building products
manufacturers.
The accounting policies of the segments are the same as those described in
the Company's December 31, 1998, Form 10-K, except that intersegment revenues
are accounted for based upon a market-based standard established by the Company.
The Company evaluates segment performance based upon gross profit.
9
<PAGE> 12
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Century's business segments are strategic business units that manufacture
and sell different products. The two business segments are managed separately
and require different technology, manufacturing processes and sales and
marketing strategies. Information regarding the Company's business segments is
summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED, SIX MONTHS ENDED,
JUNE 30, JUNE 30,
----------------------------------- ------------------------------------
1999 1998 1999 1998
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Primary Aluminum
Net sales
Third-party customers $ 12,675 $ 9,176 $ 26,018 $ 19,180
Related party customers 23,113 17,692 37,742 40,725
Intersegment 46,406 61,646 95,238 121,076
--------- --------- --------- ---------
Total net sales $ 82,194 $ 88,514 $ 158,998 $ 180,981
Segment gross profit (loss) (1) $ (6,066) $ 9,643 $ (10,223) $ 20,446
Sheet and Plate Aluminum
Net Sales
Third-party customers $ 133,218 $ 129,894 $ 268,605 $ 273,247
Segment gross profit (1) $ 5,239 $ 2,225 $ 10,955 $ 4,975
Corporate, Unallocated and Eliminations
Net Sales
Intersegment $ (46,406) $ (61,646) $ (95,238) $(121,076)
Segment gross profit (loss) $ -- $ (42) $ -- $ (84)
Totals
Net Sales
Third-party customers $ 145,893 $ 139,070 $ 294,623 $ 292,427
Related party customers 23,113 17,692 37,742 40,725
Intersegment -- -- -- --
--------- --------- --------- ---------
Total net sales $ 169,006 $ 156,762 $ 332,365 $ 333,152
Gross profit (loss) (1) $ (827) $ 11,826 $ 732 $ 25,337
</TABLE>
(1) The Primary and Sheet and Plate segments include non-cash charges in 1999
of $1,493 and $2,349, respectively, for inventory writedowns and LIFO
adjustments.
10
<PAGE> 13
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
8. SUBSEQUENT EVENT
On July 26, 1999, the Company and Century of West Virginia announced
that they had signed definitive agreements to sell their fabricated
aluminum businesses to Pechiney for $248,000. The businesses consist of the
assets of Century of West Virginia's fabrication facility near Ravenswood,
West Virginia and the stock of Century Cast Plate. Completion of the
transaction is subject to all usual governmental and regulatory clearances
and other customary closing conditions. The Company anticipates closing by
the end of the third quarter of 1999. The Company plans to use the proceeds
from the sale to pay off its revolving loan and to strengthen its primary
aluminum position through new investments.
11
<PAGE> 14
FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENT UNDER THE PRIVATE
SECURITIES REFORM ACT OF 1995.
This quarterly report on Form 10-Q contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Words such as "expects,"
"anticipates," "forecasts," "intends," "plans," "believes," "projects," and
"estimates" and variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements include, but are not
limited to, statements regarding new business and customers, contingencies, Year
2000 readiness, environmental matters and liquidity under "Part I, Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Part I, Item 3 - Quantitative and Qualitative Disclosures About
Market Risk" and "Part II, Item 1 Legal Proceedings." These statements are not
guarantees of future performance and involve risks and uncertainties and are
based on a number of assumptions that could ultimately prove to be wrong. Actual
results and outcomes may vary materially from what is expressed or forecast in
such statements. Among the factors that could cause actual results to differ
materially are: general economic and business conditions; changes in demand for
the Company's products and services or the products of the Company's customers;
fixed asset utilization; competition; the risk of technological changes and the
Company's competitors developing more competitive technologies; the Company's
dependence on certain important customers; the availability and terms of needed
capital; risks of loss from environmental liabilities; and other risks detailed
in this report. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
The following information should be read in conjunction with the Company's
1998 Form 10-K along with the consolidated financial statements and related
footnotes included within the Form 10-K.
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.
12
<PAGE> 15
In the first quarter of 1998, the average cash price per tonne of primary
aluminum on the London Metal Exchange ("LME") was $1,463. It then declined to
$1,363 in the second quarter of 1998, with a further decline to $1,283 in the
fourth quarter of 1998. The average cash price in the first quarter of 1999 was
$1,196 and it moved higher in the second quarter of 1999 to $1,306.
Demand for flat rolled products was strong in the first half of 1999 in
both the building and transportation areas, but demand in the plate and
aerospace plate markets was down from year-ago levels, with pressure on pricing
that may continue for the rest of the year.
RESULTS OF OPERATIONS
Century's financial highlights include (in thousands, except per share
data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales
Third-party customers $ 145,893 $ 139,070 $ 294,623 $ 292,427
Related party customers 23,113 17,692 37,742 40,725
Net income (loss) $ (5,080) $ 8,110 $ (7,839) $ 13,938
Earnings (loss) per share - basic $ (0.25) $ 0.41 $ (0.39) $ 0.70
</TABLE>
In 1998, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." Century's operations consist of two
segments: primary aluminum and sheet and plate aluminum products. The Company
evaluates segment performance based upon gross profit. The Company uses a
market-based transfer price to record intersegment sales.
Primary Aluminum
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales
Third-party customers $ 12,675 $ 9,176 $ 26,018 $ 19,180
Related party customers 23,113 17,692 37,742 40,725
Intersegment 46,406 61,646 95,238 121,076
Gross profit (loss) $ (6,066) $ 9,643 $ (10,223) $ 20,446
Third-party shipment pounds 18,464 12,269 37,608 24,923
Related-party shipment pounds 36,639 25,753 62,492 57,878
Intersegment shipment pounds 75,915 85,598 153,674 164,403
</TABLE>
13
<PAGE> 16
The primary aluminum segment produces t-ingot, rolling ingot, extrusion
billet and foundry ingot for internal use and sales to customers. A significant
portion of this segment's sales is to a related party: the Glencore Group.
The primary segment's net sales during the three and six months ended June
30, 1999 were $82.2 million and $159.0 million, a decrease of $6.3 million (or
7.1%) and $22.0 million (or 12.1%) from comparable 1998 periods. The segment
shipped 131.0 and 253.8 million pounds of primary aluminum products in the three
and six months ended June 30, 1999, an increase of 7.4 million and 6.6 million
pounds from comparable 1998 periods. Despite an increase in shipments, the lower
revenue in 1999 is attributable to the decline in the LME price for primary
aluminum and its influence upon the realized prices for Century's primary
aluminum products.
