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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7170
IMCO RECYCLING INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2008280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
5215 North O'Connor Blvd., Suite 940, Irving, Texas 75039
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 869-6575
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Exchange on Which Registered
------------------- ----------------------------
Common Stock, $0.10 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
As of March 15, 1996, the aggregate market value of voting stock held by
nonaffiliates of the Registrant was $222,547,762
Shares of Common Stock outstanding at March 15, 1996: 11,786,430
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement relating to its 1996
Annual Meeting of Stockholders are incorporated by reference into Part III
hereof.
PART I
ITEM PAGE
- ---- ----
Item 1. Business (including Executive Officers)...................... 3
Item 2. Properties................................................... 12
Item 3. Legal Proceedings............................................ 13
Item 4. Submission of Matters to a Vote of Security
Holders...................................................... 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.......................................... 13
Item 6. Selected Financial Data...................................... 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 15
Item 8. Financial Statements and Supplementary Data.................. 19
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure....................... 34
PART III
Item 10. Directors and Executive Officers of the
Registrant.................................................. 34
Item 11. Executive Compensation....................................... 34
Item 12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 34
Item 13. Certain Relationships and Related Transactions............... 34
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K......................................... 34
Signatures.............................................................. 40
2
PART I
ITEM 1. BUSINESS
GENERAL
The principal business of IMCO Recycling Inc. (the "Company") is owning and
operating aluminum recycling plants. The Company believes it is the world's
largest recycler of secondary aluminum, which includes used aluminum beverage
cans ("UBCs"), scrap and dross (a by-product of aluminum production). The
Company converts UBCs, scrap and dross into molten metal in furnaces which it
then delivers to customers in molten form or ingots. The Company recovers
magnesium via a relatively similar process and also recycles zinc. Except
where the context otherwise requires, the term "Company" as used herein
refers to IMCO Recycling Inc. and its subsidiaries.
The Company's strategy is to participate in sectors of the nonferrous metals
recycling industry in which it believes it can provide customers with a
technology-based, value-added service and in which it can develop significant
market share. A large percentage of the Company's processing capacity is
utilized to recycle scrap material and charge a fee for this service (a
service called "tolling"). The Company intends to continue to expand its
business both in the United States and abroad (i) by establishing additional
aluminum recycling facilities which would be dedicated to one or more major
customers, (ii) by expanding its existing facilities and (iii) by acquiring
or partnering with other similar recycling businesses. There can be no
assurance, however, that any such expansions or acquisitions will be
accomplished. See "SALES AND MARKETING."
The Company's business has benefited from the trend to include recycled
materials in finished products, and in particular from the growth in the
production and use of aluminum beverage cans and their recycling. The
recycling of UBCs in the United States has increased because of economic,
legislative and environmental factors. The number of aluminum beverage cans
produced has increased from approximately 34.7 billion in 1979 to 101 billion
in 1995, and the number of UBCs recycled increased from approximately 8.5
billion to 63 billion during the same period, according to industry estimates.
The Company's principal customers include Aluminum Company of America
("Alcoa"), Barmet Aluminum Corporation ("Barmet"), a subsidiary of CasTech
Aluminum Group Inc., Alcan Aluminum Corporation, Ravenswood Aluminum
Corporation ("Ravenswood"), Commonwealth Aluminum Corporation, ACX
Technologies, Inc., Alumax Aluminum Company, Rock Creek Aluminum Inc. and
Logan Aluminum Co., all of whom use aluminum recycled by the Company to
produce can sheet, building, automotive and other products.
For the year ended December 31, 1995, approximately 93.6% of the Company's
total pounds of metal processed involved tolling. Tolling operations do not
expose the Company to the risk of commodity price fluctuations and impose
relatively low working capital demands; consequently, the Company prefers to
utilize as much of its capacity as possible for tolling. The balance of the
Company's processing is principally derived from dross and scrap purchased,
recycled and then sold by the Company ("buy/sell" business). See
"OPERATIONS."
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BACKGROUND
The Company was organized in 1985 as Frontier Texas Corporation under the
corporate laws of Delaware. In September 1986, the Company acquired its
aluminum and magnesium recycling business through its purchase of
International Metal Co., an Oklahoma corporation. In September 1988,
International Metal Co. merged with and into the Company, and the Company
changed its name to IMCO Recycling Inc.
In January 1992, the Company purchased Interamerican Zinc, Inc. ("IZI"), a
processor and recycler of zinc dross for U.S. steel galvanizers. In March
1992, the Company entered into a long-term supply agreement with Barmet and
constructed an aluminum recycling facility adjacent to Barmet's rolling mill
in Uhrichsville, Ohio See ITEM 2. "PROPERTIES". In December 1993, the
Company purchased substantially all of the assets of a Corona, California
aluminum recycling facility, and, in September 1994, the Company purchased
Phoenix Smelting Corporation ("Phoenix") and its wholly owned subsidiary,
Metal Resources, Inc., which owns and operates an aluminum recycling facility
in Loudon, Tennessee ("Loudon").
In September 1995, the Company purchased all of the assets of an aluminum
recycling facility in Bedford, Indiana ("Bedford"). In addition, in October
1995, the Company acquired all of the stock of Alumar Associates, Inc.
("Alumar") and its wholly owned subsidiary, Metal Mark, Inc. ("Metal Mark"),
which owned and operated three aluminum recycling facilities located in
Chicago Heights, Illinois, Sikeston, Missouri, and Pittsburg, Kansas, and
also owned 50 percent of another aluminum recycling facility located in East
Chicago, Indiana. Subsequent to the purchase the Company decided to close
the Pittsburg facility because of economic considerations. See ITEM 2.
"PROPERTIES".
In December 1995, the Company became a 50% owner in a German company named
VAW-IMCO GuB und Recycling GmbH ("VAW-IMCO"). This venture was formed to own
and operate two recycling and foundry alloy facilities which were previously
owned by VAW aluminium AG, the largest aluminum company in Germany. The
plants will principally serve the European automotive markets. This venture
represents the Company's first investment in the international aluminum arena.
At year-end 1995, the Company owned and operated 10 domestic recycling plants
that have an aggregate annual processing capacity of approximately 1.46
billion pounds of aluminum and 50 million pounds of other metals. In
addition to the above wholly owned facilities, the Company is a 50% owner of
(i) the East Chicago facility mentioned above which has the ability to
process 80 million pounds of aluminum, and (ii) VAW-IMCO which will have a
processing capacity of 220 million pounds of aluminum.
In 1996, the Company plans to construct an aluminum recycling facility in
Coldwater, Michigan. The Company will be a 75% owner of the facility,
which will have a long-term supply agreement for the delivery of hot metal to
the 25% partner, Alchem Aluminum, Inc ("Alchem"). Alchem manufactures
specification aluminum alloys that are sold principally to automotive
manufacturers.
PRODUCTS AND SERVICES
The Company recycles aluminum and delivers the recycled metal to customers as
ingot or molten aluminum. The Company's customers include most of the major
United States aluminum
4
producers, aluminum diecasters, extruders, and other processors of aluminum
products. A principal element of the Company's strategic plan calls for
entering into new markets, specifically the rapidly expanding aluminum
automotive market. In 1995 the Company entered this market with the
acquisition of Metal Mark and the announced construction of the Coldwater,
Michigan plant.
In addition, the Company plans to increase its emphasis on seeking foreign
locales for its recycling facilities where market conditions warrant.
General political and economic conditions in these countries could affect the
overall financial prospects of the Company. Foreign operations are generally
subject to several risks, including foreign currency exchange rate
fluctuations, strict environmental regulations, changes in the methods and
amounts of taxation, foreign exchange controls and government restrictions on
the repatriation of hard currency.
The Company recycles magnesium dross for primary magnesium producers. It
also produces a line of magnesium anodes that are recycled from post-consumer
scrap and sold to end users and independent distributors for corrosion
protection of steel structures.
The Company believes that IZI is the largest recycler of hot-dip zinc dross
for continuous galvanizers in the U.S. IZI's principal customers during 1995
consisted of most of the major U.S. steel companies.
THE RECYCLING PROCESS
The raw material received for aluminum processing is loaded into furnaces
where gas heat is applied along with a flux mixture (salt and potash). Some
of the Company's aluminum facilities operate proprietary rotary furnaces of a
unique design (which are somewhat more flexible than reverberatory furnaces)
and can process UBCs, dross and various types of aluminum scrap. The Company
believes that its uniquely designed rotary furnaces are more efficient and
cleaner than, and provide rates of recovery superior to, conventional rotary
furnaces.