Gross profit for the three and six months ended June 30, 1999 was
adversely affected by lower realized prices, increased costs due to a shift in
mix to higher cost primary products and a non-cash charge of $1.5 for inventory
writedowns and LIFO adjustments.
Sheet and Plate Aluminum
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales
Direct customers $ 132,671 $ 127,373 $ 266,970 $ 268,534
Toll customers 547 2,521 1,635 4,713
Gross profit (loss) $ 5,239 $ 2,225 $ 10,955 $ 4,975
Direct shipment pounds 113,579 103,355 227,330 217,973
Toll shipment pounds 2,357 9,592 6,762 16,746
</TABLE>
The sheet and plate aluminum segment produces a wide range of products such
as: brazing sheet for sale to automobile manufacturers: heat treated and
non-heat treated plate for sale to aerospace and defense manufacturers; heavy
gauge, wide-leveled coil for sale to heavy truck, truck trailer, marine and rail
car manufacturers and sheet and coil for sale to building products
manufacturers.
The sheet and plates segment's net sales during the three and six months
ended June 30, 1999 were $133.2 million and $268.6 million, an increase of $3.3
million (or 2.6%) above second quarter 1998 net sales and a decrease of $4.6
million (or 1.7%) from first half 1998 net sales. The segment shipped 115.9 and
234.1 million pounds of sheet and plate products in the three and six months
ended June 30, 1999, an increase of 3.0 million pounds above second quarter 1998
shipments and a decrease of 627 thousand pounds from first half 1998 shipments.
The Company continued to see improvements in its sheet and plate product mix,
but the lower LME price for primary aluminum in 1999 and its influence on the
prices Century realizes for its sheet and plate products has more than offset
this improvement.
14
<PAGE> 17
Gross profit for the three and six months ended June 30, 1999 was $5.2
million and $11.0 million, an increase of $3.0 million and $6.0 million from
comparable 1998 periods. The increase in gross profit was the result of a shift
in product mix from lower to higher margin products and the positive impact of
the lower LME price on aluminum raw material costs. The gross profit increase
was partially offset by non-cash charges of $2.3 million for inventory
writedowns and LIFO adjustments.
Interest Expense. Interest expense during the three and six months ended
June 30, 1999 was $2.0 million and $3.6 million, an increase of $1.6 million and
$2.4 million from comparable 1998 periods. The increase in debt outstanding and
lower amounts of capitalized interest resulted in increased interest expense for
the Company.
Net Gains(Losses) on Forward Contracts. The Company recorded losses on
forward contracts for the three and six months ended June 30, 1999 of $2.5
million, while the Company recorded gains of $5.5 million and $6.5 million
during the three and six months ended June 30, 1998. Rising LME aluminum prices
in the first half of 1999 reduced the market value of the Company's forward
contracts relative to their December 31, 1998 market value, resulting in a loss.
Declining LME aluminum prices in the first half of 1998 reduced the market value
of the Company's forward contracts relative to their December 31, 1997 market
value, resulting in a gain.
Net Income. The Company lost $5.1 million and $7.8 million during the three
and six months ended June 30, 1999 compared to net income of $8.1 million and
$13.9 million during comparable 1998 periods. The lower LME prices for primary
aluminum and its influence on realized sales prices in both the primary and
sheet and plate segments along with non-cash charges for inventory writedowns,
LIFO adjustments and marking forward contracts to market were the principal
reasons for the reduction in earnings.
LIQUIDITY AND CAPITAL RESOURCES
Working capital amounted to $195.4 million and $188.2 million at June 30,
1999 and December 31, 1998, respectively. The Company's liquidity requirements
arise primarily from working capital needs, capital investments and debt
service.
The Company's statements of cash flows for the six months ended June 30,
1999 and 1998 are summarized below (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Net cash from (used in) operating activities $ (3,805) $ 22,095
Net cash used in investing activities ...... (16,079) (19,158)
Net cash from (used in) financing activities 20,499 (527)
======== ========
Increase in cash ........................... $ 615 $ 2,410
======== ========
</TABLE>
15
<PAGE> 18
Operating activities used $3.8 million in net cash during the first six
months of 1999. Contributing to the reduction in cash was the Company's net loss
of $7.8 million, growth in accounts receivable and pension contributions of
$10.0 million. This was partially offset by a reduction in the Company's raw
materials inventories. In the first six months of 1998, operating activities
provided $22.1 million in net cash to the Company. Net income and a reduction in
accounts receivable caused by favorable changes in product/customer mix and
trade accounts receivable terms added to the positive cash flow, partially
offset by payments for metal purchases, maintenance expenditures and capital
expenditures that were accrued at December 31, 1997.
The Company's net cash used in investing activities was $16.1 million and
$19.2 million during the first six months of 1999 and 1998, respectively.
Capital expenditures were $16.4 million and $19.2 million for the first six
months of 1999 and 1998, respectively. The Company used these expenditures to
purchase, modernize or upgrade production equipment, maintain facilities and
comply with environmental regulations.
Net cash flow from financing activities was $20.5 million during the first
six months of 1999. The net cash used in financing activities during the first
six months of 1998 was $527 thousand.
On January 30, 1996 Century of West Virginia and Berkeley entered into a
bank revolving credit facility ("Facility") with BankAmerica Business Credit,
Inc. ("Bank of America"). The Facility provided for a revolving credit facility
that consisted of borrowings and letters of credit up to $150.0 million in the
aggregate. On March 31, 1999, the Company refinanced the borrowings outstanding
and terminated the Facility.
On February 24, 1999, the Company entered into an agreement with
BankBoston, N.A. and the CIT Group/Business Credit, Inc. ("Bank Agreement") to
provide up to $160.0 million of revolving credit facilities to refinance
indebtedness, to finance certain capital expenditures and for other general
corporate purposes. The borrowing base for purposes of determining availability
is based upon certain eligible inventory and receivables. On March 31, 1999, the
Company closed on the revolving loan. The revolving loan is secured by Century
of West Virginia's, Berkeley's and Century Cast Plate's inventory and
receivables. See Note 3 to the Consolidated Financial Statements appearing in
Part I, Item 1.