The Loudon, Bedford and Metal Mark facilities operate conventional rotary
furnaces which are somewhat larger than the Company's proprietary rotary
furnaces. The Bedford facility's rotary furnace is unique in that it also
features automated material charging mechanisms. The Corona plant operates
reverberatory type furnaces which are specifically designed for UBCs and can
plant scrap. In 1995, the Company installed additional environmental
equipment in order to be able to process other types of clean scrap through
Corona's reverberatory furnaces.
Materials are melted in the furnaces, and the recovered metal is poured
directly into an ingot mold or hot metal crucible for delivery to customers.
Some of the Company's plants make deliveries of molten aluminum in crucibles
transported by trucks to customers' plants. The molten aluminum is poured
directly into the customer's furnace, saving the customer the time and
expense of remelting aluminum ingot. The Company normally charges an
additional fee for transportation and handling of molten aluminum. The
Bedford plant has the ability to deliver molten aluminum, but has not yet
developed the customer base to take advantage of this capability. The
Corona, Sapulpa, and Metal Mark plants are restricted by the geographical
location of their customers to delivering the aluminum in ingot form.
Magnesium is recycled by the same method in a rotary furnace at the Sapulpa,
Oklahoma plant.
5
The Company's principal type of aluminum and magnesium rotary furnace was
developed by a former shareholder of International Metal Co. The Company has
a nonexclusive right to use this furnace, subject only to the Company's
maintaining the confidentiality of the furnace design. The Company requires
its key operational employees to enter into agreements to meet this
confidentiality requirement. There can be no assurances that others will not
purchase or develop similar furnaces, that the process will not be
transferred to or obtained by others, or that other metal producers will not
develop a similar metal recovery process.
The aluminum recycling process from the Company's rotary furnaces produces a
by-product called "salt cake," which is formed from the contaminants and
coatings on aluminum scrap and dross and the salts added during the aluminum
recycling process. (The by-product of the reverberatory furnaces is dross.)
Salt cake is composed of salts, metallic aluminum, aluminum oxide and small
amounts of other materials.
The Company disposes of its salt cake and certain airborne contaminants
("baghouse dust") in landfills with cells dedicated for use exclusively by
the Company or that separately encapsulate the Company's material. Salt cake
is not currently listed as a "hazardous waste" under the Resource
Conservation and Recovery Act of 1976 ("RCRA") or as a "hazardous substance"
under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"). The Company has built and operates a lined landfill
at its Morgantown Plant in 1989 meeting RCRA Subchapter "C" hazardous waste
standards.
In May 1994 the Company announced that it had developed a patented technology
that produces fertilizer as a by-product instead of salt cake. This process,
if proven commercially feasible, would allow for "closed loop" recycling of
many of the materials used in the aluminum recycling process. In 1995 the
Company constructed a facility adjacent to its Morgantown plant to further
process the salt cake and extract whatever aluminum is left after the melting
process. This salt cake processing facility is the first step needed for
closed loop recycling. The process involves crushing of the salt cake and
separation of a portion of the aluminum contained in the salt cake. The
residual product is then landfilled in the Company's Morgantown landfill. The
plant began processing salt cake in January 1996 and is in the initial
start-up phase. See "ENVIRONMENTAL MATTERS". The Company has not
previously attempted this large scale crushing of its salt cake and the
efficiency of this process has not yet been determined.
In the zinc recycling process, dross is first melted in an electric induction
furnace and then transferred to a reactor which removes the impurities (iron
and zinc oxide, which are sold as a by-product). The remaining molten zinc
is poured into a reverberatory holding furnace from which it is blended and
cast into ingots which are returned to the customer. IZI holds patent rights
to its process in the United States and 13 other countries.
OPERATIONS
In its aluminum tolling operations, the Company accepts UBCs, dross and scrap
owned by its customers and processes this material for a tolling charge per
pound of incoming weight. In order to retain control of their metal
supplies, customers have desired to toll, rather than sell, their scrap
materials. Tolling requires no metal inventory to be purchased or held by
the Company. In addition, tolling does not expose the Company to the risk of
fluctuating metal prices since the Company does not own the material being
processed. The Metal Mark acquisition will change somewhat the Company's
historical ratio of tolling to buy/sell business because only about 50% of
6
Metal Mark's business has traditionally involved tolling. See ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS".
When purchasing metals in the open market for its buy/sell business, the
Company attempts to reduce the risk of fluctuating metal prices by arranging
for the sale of the aluminum anticipated to be recovered and by avoiding
large inventories of ingot or scrap material except to the extent necessary
to allow its plants to operate without interruption.
SALES AND MARKETING
The Company's principal customers (see "GENERAL" above) all use recycled
aluminum to produce can sheet and building, automotive and other products.
The Company provides products and services to a number of primary and
fabricating facilities of Alcoa. During 1993, 1994 and 1995, Alcoa accounted
for approximately 39%, 30% and 23%, respectively, of revenues. Barmet
accounted for approximately 14%, 12% and 9% of revenues in 1993, 1994 and
1995, respectively. The loss of either Alcoa or Barmet as customers would
have a material adverse effect upon the business of the Company and its
future operating results. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS".
Agreements with customers in the recycling industry have customarily been
short-term agreements. These usually result from a bidding process where
aluminum producers and metal traders offer to sell materials or to have
materials tolled. Consequently, the Company historically has maintained no
significant backlog of orders. However, the Company has secured some longer
term commitments for its recycling services with Alcoa, Barmet, Rock Creek
and Ravenswood.
In 1992 the Company was successful in obtaining a 10 year contract with
Barmet to process all of Barmet's scrap aluminum, UBCs and dross at the
Company's Uhrichsville plant. See "BACKGROUND" above and ITEM 2. "PROPERTIES
- - ALUMINUM RECYCLING" below.
In early 1994 the Company entered into a three-year processing agreement with
Alcoa whereby the Company's Rockwood plant will provide secondary metal for
its Alcoa, Tennessee facility. This agreement was modified in 1995 to
reflect greater volumes and to include Loudon as an approved supplier under
the terms of the contract. This agreement will extend for additional one
year terms at the end of each contract year unless terminated by either
party. If terminated by either party, the agreement will continue in effect
until the second anniversary date of the last day of the contract year during
which the termination notice was given. The agreement obligates the Company
to indemnify Alcoa for certain environmental liabilities which Alcoa may
incur in connection with the transactions contemplated by the agreement.
The Barmet and Alcoa agreements contain escalation provisions which are
intended to cover increases in certain of the Company's processing costs.
The Company may seek similar dedicated long-term arrangements with customers
in the future. See "GENERAL". Increased emphasis on dedicated facilities to
customers and dedicated contracts with customers carries the inherent risk of
increased dependence on a single or few customers with respect to a
particular Company facility. In such cases, the loss of such a customer
could have a material adverse affect on the Company's financial condition and
results of operation, and any timely replacement of volumes attributable to
such a customer could prove difficult.
7
The primary metals industry and the metals recycling industry are subject to
cyclical fluctuations, depending upon the availability and price of
unprocessed scrap metal and demand in the metal consuming industries.
Temporary reductions in can stock production by one of the Company's
customers have previously affected the Company's revenues. See ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS".
COMPETITION
The aluminum recycling industry is fragmented and highly competitive. The
principal factors of competition in the industry are price, recovery rates,
environmental and safety regulatory compliance, and services (e.g., the
ability to deliver molten aluminum). Freight costs also limit the geographic
areas in which the Company can effectively compete.
The major aluminum producers, some of which are the Company's largest
customers, have generally discontinued processing dross, instead focusing
their resources on other aspects of aluminum production. UBCs and other
scrap are processed by both the secondary recycling industry and the major
producers. The Company competes with both other secondary recyclers and
their customers when purchasing and processing scrap for the buy/sell
business.
The amount of the Company's tolling business can also vary depending upon the
extent that the major aluminum producers' used metal materials are internally
recycled. The aluminum producers generally vary their rate of internal
recycling depending upon furnace availability, inventory levels, the price of
aluminum, and their own internal demand for metal. The major aluminum
producers are larger and have greater financial resources than the Company.
A decision by these producers to expand their recycling operations could
reduce demand for certain of the Company's products and services.
SOURCE AND AVAILABILITY OF RAW MATERIALS AND ENERGY
The Company has historically not had, and does not anticipate having,
difficulties in obtaining raw materials for its operations. In the case of
buy/sell business, the primary sources of aluminum and magnesium for
recycling are dross and scrap, which are purchased from both the major
aluminum producers and metal traders.
Generally, fluctuations in market prices for both aluminum and magnesium have
not affected the availability of these metals to the Company. The
availability of zinc dross is dependent upon the demand for galvanized steel,
which has historically paralleled fluctuations in customer demand in the
automotive, appliance and construction industries.
The Company's operations are fueled by natural gas, which represents the
second largest component of operating costs. In 1993 the Company experienced
increases in its natural gas cost at two of its plants. In response to this
increase in natural gas cost, the Company, in 1994, secured 12 month
commitments of gas at a fixed rate for the majority of its gas needs at these
two plants. Natural gas prices declined in 1995, and the Company decided in
most instances to not renew its fixed price natural gas contracts. Due to
unseasonably cold weather, natural gas prices increased in early 1996. All of
the Company's long term contracts contain natural gas price escalators. See
ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS". The Company understands that most of its
competitors' operations also are fueled by natural gas; therefore, it
believes that increases in the prices for natural gas do not adversely affect
8
the Company's competitive position. The Company believes it will continue to
have access to adequate energy supplies to meet its needs for the foreseeable
future.
SEASONALITY
UBC collections have historically been highest in the summer months and lower
in the winter months. Therefore, the Company has at times experienced lower
volumes during the winter. In recent years, however, the Company's
processing volumes have fluctuated mostly due to its startup of additional
capacity rather than the seasonality of UBC collections.
TRANSPORTATION
The Company receives UBCs, dross and scrap, and ships its recycled aluminum
by both rail and truck. Most of the Company's plants own their own rail
siding or have access to rail lines nearby. IZI receives zinc dross and ships
recycled zinc by truck. The Company owns and leases various trucks and
trailers to support its business. Customarily, the transportation costs of
scrap materials to be tolled are paid by the customer, while the
transportation costs of aluminum and magnesium purchased and sold by the
Company may be paid either by the customer or the Company. The Company
contracts with third-party transportation firms for the hauling for disposal
of some of its solid waste.
EMPLOYEES
As of December 31, 1995, the Company had 984 employees, consisting of 186
employees engaged in administrative and supervisory activities and 798
employees engaged in production and maintenance. The production and
maintenance employees at the Rockwood plant are represented by the United
Steelworkers of America under a five-year collective bargaining agreement
that expires in August 2000. The production and maintenance workers at the
Uhrichsville plant are represented by the United Mine Workers of America.
This contract expires on November 30, 1998. The production and maintenance
workers at the Corona plant are represented by the International Brotherhood
of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers. This
agreement expires on November 30, 1996. The production and maintenance
workers at the Bedford plant are represented by the International Brotherhood
of Electrical Workers. This agreement expires in April 1997. The production
and maintenance workers at the Sikeston plant are also represented by the
United Steelworkers of America union under an agreement which expires in
March 1997. Labor relations with employees have been satisfactory.
ENVIRONMENTAL MATTERS
The processing of UBCs, dross and scrap generates solid waste in the form of
salt cake and baghouse dust. At the Sapulpa and Morgantown plants, the
Company disposes of its solid waste at its own permitted disposal sites. The
Rockwood, Loudon, and Bedford plants currently dispose of their solid waste
by transporting it to the Morgantown plant where the Company, in 1996, began
operating a salt cake processing facility which prepares salt cake for
landfilling. See ITEM 2. "PROPERTIES - SOLID WASTE DISPOSAL". Under the
supply agreement with Barmet, the disposal of all salt cake generated by the
Company as a result of its processing for Barmet is the responsibility of
Barmet. Salt cake from all other material processed at the Uhrichsville
plant is either shipped to the Morgantown plant for disposal or landfilled
with a local solid waste management firm. The by-product generated at the
Corona plant is in the form of dross. This dross is processed as an input
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material at one of the Company's other plants. The Chicago Heights and
Sikeston plants currently dispose of most of their salt cake with third party
landfills; however, the Company is currently evaluating the disposal of these
two plants' salt cake at Morgantown.
If salt cake were ever classified as a hazardous waste or substance under
RCRA or CERCLA, the Company's handling and disposal of salt cake would be
required to be modified. To dispose of its salt cake, the Company may then
be required to take other actions including obtaining a RCRA Subchapter "C"
permit for its Morgantown landfill, obtaining other permits (including
transportation permits), and consider landfilling additional amounts of salt
cake with third parties not under the Company's direct control. Based on
current annual processing volumes and remaining landfill capacity, the
estimated remaining lives of the landfills currently used by the Sapulpa and
Morgantown plants are two years and three years, respectively. The Company
recently built additional landfill space at its Morgantown plant. Landfill
closure costs for the Company-owned landfills are currently estimated to
exceed $4,000,000. The Company is currently providing for this expenditure
by accruing, on a current basis, these estimated costs as the landfills are
used. See ITEM 2. "PROPERTIES".
In recent years, the Company's operations, like those of other basic
industries, have become subject to stringent legislation and regulations
regarding the protection of human health and the environment. It can be
anticipated that more rigorous laws and regulations will be enacted that
could require the Company to make substantial expenditures in addition to
those referred to herein.
The Clean Air Act provides for federal, state and local regulation of the
emission of air pollutants. As a result of the Clean Air Act amendments in
1990, the Company may have to obtain additional permits, install additional
pollution control equipment and otherwise incur additional capital
expenditures. The Company does not currently believe that foreseeable costs
of compliance will have a material adverse effect on the Company's financial
position.
The Company believes that it is in material compliance with applicable
environmental regulations. Due to relatively high costs and limited coverage,
the Company does not carry environmental impairment liability insurance. The
Company made capital expenditures for environmental control facilities of
approximately $6,344,000 in 1995, most of which was for landfill capacity
additions, and it is currently estimated that such expenditures will be
approximately $5,250,000 in 1996 and $5,500,000 in 1997.
EXECUTIVE OFFICERS
The executive officers of the Company are listed below, together with brief
accounts of their experience and certain other information. Executive
officers are appointed by the Board of Directors.
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NAME AGE POSITION
- ---- --- --------
Frank H. Romanelli 51 President and Chief Executive Officer
Richard L. Kerr 53 Executive Vice President and Chief Operating
Officer; President of Metals Division
Paul V. Dufour 56 Executive Vice President - Finance and
Administration, Chief Financial Officer
and Secretary
Thomas W. Rogers 49 Senior Vice President, Marketing
C. Lee Newton 52 Senior Vice President, Operations
Frank H. Romanelli was appointed President and Chief Executive Officer
effective January 1, 1995. He was previously Executive Vice President -
Commercial at Occidental Chemicals Company in Dallas, Texas, responsible for
long-term strategy, acquisitions and divestitures and had served in various
other capacities at Occidental over the last 12 years including managing the
$1.8 billion petrochemical business.
Richard L. Kerr has served as Executive Vice President since July 1988. In
1991, he was promoted to Chief Operating Officer of the Company and in 1994
became President of the Company's Metals Division. Mr. Kerr joined
International Metal Co. in April 1984, and became Executive Vice President of
International Metal Co. in April 1987.
Paul V. Dufour has served as Vice President, Chief Financial Officer and
Secretary of the Company since March 1987. He was promoted to Senior Vice
President in May 1988 and to Executive Vice President in October 1994. He is
principally responsible for the Company's financial and administrative
functions.
Thomas W. Rogers has served as Senior Vice President of the Company since
July 1988. Mr. Rogers was employed as Plant Manager of the Sapulpa, Oklahoma
plant in October 1986 and became Senior Vice President of International Metal
Co. in April 1987.
C. Lee Newton was promoted to Senior Vice President of the Company in 1993.
Mr. Newton was named Vice President in 1990 and was the General Manager of
the Morgantown, Kentucky plant from 1989 to 1993. He was originally employed
by the Company as Plant Manager of its Rockwood, Tennessee plant in 1987.
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ITEM 2. PROPERTIES
ALUMINUM RECYCLING.