On July 26, 1999, the Company and Century of West Virginia announced that
they had signed definitive agreements to sell their fabricated aluminum
businesses to Pechiney for $248.0 million. The businesses consist of the assets
of Century of West Virginia's fabrication facility near Ravenswood, West
Virginia and the stock of Century Cast Plate. Completion of the transaction is
subject to all usual governmental and regulatory clearances and other customary
closing conditions. The Company anticipates closing by the end of the third
quarter of 1999. The Company plans to use the proceeds from the sale to pay off
its revolving loan and to strengthen its primary aluminum position through new
investments. See Note 8 to the Consolidated Financial Statements appearing in
Part I, Item 1.
Pursuant to an agreement with the Pension Benefit Guaranty Corporation
("PBGC Agreement"), the Company is required to make scheduled contributions to
its pension plan for
16
<PAGE> 19
hourly employees in 1999. The Company estimates that its scheduled contribution
will be approximately $7.0 million above the minimum required contribution under
Section 412 of the Internal Revenue Code.
The Company believes that cash flows from operations, funds available under
its bank agreements and proceeds from the sale of its fabricated aluminum
businesses will be sufficient to meet its working capital requirements, capital
expenditures, pension funding and debt service requirements in the near term and
for the foreseeable future.
ENVIRONMENTAL EXPENDITURES AND OTHER CONTINGENCIES
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 aggregate environmental
related accrued liabilities were $1.4 million at June 30, 1999 and December 31,
1998, respectively. 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 West Virginia Department of Environmental Protection. 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.
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, results of operations or liquidity.
See Note 4 to Consolidated Financial Statements appearing in Part I, Item
1.
YEAR 2000 COMPLIANCE PROGRAM
The Company began its Year 2000 program in September 1996, using funds from
its annual information services budget. In August 1997, the Board of Directors
approved $8.7 million of funding for this program and for installation of new
systems. At the same time, the Company allocated approximately 30 people (from
both inside and outside resources) to the effort. To date, the Company has
incurred $5.8 million in total costs relating to Year 2000 compliance, which is
approximately 52% of the Company's total information technology budget for the
period (including the August 1997 authorization). The Company estimates total
Year 2000 compliance costs will be about $6.0 million. Century has not had to
defer any of its information technology projects due to its Year 2000 compliance
efforts.
The Company's inventory of potentially affected systems (both information
technology and non-information technology) is complete. Major systems have been
determined to be Year 2000
17
<PAGE> 20
compliant. Each of the Company's business units conducted its own inventory,
identified its mission-critical systems and upgraded or replaced those systems
that were not Year 2000 compliant.
Each business unit reports the results of its Year 2000 program quarterly
to a corporate steering committee. This central coordination allows the Company
to evaluate and, if necessary, remedy common applications or software. The
Company completed all software and hardware testing and implementation during
the second quarter of 1999.
The Company has prepared its Year 2000 contingency plan. The primary goal
is to ensure that the Company can continue to produce and invoice for
production. The Company's plan emphasizes uninterrupted production, accounting,
staffing and delivery, as well as addresses potential banking, raw material
supply and utility failures. The Company has developed an emergency response
team for each business unit to be on hand for the turn of the millennium. Each
team is made up of senior staff and an information systems representative. Each
unit site will be equipped with satellite telephones to insure communications in
the event of a telephone outage. All locations will thus be able to report
problems.
The Company has sent questionnaires to 349 selected vendors and suppliers,
inquiring as to their Year 2000 readiness. To date, the Company has received
responses to 99% of the questionnaires from those vendors and suppliers. If
vendors and suppliers do not respond, or there is evidence of noncompliance, the
Company contacts those vendors and suppliers directly for more detailed
information. The Company completed its key vendor and supplier review during the
second quarter of 1999. In addition to the foregoing, the Company has visited
critical vendors in order to conduct in person reviews of their Year 2000
readiness preparations. A six page audit form questionnaire is sent to these
vendors in advance of the meetings and is used as a form for discussions with
these critical vendors. If the Company concludes that any of its material
vendors or suppliers are not Year 2000 compliant, the Company will identify
alternative sources for their products and services as part of its contingency
plan, to the extent possible. The Company has, for example, conducted such an
interview with its electrical supplier, since a disruption in electricity could
result in a shut down of the facilities and require the Company to incur
significant restart costs. That visit involved a review of the preparations
being made by the Company's electrical supplier.
To date, the Company has received no indication that any third party
supplier or vendor may not have accurately assessed their state of readiness or
that they may have a Year 2000 problem which may have a material adverse affect
on the Company's results of operations. However, the risk remains that those
vendors and suppliers may not have accurately assessed their state of readiness.
The contingency plan addresses, where feasible, solutions to those identifiable
risks.
18
<PAGE> 21
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
modifies the accounting for derivative and hedging activities and is effective
for fiscal years beginning after June 2000. The Company is currently evaluating
the potential impact SFAS No. 133 will have on its results of operations and
financial position.
19
<PAGE> 22
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
COMMODITY PRICES
Century produces primary aluminum products and manufactures aluminum sheet
and plate products. The Company's earnings are exposed to aluminum price
fluctuations. The Company manages this risk through the issuance of fixed price
commitments and financial instruments. The Company does not engage in trading or
speculative transactions. Although the Company has not materially participated
in the purchase of call options, in cases where Century sells forward primary
aluminum, it may purchase call options to preserve the benefit from price
increases significantly above forward sales prices. In addition, it may purchase
put options to protect itself from price decreases.
The Company had fixed price commitments to sell 535.8 million pounds of
primary, scrap aluminum and sheet and plate products at June 30, 1999. The
Company had fixed price commitments to purchase 144.0 million pounds of aluminum
and alloy raw materials at June 30, 1999. In addition, the Company has a
long-term supply agreement for 936.0 million pounds of alumina annually;
whereby, the Company will pay a fixed price for alumina with annual price
increases of approximately 2.5% through 2001.
At June 30, 1999, the Company had entered into 15.3 million pounds of
forward primary aluminum purchase contracts, primarily with the Glencore Group,
to mitigate the risk of commodity price fluctuations inherent in a portion of
its anticipated future sales of aluminum sheet and plate products. At June 30,
1999, the Company had also entered into 43.7 million pounds of forward primary
aluminum sales contracts with the Glencore Group to mitigate the risk of
commodity price fluctuations inherent in a portion of its inventory and fixed
price purchase commitments. These contracts will be settled in cash at various
dates in 1999. Based on market prices at June 30, 1999, these financial
instruments could be settled by the Company paying approximately $171 thousand.
The actual settlement will be based on market prices at the respective
settlement dates.