The Company owns and operates the following processing plants as detailed below:
ESTIMATED
NUMBER ANNUAL MOLTEN
OWNED OF CAPACITY YEAR YEAR MATERIALS DELIVERY
PLANT ACREAGE FURNACES (MILLION LBS) BUILT ACQUIRED PROCESSED CAPABILITY
----- ------- -------- ------------- ----- -------- --------- ----------
Alum,
Sapulpa, OK. 64 7 145 1962 -- Mag No
Rockwood,TN. 238 6 200 1985 -- Alum Yes
Morgantown, KY. 454 6 200 1989 -- Alum Yes
Uhrichsville, OH. 42 10 335 1992 -- Alum Yes
Corona, CA. 20 3 100 -- 1993 Alum No
Loudon, TN. 173 3 180 -- 1994 Alum Yes
Bedford, IN. 19 2 150 -- 1995 Alum Yes
Chicago Hts., IL. 13 2 100 -- 1995 Alum No
Sikeston, MO. 24 3 60 -- 1995 Alum No
Adrian, MI. * 2 40 -- 1992 Zinc No
___________________________
* - The 50,000 sq. ft. Adrian facility is leased by IZI. This lease, which
includes both the operations and office space, expires in May 1997 and is
presently not expected to be renewed.
The Company also owns 50% of a recycling facility located in East Chicago,
Indiana. This facility has annual capacity to process 80 million pounds of
aluminum.
Barmet has an option to acquire up to a 49% equity interest in the
Uhrichsville plant at a price equal to that equity percentage multiplied by
the depreciated book value of the plant or the subsidiary owning the plant,
plus a premium to compensate the Company for its recycling technology. The
option price may be above or below the fair value of the Uhrichsville plant.
Should Barmet exercise its option, there can be no assurance that the
production or earnings attributable to the purchased interest could be
replaced, and the Company's net earnings and cash flow could be adversely
affected.
In 1996, the Company plans to construct a new aluminum recycling facility in
Coldwater, Michigan. This facility, which will be 75% owned by the Company
and 25% owned by the plant's largest customer, Alchem, will have a rated
annual capacity of 150 million pounds and will principally serve the
automotive market. The Company will be the operator of the facility and will
deliver molten aluminum to its customer-partner. Alchem will have certain
rights to purchase additional equity interests not to exceed 40% of the total
joint venture equity if the facility is expanded or if Alchem increases its
supply commitments.
In 1996, the Company began its participation in a 50/50 venture in Germany
known as VAW-IMCO GuB und Recycling GmbH. The venture will operate two
recycling and foundry alloy
12
facilities located at Grevenbroich and Toging, Germany. Annual capacity for
these two plants is expected to be 220 million pounds.
In 1995, the Sapulpa, Rockwood, Morgantown and Uhrichsville plants all
operated at rates in excess of their stated capacities.
SOLID WASTE DISPOSAL
The Company completed a new landfill cell adjacent to its plant in
Morgantown, Kentucky in 1996. This landfill will be used to deposit all of
the waste generated from the new salt cake processing facility at the
Morgantown site. It is currently anticipated that this new landfill cell,
which is designed to be expanded several times throughout its life, will
serve the Company's landfilling needs for over 80% of the salt cake generated
by facilities currently owned by the Company in the United States for the
next several years. The Company also owns a landfill at its Sapulpa plant
which is estimated to have two years of limited use remaining. See ITEM 1.
"BUSINESS - ENVIRONMENTAL MATTERS".
ADMINISTRATIVE
In Irving, Texas, the Company leases approximately 17,300 square feet of
office space for certain of its executive, financial and management
functions. This lease expires in 2000.
The Company believes that its plants and equipment are maintained in good
operating condition. Substantially all of the properties and equipment at the
Sapulpa, Rockwood and Morgantown plants are mortgaged to secure senior
indebtedness. See NOTE F--LONG TERM DEBT AND CREDIT LINES OF NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal proceedings against
the Company or its operations. The Company is party from time to time to
what it believes are routine litigation and proceedings considered as part of
the ordinary course of its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company during
the quarter ended December 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on The New York Stock Exchange (trading
symbol: IMR). The following table sets forth, for the fiscal quarters
indicated, the high and low sales prices for the Company's Common Stock, as
reported on The New York Stock Exchange composite tape from January 1, 1994
through December 31, 1995, and the dividends declared per share during the
periods indicated.
13
DIVIDENDS
HIGH LOW DECLARED
---- --- ---------
Calendar Year 1994
First Quarter $15 $12-1/8 $ --
Second Quarter 14-7/8 12-1/2 --
Third Quarter 16-7/8 13-1/2 --
Fourth Quarter 15-3/4 12-1/2 0.10
Calendar Year 1995
First Quarter $16-3/8 $13-3/8 $ --
Second Quarter 19-1/4 15-1/4 0.035
Third Quarter 23-3/4 17-7/8 0.035
Fourth Quarter 24-1/2 20-1/2 0.035
In late 1994 the Board of Directors declared a special year-end $0.10 per
share cash dividend, payable on January 26, 1995 to holders of record of
Common Stock as of December 29, 1994. This was the first dividend declared
by the Company. The Company subsequently commenced paying a quarterly
dividend of $.035 per share in the second quarter of 1995 and declared a
total of $.105 per share of quarterly dividends in 1995. Dividends as may be
determined by the Board of Directors may be declared and paid on the Common
Stock from time to time out of any funds legally available therefor. The
Company's long-term debt instruments limit the amount of cash dividends the
Company can pay. This amount is determined by reference to a portion of the
Company's "unrestricted net income" accumulated since September 1995 (as
defined in its long-term debt instruments). The Company intends to continue
the payment of dividends on its Common Stock, although future dividend
declarations are discretionary with the Company's Board of Directors and will
depend upon the Company's level of earnings, cash flow, financial
requirements, economic and business conditions and other relevant factors,
including the restrictions contained in the Company's long-term debt
instruments. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND NOTE F--LONG TERM DEBT AND CREDIT
LINES OF NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
On March 15, 1996, the outstanding shares of Common Stock were held of record
by 566 stockholders.
ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues $49,177 $60,223 $74,216 $101,116 $141,167
Net Earnings 5,594 7,475 8,022 8,471 12,470
Net earnings per
common share 0.52 0.67 0.70 0.73 1.03
Total assets 52,960 68,871 79,427 96,791 139,877
Long-term debt
(excluding current
maturities) 13,000 10,500 8,000 11,860 29,754
Dividends declared
per common share -- -- -- 0.10 0.105
14
See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Most of the Company's processing consists of aluminum, magnesium and zinc
tolled for its customers. To a lesser extent, the Company also purchases
scrap metal and dross for processing and resale. Both the Company's tolling
fees and the selling price of metal it buys, recycles and sells for its own
account are included in sales revenue. Accordingly, tolling business
produces a lower amount of revenues and cost of sales than does the buy/sell
business. Variations in the mix of these two businesses can cause revenues
to change significantly from period to period while not significantly
affecting gross profit, because both types of transactions generally have the
same gross profit per pound of metal processed. As a result, the Company
considers processing volume to be a more important determinant of performance
than revenues.
During the early 1990s there was an excess of primary aluminum produced
worldwide, and aluminum inventories on the worldwide commodity exchanges were
at record levels, peaking in January 1994. This glut of aluminum was
primarily responsible for causing aluminum prices to decline throughout this
time period, and prices in January 1994 were at inflation-adjusted historical
lows. This situation impacted the profitability of the major aluminum
producers who are some of the Company's largest customers. This environment
of low profitability for the Company's customers also had a negative impact
on the Company's gross margin, as it had been unable to pass cost increases
through to its customers. In early 1994, worldwide inventories began falling
for a number of reasons, including an increase in demand for aluminum,
particularly in the United States, and prices for aluminum began to rise.
This increase in pricing for aluminum had a positive effect on the Company in
1994 both in its buy/sell business where the Company received increased
prices for the aluminum it owned, and in its tolling business where certain
increases in price for tolling services provided by the Company were
obtained. During 1995, worldwide aluminum prices declined from their 1994
levels, particularly in the fourth quarter. For the year ended December 31,
1995, this decline was more than offset by increased processing volumes.
However, in the first quarter of 1996, the combination of higher energy
costs, lower aluminum prices and weather related disruptions which affected
volumes processed, negatively impacted the Company's results. It is not
possible to predict the future price of aluminum or the level of worldwide
inventories of aluminum and whether, or to what extent, such factors will
affect the Company's future business.