A hypothetical $0.10 per pound increase in the market price of primary
aluminum is estimated to have an unfavorable impact of $2.9 million on net
income for the six months ended June 30, 1999 as a result of the forward primary
aluminum purchase and sale contracts entered into by the Company at June 30,
1999. The effect of the hypothetical change of $0.10 per pound was calculated
using a parallel shift in the June 30, 1999 forward price curve for primary
aluminum. The price curve takes into account the time value of money, as well as
future expectations regarding the price of primary aluminum. Actual changes in
commodity prices may differ from hypothetical changes. This quantification of
the Company's exposure to the commodity price of aluminum is necessarily
limited, as it does not take into consideration the Company's inventory or fixed
price commitments, or the offsetting impact upon the purchase price of raw
materials and sales price of aluminum products.
All gains and losses from forward contract activity are reported separately
in the statements of operations. Unrealized gains or losses on the forward
primary aluminum contracts, realized gains or losses from the cash settlement of
the forward primary aluminum contracts, and
20
<PAGE> 23
reversals of prior period unrealized losses are reported as either gains or
losses on forward contracts.
Century monitors its overall position, and its metals risk management
activities are subject to the management, control and direction of senior
management. These activities are regularly reported to the Board of Directors of
Century.
INTEREST RATES
The Company is exposed to interest rate volatility with regard to its
variable rate revolving term debt of $112,000 million at June 30, 1999. The
primary exposure is movement in the U.S. Treasury rates and LIBOR. A
hypothetical 1% increase in these interest rates would increase annual interest
expense by approximately $1.1 million. Actual changes in interest rates may
differ from hypothetical changes. This analysis does not take into effect other
changes that might occur in the economic environment due to such changes in
short term interest rates.
21
<PAGE> 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 4. Submission of Matters to a Vote of Stockholders
At the annual meeting of Century Aluminum Company stockholders held on June
8, 1999, Craig A. Davis and William R. Hampshire were re-elected as directors of
Century Aluminum Company to serve for three-year terms. Votes cast for Mr. Davis
were 15,651,662 and votes withheld were 3,071,891; votes cast for Mr. Hampshire
were 15,658,147 and votes withheld were 3,065,406.
Also at that annual meeting, a proposal to approve an amendment to the
Company's 1996 Stock Incentive Plan was adopted. Total votes cast for the
amendment to the 1996 Stock Incentive Plan were 18,177,260, votes cast against
were 253,126 and there were 293,167 abstentions.
Additionally, a proposal to ratify the appointment of Deloitte & Touche LLP
as the Company's independent auditor for the fiscal year ending December 31,
1999 was approved. Total votes cast for the proposal were 18,707,277, votes cast
against were 10,418 and there were 5,858 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.39 - Century Aluminum Company 1996 Stock Incentive Plan as
Amended through June 8,1999
Exhibit 27.0 - Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended June 30,
1999.
22
<PAGE> 25
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 13, 1999 By: /s/ Craig A. Davis
----------------- ------------------------------------------------
Craig A. Davis
Chairman/Chief Executive Officer
Date: August 13, 1999 By: /s/ David W. Beckley
----------------- ------------------------------------------------
David W. Beckley
Executive Vice-President/Chief Financial Officer
23
<PAGE> 26
EXHIBIT INDEX
Exhibit
Number Description
--------- --------------------------------------------------------------
10.39 Century Aluminum Company 1996 Stock Incentive Plan as Amended
through June 8,1999
27.0 Financial Data Schedule
24
<PAGE> 1
CENTURY ALUMINUM COMPANY
1996 STOCK INCENTIVE PLAN
AS AMENDED THROUGH JUNE 8, 1999
I. PURPOSES AND SCOPE OF PLAN
Century Aluminum Company (the "Company") desires to afford certain salaried
officers and other salaried key employees of the Company and its subsidiaries
who are in a position to affect materially the profitability and growth of the
Company and its subsidiaries an opportunity to acquire a proprietary interest in
the Company, and thus to create in such persons interest in and a greater
concern for the welfare of the Company. Directors who are salaried key employees
within the meaning of the foregoing are eligible to participate in the 1996
Stock Incentive Plan (the "Plan"). These objectives will be promoted through the
granting to such key employees of equity instruments including (i) incentive
stock options ("Incentive Options") which are intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"); (ii) options
which are not intended to so qualify ("NQSOs"); and (iii) performance share
units ("Performance Shares").
The awards offered pursuant to this Plan are a matter of separate
inducement and are not in lieu of any salary or other compensation for services.
The Company, by means of the Plan, seeks to retain the services of persons
now holding key positions and to secure the services of persons capable
of filling such positions.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of shares of common stock of the Company reserved and
available for distribution pursuant to options and awards granted hereunder
shall not exceed, in the aggregate, 1,500,000 shares of the authorized common
stock, $0.01 par value, per share, of the Company (the "Shares"), subject to
adjustment described below.
Shares which may be acquired under the Plan may be either authorized
but unissued Shares or Shares of issued stock held in the Company's treasury, or
both, at the discretion of the Company. Whenever any outstanding option or award
or portion thereof expires, is canceled, is forfeited or is otherwise terminated
for any reason without having been exercised or without having fully vested, the
Shares allocable to the expired, canceled, forfeited or otherwise terminated
portion of the option or award may again be the subject of options or awards
granted hereunder.
In the event of any stock dividend, stock split, combination or exchange
of Shares, recapitalization or other change in the capital structure of the
Company, corporate separation or division (including, but not limited to,
split-up, split-off, spin-off or distribution to Company shareholders other than
a normal cash dividend), sale by the Company of all or a substantial portion of
its assets, rights offering, merger, consolidation, reorganization or partial or
complete liquidation, or any other corporate transaction or event having an
effect similar to any of the
<PAGE> 2
foregoing, the aggregate number of Shares reserved for issuance under the Plan,
the number and option price of Shares subject to outstanding options, the
financial performance goals contained in a Performance Share award, the number
of Shares subject to a Performance Share award and any other characteristics or
terms of the options and awards as the Board of Directors (as hereinafter
defined) or the Committee (as hereinafter defined), as the case may be, shall
deem necessary or appropriate to reflect equitably the effects of such changes
to the holders of options and awards, shall be appropriately substituted for
new shares or adjusted, as determined by the Board of Directors or the
Committee, as the case may be, in its discretion. Notwithstanding the foregoing,
(i) each such adjustment with respect to an Incentive Option shall comply with
the rules of Section 424(a) of the Code, and (ii) in no event shall any
adjustment be made which would render any Incentive Option granted hereunder
other than an incentive stock option for purposes of Section 422 of the Code
without the consent of the grantee.
III. ADMINISTRATION
The Compensation Committee (the "Committee"), or the Board of Directors
of the Company (the "Board of Directors") if there is no Committee, will have
sole and exclusive authority to administer the Plan. The Committee shall consist
of no fewer than two (2) members of the Board of Directors, each of whom shall
be a "non-employee Director" within the meaning of Rule 16b-3 or any successor
rule or regulation ("Rule 16b-3") promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The Committee shall administer the
Plan so as to comply at all times with Rule 16b-3. A majority of the members of
the Committee shall constitute a quorum, and the act of a majority of the
members of the Committee shall be the act of the Committee. Any member of the
Committee may be removed at any time, either with or without cause, by
resolution adopted by a majority of the Board of Directors, and any vacancy on
the Committee may at any time be filled by resolution adopted by a majority of
the Board of Directors.
Subject to the express provisions of the Plan, the Board of Directors
or the Committee, as the case may be, shall have authority, in its discretion,
to (i) select employees of the Company and its subsidiaries as recipients of
options or awards; (ii) determine the number and type of options or awards to be
granted; (iii) determine the terms and conditions, not inconsistent with the
terms hereof, of any options or awards granted; (iv) adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable; (v) interpret the terms and provisions
of the Plan and any option or award granted and any agreements relating thereto;
and (vi) otherwise supervise the administration of the Plan.
The determination of the Board of Directors or the Committee, as the case
may be, on matters referred to in this Article III shall be conclusive.
The Board of Directors or the Committee, as the case may be, may employ
such legal counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion received from any such
counsel or consultant and any computation received from any such consultant or
agent. Expenses incurred by the Board of Directors or the Committee in the
engagement of such counsel, consultant or agent shall he paid by the
2
<PAGE> 3
Company. No member or former member of the Committee or of the Board of
Directors shall be liable for any action or determination made in good faith
with respect to the Plan or any option or award granted hereunder.
The Company shall indemnify each member of the Board of Directors or the
Committee, as the case may be, for all costs and expenses and, to the extent
permitted by applicable law, any liability incurred in connection with defending
against, responding to, negotiation for the settlement of, or otherwise dealing
with any claim, cause of action or dispute of any kind arising in connection
with any actions in administering the Plan or in authorizing or denying
authorization to any transaction hereunder
IV. ELIGIBILITY
Options and Performance Share awards may be granted only to certain salaried
officers and other salaried key employees of the Company and its subsidiaries
who are not members of the Committee; provided, that no person shall be eligible
for any award if the granting of such award to such person would prevent the
satisfaction by the Plan of the general exemptive conditions of Rule 16b-3. In
no event may any eligible person be granted or awarded stock options and
Performance Shares covering, in the aggregate, more than 300,000 Shares
(subject to adjustment as described in Article II above) in any fiscal year of
the Company.
V. STOCK OPTIONS
1. General. Options may be granted alone or in addition to other awards
granted under the Plan. Any options granted under the Plan shall be in such form
as the Board of Directors or the Committee, as the case may be, may from time to
time approve and the provisions of the option grants need not be the same with
respect to each optionee. Options granted under the Plan may be either Incentive
Options or NQSOs. The Board of Directors or the Committee, as the case may be,
may grant to any optionee Incentive Options, NOSOs or both types of options.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions not
inconsistent with the terms of the Plan, as the Board of Directors or the
Committee, as the case may be, deems appropriate. Each option grant shall be
evidenced by an agreement executed on behalf of the Company by an officer
designated by the Committee and accepted by the optionee. Such agreement shall
describe the options and state that such options are subject to all the terms
and provisions of the Plan and shall contain such other terms and provisions,
consistent with the Plan, as the Board of Directors or the Committee, as the
case may be, may approve.
2. Exercise Price and Payment. The price per Share under any option
granted hereunder shall be such amount as the Board of Directors or the
Committee, as the case may be, shall determine, provided, however, that such
price shall not be less than one hundred percent (100%) of the fair market value
of the Shares subject to such option, as determined below, at the
3
<PAGE> 4
date the option is granted (110% in the case of an Incentive Option granted to
any person who, at the time the option is granted, owns stock of the Company or
any subsidiary or parent of the Company possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or of
any subsidiary or parent of the Company (a "10% Shareholder")).
Except with respect to options ("Effective Date Options") granted
effective upon the consummation of the IPO (as hereinafter defined), if the
Shares are listed on a national securities exchange in the United States on the
date any option is granted, the fair market value per Share shall be deemed to
be the average of the high and low sale price on such national securities
exchange in the United States on the date upon which the option is granted, but
if the Shares are not traded on such date, or such national securities exchange
is not open for business on such date, the fair market value per Share shall be
the average of the high and low sale price determined as of the closest
preceding date on which such exchange shall have been open for business and the
Shares were traded. If the Shares are listed on more than one national
securities exchange in the United States on the date any such option is granted,
the Board of Directors or the Committee, as the case may be, shall determine
which national securities exchange shall be used for the purpose of determining
the fair market value per Share. If the Shares are not listed on a national
securities exchange but are listed on the Nasdaq National Market ("Nasdaq"), the
fair market value per share shall be deemed to be the average of the high and
low sale prices on the date upon which the option is granted as reported by
Nasdaq or, if the Shares are not traded on such date or Nasdaq is not open for
business on such date, the fair market value per Share shall be the average of
the high and low sale price determined as of the closest preceding date on which
Nasdaq shall have reported the Shares. With respect to Effective Date Options,
the fair market value per Share shall be equal to the public offering price of
the Shares, as such price is set forth on the cover of the final prospectus
related to the initial public offering of Shares (the "IPO").
For purposes of this Plan, the determination by the Board of Directors or
the Committee, as the case may be, of the fair market value of a Share shall
be conclusive.
3. Term of Options and Limitations on the Right of Exercise. The term of
each option will be for such period as the Board of Directors or the Committee,
as the case may be, shall determine, provided that, except as otherwise provided
herein, in no event may any option granted hereunder be exercisable more than
ten (10) years from the date of grant of such option (five years in the case of
an Incentive Option granted to a 10% Shareholder). Each option shall become
exercisable in such installments and at such times as may be designated by the
Board of Directors or the Committee, as the case may be, and set forth in the
agreement related to the grant of options. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at any
time after becoming exercisable, but not later than the date the option expires.