The following table shows the total pounds of material processed (aluminum,
magnesium and zinc), the percentage of total pounds processed represented by
tolled aluminum, purchased aluminum, magnesium and zinc, total revenues,
total gross profits and gross profit percentages:
15
1993 1994 1995
-------- ---------- ----------
(in thousands, except percentages)
Pounds processed 787,000 1,012,600 1,323,382
Percent of total pounds processed
Tolled Aluminum 92% 93% 92%
Purchased Aluminum 4% 3% 5%
Magnesium 1% 1% **
Zinc 3% 3% 3%
Revenues $ 74,216 $ 101,116 $ 141,167
Gross Profit $ 16,764 $ 22,638 $ 30,939
Gross Profit % 22.6% 22.4% 21.9%
__________________________
** less than 1 percent
RESULTS OF OPERATIONS
FISCAL YEAR 1995 VS. FISCAL YEAR 1994
The Company processed 1.3 billion pounds of metal in 1995 which represented
an increase of 31% over the 1.0 billion pounds processed in 1994. Increases
from the Bedford and Metal Mark plants acquired late in 1995, and the Loudon
plant which was acquired in September of 1994 and expanded in 1995, along
with increased volume from all plant locations, accounted for the favorable
variances. Revenues in 1995 were $141,167,000 which represented an increase
of 40% over 1994's revenue of $101,116,000. The percentage increase in
revenues was greater than the increase in volumes processed because the
amount of buy/sell business was greater in 1995 compared to 1994. Assuming
that Metal Mark maintains its approximate one-to-one historical ratio of
tolling to buy/sell business, the Company's revenues are projected to
continue to outpace the relative gains in processing volumes in 1996 because
of the full year's effect of the Metal Mark business.
Gross profit of $30,939,000 was 37% above the $22,638,000 reported in 1995.
Most of this resulted from the increased pounds processed.
Selling, general and administrative costs increased 56% to $10,027,000
compared to the $6,440,000 reported in 1994. This increase occurred because
of the addition of key personnel required to manage the Company's rapid
growth and because of selling, general and administrative costs associated
with acquisitions carried out during the year.
Interest expense was about the same in 1995 as it was in 1994, while interest
income rose to $424,000 compared to $154,000 in 1994. This increase was due
to larger amounts of cash invested.
The Company's income before taxes of $20,363,000 rose 49% compared to 1994.
In 1994 the Company recorded nonrecurring litigation expense related to a
lawsuit which reduced 1994's income before taxes by $1,635,000. Excluding
this item, 1995's increase would have been about 33% or very similar to the
increases recorded in volume processed and gross profits.
16
The Company's increased income before tax and higher tax rates caused income
tax expense to rise to $7,893,000 compared to $5,232,000 in 1994. The
effective tax rate was about 39% in 1995 compared to 38% in 1994.
FISCAL YEAR 1994 VS. FISCAL YEAR 1993
The Company processed 1.013 billion pounds in 1994, a 29% increase over the
787 million pounds of material it processed in 1993. Most of this increase
was due to increased processing at the Uhrichsville plant, which reached full
capacity during mid-year 1993 and was expanded by 25% in September 1994.
Processing from the Corona plant acquired in December 1993 and Loudon which
was acquired in September of 1994 also were significant contributors to the
increased volume of metal processed in 1994. In addition, all of the
Company's other plants processed more metal in 1994 than they did in 1993.
Revenues of $101,116,000 were 36% higher than 1993 revenues of $74,216,000.
The percentage increase in revenues was somewhat higher than the percentage
increase in processing pounds, mostly because aluminum prices in 1994 were
higher than in 1993, which resulted in higher revenues from the Company's
buy/sell business.
Gross profit of $22,638,000 increased 35% over 1993's amount of $16,764,000.
More than 80% of this increase was due to greater volumes of material
processed. The remainder of the gross profit increase in 1994 compared to
1993 was a result of increases in revenue exceeding increases in costs. The
revenue increase was largely a result of increases in the buy/sell business
which, as noted above, benefited from rising aluminum prices in 1994. The
increased costs were mostly concentrated in workers compensation, medical,
and refuse disposal costs.
Selling, general and administrative costs increased 28% above 1993's amount
to $6,440,000. Most of the increase is attributed to additional employees
required by the Company's growth, and improvements to the operating
information system, which improved efficiency, also increased the costs in
this category.
As reported during 1994, the Company incurred nonrecurring litigation costs
of $1,635,000, which represented the cost of settling certain litigation and
associated legal costs related to a partnership which owned shares of the
Company's stock. The Company agreed to the settlement without admitting
liability in order to avoid prolonged and costly litigation. The plaintiffs
released all claims against the Company and its subsidiaries, and the Company
received the preferred stock of a subsidiary whose ownership had been
disputed.
Interest expense of $1,014,000 was about 13% higher than 1993's amount. Most
of this difference was due to interest on the additional borrowings related
to the acquisition of Loudon.
Interest income of $154,000 decreased over 50% compared to 1993. Lower
levels of cash to invest, principally because of capital spending and
acquisitions, are the reasons for this result.
Income before taxes of $13,703,000 increased 23% above 1993's level of
$11,143,000. The effective tax rate rose to 38% in 1994 compared with 28% in
1993. Increased state income tax amounts in 1994 and an increase in federal
tax rates from 34% to 35% (caused by reaching a threshold level of income
requiring this increase) were the reasons for the increase in the rate.
17
LIQUIDITY AND CAPITAL RESOURCES
Operations provided cash of $26,289,000 in 1995, compared with $13,622,000 of
cash provided by operations in 1994. Increased earnings as previously
discussed and increases in other noncash charges (such as depreciation and
deferred taxes) along with a reduction in working capital (excluding that
attributed to acquisitions) in 1995 compared to an increase in 1994 were the
factors leading to the increase in cash provided from operations. Working
capital (excluding that attributed to acquisitions) decreased $2,411,000 in
1995 which represented a source of cash while it increased $5,302,000 in
1994. The decrease in 1995 was principally the result of reductions in
accounts receivable which had increased in 1994. At December 31, 1995, the
Company's current ratio of 2.41 was similar to the December 31, 1994 ratio of
2.64. The Company's working capital requirements may increase in 1996 due to
an anticipated higher level of processing pounds.
Capital spending, excluding acquisitions, amounted to $15,538,000 in 1995 and
$6,646,000 in 1994. The new salt cake processing facility and new landfill
both at the Morgantown facility accounted for the largest items in 1995.
Spending in 1994 was largely related to the expansion of the Uhrichsville
plant. The acquisition of Bedford and Metal Mark required $20,137,000 in
1995 while the acquisition of Loudon required approximately $5,300,000 in
1994.
In order to take advantage of expansion opportunities and in connection with
the acquisition of Bedford and Metal Mark, the Company borrowed $5,000,000 in
September 1995 under terms it had previously negotiated with a commercial
lending institution. This Variable Rate Converting Revolving Loan has an
amortization of five years and bears interest at a fluctuating rate,
currently set at 6.8125%.
In addition, in November 1995 the Company borrowed $15,000,000 of unsecured
debt which represents half of the commitment the Company received from a
private placement of notes. The remaining half, or $15,000,000, is
anticipated to be issued in the second quarter of 1996 to fund the Company's
investment in the VAW-IMCO venture. The notes issued in 1995 have a fixed
interest rate set at 7.28% per annum and require mandatory annual prepayments
of $3,000,000 beginning in 2003. The notes to be issued in 1996 will have
their interest rate set when they are issued. In 1994 the Company also
borrowed $5,000,000 under a five year term note (the "Term Note") to fund the
repayment of certain debt assumed in connection with the Loudon acquisition.
Also in 1995, the Company increased its borrowing limit up to $10,000,000
under a restated revolving credit facility (the "Revolving Facility"). Under
the Revolving Facility, the Company has a subfacility for the issuance of
standby letters of credit, the amount available for borrowing is based on the
Company's working capital as defined. At year end, and at March 25, 1996,
the Company had no borrowings outstanding under the Revolving Facility.
Capital expenditures for property, plant and equipment in 1996 are currently
estimated to total approximately $19,000,000. The Company believes that its
cash on hand, the resources available under the terms of its credit
facilities and anticipated 1996 cash from operations should provide the
financial resources necessary to fund its current needs and to meet its
obligations in 1996 and for the foreseeable future.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX OF FINANCIAL STATEMENTS OF IMCO RECYCLING INC. AND SUBSIDIARIES
PAGE
----
Report of Ernst & Young LLP, Independent Auditors......................... 20
Consolidated Balance Sheets at December 31, 1995 and 1994................. 21
Consolidated Statements of Earnings for the three years ended
December 31, 1995....................................................... 22
Consolidated Statements of Cash Flows for the three years ended
December 31, 1995....................................................... 23
Consolidated Statements of Changes in Stockholders' Equity for the
three years ended December 31, 1995..................................... 24
Notes to Consolidated Financial Statements................................ 25-33
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been
omitted.
19
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and
Board of Directors
IMCO Recycling Inc.
We have audited the accompanying consolidated balance sheets of IMCO
Recycling Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of IMCO Recycling Inc. and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
February 5, 1996
20
CONSOLIDATED BALANCE SHEETS
- ---------------------------
IMCO RECYCLING INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
DECEMBER 31,
1995 1994
-------- -------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,678 $ 2,854
Accounts receivable 27,442 19,239
Inventories 9,146 3,186
Deferred income taxes 1,298 1,978
Other current assets 1,353 598
-------- -------
TOTAL CURRENT ASSETS 47,917 27,855
PROPERTY AND EQUIPMENT, net 78,769 61,046
INTANGIBLE ASSETS
Excess of acquisition cost over the fair value of net assets
acquired, net of accumulated amortization of $3,866 and
$3,219 at December 31, 1995 and 1994, respectively 10,968 6,056
Patents, net 233 296
-------- -------
TOTAL INTANGIBLE ASSETS 11,201 6,352
OTHER ASSETS, net 1,990 1,538
-------- -------
$139,877 $96,791
-------- -------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,691 $ 4,150
Accrued liabilities 7,059 4,156
Dividends payable -- 1,152
Current maturities of long-term debt 2,169 1,094
-------- -------
TOTAL CURRENT LIABILITIES 19,919 10,552
LONG-TERM DEBT 29,754 11,860
DEFERRED INCOME TAXES 5,516 4,857
OTHER LONG-TERM LIABILITIES 1,412 1,232
STOCKHOLDERS' EQUITY
Preferred Stock; par value $.10; 8,000,000 shares authorized;
none issued -- --
Common Stock; par value $.10; 20,000,000 shares authorized,
11,964,911 issued at December 31, 1995; 11,756,698 issued
at December 31, 1994 1,196 1,176
Additional paid in capital 27,282 23,511
Retained earnings 56,672 45,421
Treasury stock, at cost; 207,972 shares at December 31, 1995;
244,910 shares at December 31, 1994 (1,874) (1,818)
-------- -------
83,276 68,290
-------- -------
$139,877 $96,791
-------- -------
-------- -------
See notes to consolidated financial statements
21
CONSOLIDATED STATEMENTS OF EARNINGS
- -----------------------------------
IMCO RECYCLING INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
REVENUES $ 141,167 $ 101,116 $ $74,216
Cost of sales 110,228 78,478 57,452
---------- ---------- ----------
GROSS PROFIT 30,939 22,638 16,764
Selling, general and administrative
expense 10,027 6,440 5,023
Nonrecurring litigation expense -- 1,635 --
Interest expense 1,073 1,014 897
Interest and other (income) (524) (154) (299)
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 20,363 13,703 11,143
Provision for income taxes 7,893 5,232 3,121
---------- ---------- ----------
NET EARNINGS $ 12,470 $ 8,471 $ 8,022
---------- ---------- ----------
NET EARNINGS PER COMMON SHARE $ 1.03 $ .73 $ .70
---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 12,108,216 11,643,846 11,524,223
See notes to consolidated financial statements
22
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
IMCO RECYCLING INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
-------- -------- --------
OPERATING ACTIVITIES:
Net earnings $ 12,470 $ 8,471 $ 8,022
Depreciation and amortization 9,353 7,367 6,201
Other noncash items 888 1,227 586
Provision for deferred taxes 1,167 1,859 654
Changes in noncash components of working capital
(excluding investing and financing transactions):
Accounts receivable 3,330 (5,829) (7,369)
Inventories (1,756) 95 (874)
Other current assets (546) (121) (31)
Accounts payable and accrued liabilities 1,383 553 (140)
-------- -------- --------
NET CASH FROM OPERATING ACTIVITIES 26,289 13,622 7,049
INVESTING ACTIVITIES:
Purchase of property and equipment (15,538) (6,646) (11,939)
Purchase of other businesses (20,137) (5,325) (5,103)
Other (1,304) (1,005) 58
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (36,979) (12,976) (16,984)
FINANCING ACTIVITIES:
Net (decrease) increase in short-term borrowings -- (1,800) 1,800
Proceeds from issuance of long-term debt 20,000 5,000 --
Principal payments of long-term debt (1,477) (2,751) (2,500)
Proceeds from issuance of common stock -- -- 332
Dividends paid (2,371) -- --
Other 362 94 (239)
-------- -------- --------
NET CASH FROM (USED BY) FINANCING ACTIVITIES 16,514 543 (607)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 5,824 1,189 (10,542)
BEGINNING CASH AND CASH EQUIVALENTS 2,854 1,665 12,207
-------- -------- --------
ENDING CASH AND CASH EQUIVALENTS $ 8,678 $ 2,854 $ 1,665
-------- -------- --------
SUPPLEMENTARY INFORMATION:
Cash payments for interest $ 1,357 $ 1,271 $ 1,440
Cash payments for taxes $ 6,440 $ 3,411 $ 2,535
See notes to consolidated financial statements
23
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- ----------------------------------------------------------
IMCO RECYCLING INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
COMMON STOCK TREASURY STOCK
-------------------- ---------------------
PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
---------- ------ ------- -------- -------- --------
BALANCE AT
DECEMBER 31, 1992 11,458,708 $1,146 $19,617 $30,080 (315,367) $(1,933)
Net earnings 8,022
Exercise of stock options 43,000 4 328 -- 5,000 31
Net treasury stock activity -- -- -- -- (24,170) (353)
Tax benefit from the
exercise of nonqualified
stock options -- -- 114 -- -- --
BALANCE AT
DECEMBER 31, 1993 11,501,708 1,150 20,059 38,102 (334,537) (2,255)
Net earnings -- -- -- 8,471 -- --
Cash dividend ($.10 per
share) -- -- -- (1,152) -- --
Litigation agreement -- -- 67 -- 25,000 185
Exercise of stock options -- -- 20 -- 19,735 (81)
Purchase of Phoenix Smelting 254,990 26 3,207 -- 44,892 333
Tax benefit from the
exercise of nonqualified
stock options -- -- 158 -- -- --
BALANCE AT
DECEMBER 31, 1994 11,756,698 1,176 23,511 45,421 (244,910) (1,818)
Net earnings -- -- -- 12,470 -- --
Cash dividend ($.105 per
share) -- -- -- (1,219) -- --
Exercise of stock options -- -- 234 -- 36,938 (56)
Purchase of Alumar
Associates, Inc. 208,213 20 3,354 -- -- --
Tax benefit from the
exercise of nonqualified
stock options -- -- 183 -- -- --
BALANCE AT
DECEMBER 31, 1995 11,964,911 $1,196 $27,282 $56,672 (207,972) $(1,874)
See notes to consolidated financial statements
24
IMCO RECYCLING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(dollars in tables are in thousands, except per share)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
IMCO Recycling Inc. and all of its subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated upon
consolidation. Investments in affiliated companies, owned 50% or less, are
recorded by the Company on the equity method. The Company's principal
business involves the owning and operating of aluminum recycling facilities.
The Company recycles scrap material for a fee and returns the material to its
customers, some of whom are the world's largest aluminum companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS:
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying amount
approximates fair value because of the short maturity of those instruments.
INVENTORIES:
Inventories are stated at the lower of average cost or market.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Major renewals and improvements
are capitalized, while maintenance and repairs are expensed when incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets.
Landfill closure costs are currently estimated to be in excess of $4,000,000
and are being accrued over the estimated useful lives of the landfills.
Landfill costs are depreciated as space in the landfill is used.
Interest is capitalized in connection with the construction of major
facilities. In 1995, 1994 and 1993, $438,000, $309,000, and $525,000 of
interest costs were capitalized, respectively.
25
NET EARNINGS PER SHARE:
Earnings per common share are based upon the weighted average number of
common and common equivalent shares outstanding in each period. Common
equivalent shares relate solely to outstanding warrants and stock options.
Warrants to purchase 50,000 shares of stock were outstanding at December 31,
1995. The warrants were issued in 1986 at an exercise price of $.10 per
share and have a 10-year life. Shares have been reserved relating to these
warrants.