Stock options may provide for acceleration of exercisability in the event of the
death, disability or retirement of the optionee.
The Board of Directors or the Committee, as the case may be, shall have the
right to limit, restrict or prohibit, in whole or in part, from time to time,
conditionally or unconditionally, rights to exercise any option granted
hereunder.
4
<PAGE> 5
To the extent that an option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
4. Exercise of Options. Options granted under the Plan shall be exercised
by the optionee as to all or part of the Shares covered thereby by the giving
of written notice of the exercise thereof to the Secretary of the Company
at the principal business office of the Company, specifying the number of Shares
to be purchased, accompanied by payment therefor made to the Company for the
full purchase price of such Shares. The date of actual receipt by the Company of
such notice shall be deemed the date of exercise of the option with respect to
the Shares being purchased.
Upon the exercise of an option granted hereunder, the Company shall
cause the purchased Shares to be issued only when it shall have received the
full purchase price for the Shares in cash; provided, however, that in lieu of
cash, the holder of an option may, to the extent permitted by applicable law,
exercise an option in whole or in part, by delivering to the Company
unrestricted Shares (in proper form for transfer and accompanied by all
requisite stock transfer tax stamps or cash in lieu thereof) owned by such
holder having a fair market value equal to the cash exercise price applicable to
that portion of the option being exercised. The fair market value of the Shares
so delivered shall be determined as of the date immediately preceding the date
on which the option is exercised, or as may be required in order to comply with
or to conform to the requirements of any applicable laws or regulations. For
purposes of this paragraph, the provisions of Article V, Paragraph 2 hereof
relating to the fair market value of Shares shall apply in all respects.
Notwithstanding the foregoing, the Company, in its sole discretion, may
establish cashless exercise procedures whereby an option holder, subject to the
requirements of Rule 16b-3, Regulation T, federal income tax laws, and other
federal, state and local tax and securities laws, can exercise an option or a
portion thereof without making a direct payment of the option price to the
Company, including a program whereby option shares would be sold on behalf of
and at the request of an option holder by a designated broker and the exercise
price would be satisfied out of the sale proceeds and delivered to the Company.
If the Company so elects to establish a cashless exercise program, the Company
shall determine, in its sole discretion, and from time to time, such
administrative procedures and policies as it deems appropriate and such
procedures and policies shall be binding on any option holder wishing to utilize
the cashless exercise program.
5. Nontransferability of Options. An Incentive Option granted hereunder
shall not be transferable, whether by operation of law or otherwise, other than
by will or the laws of descent and distribution, and any Incentive Option
granted hereunder shall be exercisable, during the lifetime of the holder, only
by such holder. Except as otherwise provided in the applicable option agreement,
a NQSO granted hereunder shall not be transferable, whether by operation of law
or otherwise, other than by will or the laws of descent and distribution, and
any NQSO granted hereunder shall be exercisable, during the lifetime of the
holder, only by such holder. The option of any person to acquire Shares and all
his rights thereunder shall terminate immediately if the holder: (a) attempts to
or does sell, assign, transfer, pledge, hypothecate or
5
<PAGE> 6
otherwise dispose of the option or any rights thereunder to any other person
except as permitted above; or (b) becomes insolvent or bankrupt or becomes
involved in any manner so that the option or any rights thereunder becomes
subject to being taken from him to satisfy his debts or liabilities.
6. Termination of Employment. Except as set forth in Article VII,
upon termination of employment of any option holder, any option previously
granted to such option holder, unless otherwise specified by the Board of
Directors or the Committee, as the case may be, shall, to the extent not
theretofore exercised, terminate and become null and void, provided that:
(a) if the option holder shall die while in the employ of
the Company or any subsidiary of the Company, and at a time when such
employee was entitled to exercise an option as herein provided, his
estate or the legatees or distributees of his estate or of the option,
as the case may be, of such option holder, may, within one (1) year
following the date of death, but not beyond that time and in no event
later than the expiration date of the option, exercise such option, to
the extent not theretofore exercised, in respect of any or all of such
number of Shares which the option holder was entitled to purchase; and
(b) if the employment of any option holder to whom such option
shall have been granted shall terminate by reason of the option
holder's retirement on or after he reaches the age of 60 years in such
manner as would entitle him to receive full Social Security benefits if
he were then 65 years of age, or disability (as described in Section
22(e)(3) of the Code), and while such employee is entitled to exercise
such option as herein provided, such option holder shall have the right
to purchase under the option the number of Shares, if any, which he was
entitled to purchase at the time of such termination, at any time up to
and including three (3) months after the date of such termination of
employment, but not beyond that time and in no event shall an option be
exercised later than the expiration date of the option.
In no event shall any person be entitled to exercise any option after
the expiration of the period of exercisability of such option as specified
therein.
Except as otherwise determined by the Board of Directors or the
Committee, as the case may be, and other than as set forth above, if an option
holder voluntarily terminates his or her employment, or is discharged, any
option granted hereunder shall be canceled and the option holder shall have no
further rights to exercise any such option and all of the option holder's rights
thereunder shall terminate as of the effective date of such termination of
employment.
If an option granted hereunder shall be exercised by the legal
representative of a deceased option holder or former option holder or by a
person who acquired an option granted hereunder by bequest or inheritance or by
reason of the death of any option holder or former option holder, written notice
of such exercise shall be accompanied by a certified copy of letters
testamentary or equivalent proof of the right of such legal representative or
other person to exercise such option.
6
<PAGE> 7
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422(a) of the Code.
A termination of employment shall not be deemed to occur by reason of
(i) the transfer of an employee from employment by the Company to employment by
a subsidiary of the Company or (ii) the transfer of an employee from employment
by a subsidiary of the Company to employment by the Company or by another
subsidiary of the Company.
7. Maximum Allotment of Incentive Options. If the aggregate fair market
value of Shares with respect to which Incentive Options are exercisable for the
first time by an employee during any calendar year (under all stock option plans
of the Company and any parent or any subsidiary of the Company) exceeds
$100,000, any options which otherwise qualify as Incentive Options, to the
extent of the excess, will be treated as NQSOs.
VI. PERFORMANCE SHARE AWARDS
1. General. Performance Share awards may be granted alone or in addition
to any other awards granted under the Plan. The provisions of Performance Share
awards need not be the same with respect to each recipient. Performance Share
awards granted under the Plan shall be in such form as the Board of Directors or
the Committee, as the case may be, may from time to time approve. Each grant of
a Performance Share award shall be evidenced by an agreement executed on behalf
of the Company by an officer designated by the Board of Directors or the
Committee, as the case may be, and accepted by the recipient. Such agreement
shall describe the Performance Share award and state that such award is subject
to all the terms and provisions of the Plan and shall contain such other terms
and provisions, consistent with the Plan, as the Board of Directors or the
Committee, as the case may be, may approve. Each Performance Share awarded under
the Plan shall entitle the grantee to receive one Share upon vesting of such
Performance Share.
2. Restrictions. Each Performance Share award shall vest upon (A) the
passage of time and/or (B) the attainment by the Company of specified financial
performance objectives. Company financial performance objectives may be
expressed in terms of (i) earnings per Share, (ii) pre-tax profits (either on
the Company or business unit level), (iii) net earnings or net worth, (iv)
return on equity or assets, (v) any combination of the foregoing, or (vi) any
other standard or standards deemed appropriate by the Board of Directors or the
Committee, as the case may be, at the time the award is granted. Such time
periods (the "Performance Period") and financial performance goals shall be set
by the Board of Directors or the Committee, as the case may be, in its sole
discretion.
Performance Share awards shall become vested in a recipient upon the
lapse of the Performance Period, if any, and/or the attainment of the associated
financial performance goals set forth in the agreement between the recipient and
the Company. Performance Share awards shall vest in such installments and at
such times as may be designated by the Board of Directors or the Committee, as
the case may be, and set forth in the agreement related to the granting of the
Performance Share awards. The agreement evidencing the Performance Share awards
may
7
<PAGE> 8
provide for acceleration of vesting in the event of the death, disability or
retirement of the recipient
3. Stock Certificate. No stock certificates shall be issued to the
recipient with respect to Performance Share awards until such time as the
Performance Share awards vest.
4. Treatment of Dividends. If any ordinary cash dividends are declared
or paid on Shares, the record date of which is prior to the forfeiture or the
vesting of Performance Share awards, the holder of the Performance Share awards
shall be entitled to receive an amount equal to the amount of the per Share
dividend declared for each Performance Share. Such dividends shall be paid to
such recipients at the same time and in the same manner as dividends are paid to
stockholders of the Company.
5. Nontransferability. Subject to the provisions of this Plan and the
applicable agreement, during the period when the Performance Shares have not
vested, the recipient shall not be permitted to sell, transfer, pledge, assign
or otherwise encumber Performance Shares awarded under the Plan.
6. Shareholder Rights. The recipient shall have no rights with respect
to the Performance Shares or any Shares related thereto until they have vested,
including no right to vote the Performance Shares or such Shares, other than the
right to receive dividends as set forth in the Plan.
7. Termination of Employment. Subject to the provisions of Paragraph 2
above, all unvested Performance Shares shall be forfeited upon termination of
employment.
VII. CHANGE OF CONTROL
Notwithstanding anything to the contrary contained herein, upon a
Change of Control (as defined below) of the Company, (i) all options shall
immediately vest and become exercisable in full during the remaining term
thereof, and shall remain so, whether or not the option holder to whom such
options have been granted remains an employee of the Company or its
subsidiaries, and (ii) the restrictions applicable to any or all Performance
Share awards shall lapse and such awards shall be fully vested.
A "Change of Control" shall be deemed to have taken place upon the
occurrence of any of the following events:
(i) any person (which shall mean and include an individual,
corporation, partnership, group, association or other "person", as such
term is used in Sections 13 and 14 of the Exchange Act) which theretofore
beneficially owned less than 20% of the Shares then outstanding, acquires
Shares in a transaction or series of transactions, not previously
approved by the Board of Directors, that results in such person directly
or indirectly owning at least 20% of the Shares then outstanding; or
(ii) the election or appointment, within a twelve (12) month
period, of persons to the Board who were not directors at the beginning
of such twelve (12) month period, whose election or appointment was not
approved by a majority of those persons
8
<PAGE> 9
who were Board members at the beginning of such period, and which newly
elected or appointed Board members shall constitute a majority of the
Board.
Notwithstanding anything herein to the contrary, no Change of Control
(only with respect to the particular option holder or award grantee referred to
therein in the case of (A)) shall be deemed to have occurred by virtue of any
event which results from the acquisition, directly or indirectly, of 20% or more
of the outstanding Shares by (A) the option holder or Performance Share
recipient or a person including the option holder or Performance Share
recipient, (B) the Company, (C) a subsidiary of the Company, or (D) any savings,
pension or other employee benefit plan of the Company or of a subsidiary, or any
entity holding securities of the Company recognized, appointed, or established
by the Company or by a subsidiary for or pursuant to the terms of such plan.
VIII. PURCHASE FOR INVESTMENT
Except as hereafter provided, the Company may require the recipient of
Shares pursuant to an option or award granted hereunder, upon receipt thereof,
to execute and deliver to the Company a written statement, in form satisfactory
to the Company, in which such holder represents and warrants that such holder is
purchasing or acquiring the Shares acquired thereunder for such holder's own
account, for investment only and not with a view to the resale or distribution
thereof, and agrees that any subsequent offer for sale or sale or distribution
of any of such Shares shall be made only pursuant to either (a) a Registration
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Act"), which Registration Statement has become effective and is current
with regard to the Shares being offered or sold, or (b) a specific exemption
from the registration requirements of the Act, but in claiming such exemption
the holder shall, prior to any offer for sale or sale of such Shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Company, from counsel for or approved by the Company, as to the applicability of
such exemption thereto. The foregoing restriction shall not apply to (i)
issuances by the Company so long as the Shares being issued are registered under
the Act and a prospectus in respect thereof is current or (ii) reofferings of
Shares by affiliates of the Company (as defined in Rule 405 or any successor
rule or regulation promulgated under the Act) if the Shares being reoffered are
registered under the Act and a prospectus in respect thereof is current.
IX. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
The Company may endorse such legend or legends upon the certificates
for Shares issued pursuant to a grant hereunder and may issue such "stop
transfer" instructions to its transfer agent in respect of such Shares as, in
its discretion, it determines to be necessary or appropriate to (i) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Act, (ii) implement the provisions of the Plan and any agreement between the
Company and the optionee or grantee with respect to such Shares, or (iii) permit
the Company to determine the occurrence of a disqualifying disposition, as
described in Section 421(b) of the Code, of Shares transferred upon exercise of
an Incentive Option granted under the Plan.