AMORTIZATION OF INTANGIBLES:
The excess of original acquisition cost over the fair value of net assets
acquired is amortized on a straight-line basis over their expected life,
currently from 7-40 years. Management regularly reviews the remaining
goodwill with consideration toward recovery through future operating results.
Goodwill is evaluated by the Company on an undiscounted basis. Deferred debt
issuance costs, included in other assets, are being amortized over the term
of the long-term debt based upon the average amount of debt outstanding.
Patents are amortized over their remaining legal lives.
CREDIT RISK:
A majority of the Company's accounts receivable are due from companies in the
aluminum industry. Credit is extended based on evaluation of the customers'
financial condition and, generally, collateral is not required. Credit
losses are within management's expectations and historically have been very
low.
NOTE B -- ACQUISITIONS
In September 1995, the Company purchased all of the assets of an aluminum
recycling facility located in Bedford, Indiana from a private aluminum
company. The value of the transaction, which was accounted for as a
purchase, was approximately $8,500,000. Goodwill of about $2,000,000 related
to this acquisition is being amortized over 15 years. Had the acquisition
occurred on January 1, 1995, it would not have had a material impact on
either the revenues or net earnings of the Company.
In October 1995, the Company acquired all of the outstanding stock of Alumar
Associates, Inc. which owned Metal Mark, Inc. Metal Mark owned and operated
three aluminum recycling plants located in Chicago Heights, Illinois,
Sikeston, Missouri, and Pittsburg, Kansas and owned 50% of a fourth facility
in East Chicago, Indiana. The value of the transaction, which was accounted
for as a purchase, was about $8,500,000, with $4,000,000 paid in cash and the
balance consisting of 208,213 shares of the Company's common stock. In
addition, the Company repaid long-term debt of Alumar of about $8,245,000.
Goodwill related to the acquisition of about $2,000,000 is being amortized
over 15 years.
The following unaudited, summarized pro forma results of operations of the
combined entities of IMCO and Metal Mark, for the years ended December 31,
1994 and 1995, assuming the acquisition occurred as of the beginning of the
respective periods is as presented below:
26
1995 1994
-------- --------
Revenues $204,734 $168,288
Net Earnings $ 13,917 $ 9,637
Earnings per share $ 1.14 $ .81
This pro forma information does not purport to be indicative of what would
have occurred had the acquisition been made as of those dates or of results
which may occur in the future.
In September 1994, the Company purchased the stock of Phoenix Smelting
Corporation which operated an aluminum recycling facility in Loudon,
Tennessee through its wholly owned subsidiary, Metal Resources, Inc.
("Loudon"). The value of the transaction was approximately $10,000,000
including the Company's repayment of about $5,100,000 of Loudon debt and the
issuance of approximately 300,000 shares of common stock. Loudon had, and
the Company thereby acquired, a net operating loss carryforward ("NOL") of
about $1,100,000. The use of this NOL is subject to certain limitations and
will expire in the year 2009. The Company recorded a valuation allowance of
approximately $600,000 reducing the value of this NOL at the acquisition
date. Goodwill related to this purchase was about $250,000, which is being
amortized over 15 years. Had the acquisition occurred on January 1, 1994, it
would not have had a material impact on either revenues or net earnings of
the company.
In December 1993, a subsidiary of the Company acquired all of the assets of
an aluminum recycling plant in Corona, California from a private aluminum
company. The purchase cost was about $5,000,000. The Company recorded
goodwill of approximately $1,000,000 related to the purchase, which is being
amortized over 15 years.
NOTE C -- INVENTORIES
The components of inventories are:
DECEMBER 31,
1995 1994
------ ------
Finished Goods $6,839 $1,391
Raw Materials 1,986 1,440
Supplies 321 355
------ ------
$9,146 $3,186
------ ------
NOTE D -- PROPERTY AND EQUIPMENT
The components of property and equipment are:
DECEMBER 31,
1995 1994
-------- --------
Land, Buildings and Improvements $ 58,280 $ 45,329
Production Equipment and Machinery 49,236 37,278
Office Furniture, Equipment and Other 4,242 3,363
-------- --------
111,758 85,970
Accumulated Depreciation (32,989) (24,924)
-------- --------
$ 78,769 $ 61,046
-------- --------
27
In March 1992, the Company entered into an agreement with Barmet Aluminum
Corporation ("Barmet"), a subsidiary of CasTech Aluminum Group Inc., to
construct, own and operate the Uhrichsville plant adjacent to Barmet's
rolling mill in Uhrichsville, Ohio and to supply Barmet with all of its
secondary aluminum needs. The Uhrichsville plant, including costs for
capitalized interest and for the 1994 expansion, cost approximately
$20,750,000. Barmet has an option to acquire up to a 49% equity interest in
the Uhrichsville plant at a price equal to such equity percentage multiplied
by depreciated book value of the plant plus a premium to compensate the
Company for its recycling technology.
In 1996 the Company is planning to invest about $12,000,000 for a 50%
interest in a German joint venture to be called VAW-IMCO. This venture was
formed to own and operate two recycling facilities previously owned by VAW,
the largest aluminum company in Germany. The plants will serve the European
automotive market. In addition, the Company is planning to construct and
operate a new aluminum recycling facility in Coldwater, Michigan during
1996. The total cost is currently projected at approximately $12,000,000.
The Company will own 75% of this facility and it is intended to serve the
U.S. automotive market.
NOTE E -- INCOME TAXES
The provision for income taxes was as follows:
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
------ ------ ------
CURRENT:
Federal $5,241 $2,690 $2,017
State 1,485 683 450
------ ------ ------
6,726 3,373 2,467
DEFERRED:
Federal $1,678 $1,955 $ 649
State (511) (96) 5
------ ------ ------
1,167 1,859 654
------ ------ ------
$7,893 $5,232 $3,121
------ ------ ------
------ ------ ------
The tax expense computed by applying the statutory federal income tax rate to
earnings before taxes differed from the provision for taxes as follows:
28
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
------ ------ ------
Tax at statutory rates $7,127 $4,659 $3,789
Goodwill amortization,
nondeductible 91 59 61
State income taxes, net 633 387 292
Recognition of credit
carryforwards -- -- (699)
Other, net 42 127 (322)
------ ------ ------
Provision $7,893 $5,232 $3,121
------ ------ ------
------ ------ ------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets are as
follows:
DECEMBER 31,
1995 1994
------ ------
DEFERRED TAX LIABILITIES:
Accelerated depreciation $7,902 $6,534
Federal effect of state income taxes 516 169
Other 199 167
------ ------
Total Deferred Tax Liabilities 8,617 6,870
DEFERRED TAX ASSETS:
Net operating loss carryforwards 919 2,159
Tax credit carryforwards 1,709 1,334
Accruals 1,758 1,066
Federal effect of state income taxes 473 290
Other 230 105
------ ------
Gross Deferred Tax Assets 5,089 4,954
Valuation Allowance (690) (963)
------ ------
Net Deferred Tax Assets 4,399 3,991
------ ------
Net Deferred Tax Liability $4,218 $2,879
------ ------
At December 31, 1995, the Company had a $690,000 valuation allowance to
reduce certain deferred tax assets to amounts that are more likely to be
realized. The allowance includes $473,000 in related net operating loss
assets generated by Loudon, prior to its acquisition by the Company. The
remaining $217,000 relates to the Company's ability to utilize certain state
tax credits.
At December 31, 1995, the Company had $1,709,000 of unused tax credit
carryforwards, $168,000 of which expire in 1998, $69,000 of which expire in
2010, and $1,472,000 of which do
29
not expire. State investment tax credits total $1,077,000. However, due to
annual limitations on credit utilization, the Company has included $217,000
of this amount in the valuation allowance.
At December 31, 1995, the Company had approximately $1,511,000 of unused net
operating loss carryforwards for federal purposes which expire in the years
2001 and 2009, and had approximately $5,574,000 for state purposes which
expire in 2008 and 2009. The issuance of Common Stock in a public offering
on May 19, 1989 produced an "ownership change" under Section 382 of the
Internal Revenue Code of 1986, as amended, and subjects the Company's use of
the historic net operating loss carryforwards to certain limitations. Under
Section 382, the total amount of the Company's net operating loss
carryforwards remain unchanged. However, the net operating loss
carryforwards utilized to offset income earned in tax years subsequent to
1989 is limited to $3,877,000 per year. The 1994 acquisition of Loudon
resulted in an "ownership change" for Loudon. As a result of the change,
Loudon's net operating loss carryfowards will be subject to an annual
limitation of approximately $300,000 per year.