9
<PAGE> 10
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares upon exercise of an option or grant of
Performance Share awards, as well as all fees and expenses necessarily incurred
by the Company in connection with such issuance or transfer, except fees and
expenses which may be necessitated by the filing or amending of a Registration
Statement under the Act, which fees and expenses shall be borne by the recipient
of the Shares unless such Registration Statement has been filed by the Company
for its own corporate purposes (and the Company so states).
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
X. WITHHOLDING TAXES
An employee exercising an NQSO or acquiring Shares pursuant to the
vesting of Performance Shares may elect to have a specified percentage of his
shares withheld by the Company in order to satisfy tax obligations. Any such
election shall be made pursuant to a written notice signed by the employee. The
Company may require an employee exercising an NQSO or disposing of Shares
acquired pursuant to the exercise of an Incentive Option in a disqualifying
disposition (within the meaning of Section 421(b) of the Code) or acquiring
Shares pursuant to Performance Share awards to reimburse the Company for any
taxes required by any government to be withheld or otherwise deducted and paid
by the Company in respect of the issuance or disposition of Shares. In lieu
thereof, the Company shall have the right to withhold the amount of such taxes
from any other sums due or to become due from the Company to the employee upon
such terms and conditions as the Board of Directors or the Committee, as the
case may be, shall prescribe. Notwithstanding the foregoing, the Committee may,
by the adoption of rules or otherwise, modify the provisions of this Article X
or impose such other restrictions or limitations as may be necessary to ensure
that the withholding transactions described above will be exempt transactions
under Section 16(b) of the Exchange Act.
With respect to withholding required hereunder, an optionee or holder
of a Performance Share award may elect, subject to the approval of the Board of
Directors or the Committee, as the case may be, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares having a
fair market value (as determined under the provisions of Article V, Paragraph 2)
on the date the tax is to be determined equal to the minimum statutory total tax
which could be imposed on the transaction. All such elections shall be
irrevocable, made in writing, signed by the optionee or holder, and shall be
subject to any restrictions or limitations that the Board of Directors or the
Committee, as the case may be, in its sole discretion, deems appropriate.
If an optionee makes a disposition, within the meaning of Section 424(c)
of the Code and regulations promulgated thereunder, of any Share or Shares
issued to such optionee pursuant to the exercise of an Incentive Option within
the two-year period commencing on the day after the date of the grant or within
the one-year period commencing on the day after the date of transfer of such
Share or Shares to the optionee pursuant to such exercise, the optionee shall,
within ten (10) days of such disposition, notify the Company thereof, by
delivery of written notice to the Company at its principal executive office.
10
<PAGE> 11
XI. DEFERRAL
The Board of Directors or the Committee, as the case may be, may permit
an optionee or holder of Performance Share awards to defer such individual's
receipt of Shares that would otherwise be due to such optionee or holder by
virtue of the exercise of an option or the lapse of restrictions with respect to
Performance Share awards. If any such deferral election is required or
permitted, the Board of Directors or the Committee, as the case may be, shall,
in its sole discretion, establish rules and procedures for such deferrals.
XII. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board of Directors or the Committee, as the case may
be, shall determine in its discretion that the listing, registration or
qualification of the Shares covered by the Plan upon any national securities
exchange or under any state or federal law or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the sale or purchase of Shares under the Plan, no Shares shall
be issued unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Board of Directors or the Committee, as
the case may be.
XIII. AMENDMENT OF THE PLAN
The Board of Directors or the Committee, as the case may be, may, from
time to time, amend the Plan, provided that no amendment shall be made, without
the approval of the stockholders of the Company, that will (i) increase the
total number of Shares which may be issued under the Plan (other than an
increase resulting from an adjustment provided for in Article II, (ii) modify
the provisions of the Plan relating to eligibility, (iii) materially increase
the benefits accruing to participants under the Plan, or (iv) extend the maximum
period of the Plan. The Board of Directors or the Committee, as the case may be,
shall be authorized to amend the Plan and the awards granted hereunder to permit
the Incentive Options granted hereunder to qualify as incentive stock options
within the meaning of Section 422 of the Code and to comply with Rule 16b-3. The
rights and obligations under any option or award granted before amendment of the
Plan or any unexercised portion of such option shall not be adversely affected
by amendment of the Plan or the option without the consent of the holder of the
option or the award.
XIV. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors or the Committee, as the case may be, may at any
time suspend or terminate the Plan. The Plan, unless sooner terminated by action
of the Board of Directors or the Committee, as the case may be, shall terminate
as provided in Article XVII. An option or award may not be granted while the
Plan is suspended or after it is terminated. Rights and obligations under any
option or award granted while the Plan is in effect shall not be altered or
impaired by suspension or termination of the Plan, except upon the consent of
the person to whom the option
11
<PAGE> 12
or award was granted. The power of the Board of Directors or the Committee, as
the case may be, to construe and administer any options and awards granted prior
to the termination or suspension of the Plan under Article III nevertheless
shall continue after such termination or during such suspension.
XV. GOVERNING LAW
The Plan, such options and awards as may be granted thereunder and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware.
XVI. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be
deemed to affect the validity of any other provision.
XVII. EFFECTIVE DATE, DURATION OF THE PLAN
The Plan shall become effective as of February 28, 1996, subject to
approval by the Company's stockholders, and shall remain in effect, subject to
the provisions of Article XIV, until all Shares subject to the Plan have been
purchased or acquired according to the Plan's provisions. However, in no event
may any options or Performance Share awards be granted under the Plan on or
after February 28, 2006.
12
<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>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 627
<SECURITIES> 0
<RECEIVABLES> 87,624
<ALLOWANCES> 0
<INVENTORY> 182,875
<CURRENT-ASSETS> 294,381
<PP&E> 228,784
<DEPRECIATION> 0
<TOTAL-ASSETS> 541,426
<CURRENT-LIABILITIES> 98,947
<BONDS> 0
0
0
<COMMON> 202
<OTHER-SE> 164,406
<TOTAL-LIABILITY-AND-EQUITY> 541,426
<SALES> 332,365
<TOTAL-REVENUES> 332,365
<CGS> 331,633
<TOTAL-COSTS> 331,633
<OTHER-EXPENSES> 669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,552
<INCOME-PRETAX> (14,591)
<INCOME-TAX> (6,752)
<INCOME-CONTINUING> (7,839)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,839)
<EPS-BASIC> (0.39)
<EPS-DILUTED> (0.39)
</TABLE>