NOTE F -- LONG-TERM DEBT AND CREDIT LINE
Long-term debt is summarized as follows:
DECEMBER 31,
1995 1994
------- -------
11.18% MONY Senior Notes $ 8,000 $ 8,000
Variable Rate Term Loan 3,750 4,750
Variable Rate Converting Revolving Loan 4,750 --
7.28% MONY Senior Notes 15,000 --
Other 423 204
------- -------
Subtotal 31,923 12,954
Less current maturities 2,169 1,094
------- -------
Total $29,754 $11,860
------- -------
The 11.18% MONY Senior Notes are collateralized by the Company's Sapulpa,
Rockwood, and Morgantown property and equipment carried at a net amount of
approximately $27,600,000. The notes mature December 1, 1998.
The 7.28% MONY Senior Notes are unsecured. The Company can prepay the notes
at any time subject to a make-whole provision. The notes mature October 31,
2007 with mandatory annual prepayments of $3,000,000 scheduled for each
October 31 beginning in 2003.
The Senior Notes Agreements contain restrictive covenants concerning plant
maintenance, disposition and replacement of assets, insurance coverage,
financial reporting, and internal and external financing, investing, and
operating activities. There are also provisions limiting the payment of cash
dividends on and purchases of the Company's Common Stock; however, at
December 31, 1995, retained earnings of $6,234,000 were not restricted under
these provisions.
The Variable Rate Term Loan has an amortization schedule of five years and
bears interest at a fluctuating rate based on the Company's ratio of total
debt to earnings before interest, tax, depreciation and amortization. The
Company has the option to choose either the bank's prime rate,
30
the bank's cost of funds plus 1%, or the appropriate Eurodollar rate plus 1%.
At December 31, 1995, the rate was 6.8125%
The Variable Rate Converting Revolving Loan has an amortization schedule of
four years and bears interest at a fluctuating rate based on the Company's
ratio of total debt to earnings before interest, tax, depreciation and
amortization. The Company has the option to choose either the bank's prime
rate, the bank's cost of funds plus 1%, or the appropriate Eurodollar rate
plus 1%. At December 31, 1995, the rate was 6.875%.
The fair value of the Company's debt approximates its carrying value due to
its recent issuance, floating rate or relatively short maturity.
NOTE G -- RETIREMENT PLANS
The Company has a profit-sharing retirement plan covering most of its
employees who meet defined service requirements. Contributions are
determined annually by the Board of Directors and may be as much as 15% of
covered salaries. Contributions for 1995, 1994 and 1993 were $1,331,000,
$1,039,000, and $738,000, respectively.
Pursuant to the terms of the asset purchase agreement for the Bedford,
Indiana facility, the Company assumed the obligation to continue to provide a
pension plan for eligible hourly employees at this location. Pension
payments are determined by a premium factor times the number of years of
service for each employee. Pension payments for 1995 were $ 24,000.
NOTE H -- STOCK OPTION PLANS
In 1992 the Company adopted the 1992 Stock Option Plan, which provides for
the granting of nonqualified and incentive stock options to employees,
officers, consultants and nonemployee members of the Board of Directors.
Options granted to employees under this plan have various vesting periods.
Annually, nonemployee directors will be granted nonqualified stock options
exercisable after six months from the date of grant, equal to that number of
shares determined by dividing the annual director fee amount by the fair
market value of a share of common stock as of the date of grant. All options
granted under this plan, once vested, are exercisable for a period of up to
10 years from the date of grant, although options may expire earlier because
of termination of employment or service.
The 1992 Stock Option Plan allows for the payment of all or a portion of the
exercise price and tax withholding obligations in shares of the Company's
common stock delivered and/or withheld. Such payment or withholding will be
valued at fair market value as of the date of exercise. Participants making
use of this feature will automatically be granted a reload stock option to
purchase a number of shares equal to the number of shares delivered and/or
withheld. When a reload stock option is granted, a portion of the shares
issued to the participant will be designated as restricted stock for a period
of five years, although the restriction may be removed earlier under certain
circumstances. Reload stock options have an exercise price equal to the fair
market value as of the date of exercise of the original options and will
expire on the same date as the original options.
In 1995, 1994, and 1993 the Company acquired from employees and placed in the
treasury, 40,652, 27,665 and 24,170 shares, respectively, pursuant to
provisions of the Company's stock option plan. Such shares were tendered or
withheld in satisfaction of those employees' federal and
31
state withholding taxes on compensation resulting from the exercise of
nonqualified stock options and for the aggregate exercise cost of certain of
the options.
In 1990 the Company adopted an amended and restated stock option plan. This
plan provides for the granting of nonqualified and incentive stock options.
The number of shares of common stock authorized for issuance under the plan
is 1,200,000 shares. Options granted under the plan have various vesting
periods and are exercisable for a period of 10 years from the date of grant,
although options may expire earlier because of termination of employment.
Transactions under the option plans are as follows:
1995 1994 1993
------------ ------------ -----------
Options outstanding January 1, 1,172,402 833,555 725,425
Options granted 200,473 389,847 157,130
Options exercised (77,590) (47,400) (48,000)
Options canceled (3,921) (3,600) (1,000)
Options outstanding at
December 31, 1,291,364 1,172,402 833,555
Option price range at
December 31, $.10-$22.75 $.10-$13.75 $.10-$13.75
Option price exercise range $4.89-$13.75 $4.57-$13.63 $4.89-$7.55
Options exercisable at
December 31, 714,991 580,355 383,525
Options available for grant at
December 31, 391,646 38,198 424,445
NOTE I -- RELATED PARTY TRANSACTIONS
An agreement exists with one of the members of the Board of Directors for
consulting on Company operations on a month-to-month basis. This agreement,
which may be terminated on thirty days' notice, was previously paid at a
rate of $10,000 per month and for 1996 will be paid at the rate of $15,000
per month. Payment of $120,000 was made under this consulting agreement
during each of the three years ended December 31, 1995.
NOTE J -- SIGNIFICANT CUSTOMERS
During 1995, sales to Aluminum Company of America ("Alcoa") totaled
$32,400,000 or 23% of revenues. No other customer accounted for more than 10%
of revenues in 1995.
During 1994, sales to Alcoa totaled $30,382,000 or 30% of revenues. Sales to
Barmet Aluminum totaled $12,476,000 or 12% of revenues. No other customer
accounted for more than 10% of revenues in 1994.
During 1993, sales to Alcoa totaled $28,585,000 or 39% of revenues. Sales to
Barmet Aluminum totaled $10,569,000 or 14% of revenues. No other customer
accounted for more than 10% of revenues in 1993.
32
NOTE K -- QUARTERLY FINANCIAL DATA (Unaudited)
Quarterly financial results for 1995 and 1994 were as follows:
1ST 2ND 3RD 4TH TOTAL
1995 QUARTER QUARTER QUARTER QUARTER YEAR
- --------------------------------------------------------------------------
Revenues $30,746 $29,725 $32,105 $48,591 $141,167
Gross Profit $ 7,435 $ 7,315 $ 7,783 $ 8,406 $ 30,939
Income before tax $ 4,824 $ 4,933 $ 5,543 $ 5,063 $ 20,363
Net earnings $ 2,894 $ 2,959 $ 3,327 $ 3,290 $ 12,470
Earnings per share $ .24 $ .25 $ .27 $ .27 $ 1.03
1ST 2ND 3RD 4TH TOTAL
1994 QUARTER QUARTER QUARTER QUARTER YEAR
- --------------------------------------------------------------------------
Revenues $21,682 $23,070 $26,206 $30,158 $101,116
Gross Profit $ 4,819 $ 4,685 $ 6,065 $ 7,069 $ 22,638
Income before tax $ 3,187 $ 1,591 $ 4,070 $ 4,855 $ 13,703
Net earnings $ 2,032 $ 1,038 $ 2,589 $ 2,812 $ 8,471
Earnings per share $ .18 $ .09 $ .22 $ .24 $ .73
33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors of the
Company appears under the caption "Election of Directors" in the definitive
Proxy Statement (herein so called) of the Company relating to the Company's
1996 Annual Meeting of Stockholders, to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A of the
Securities Exchange Act of 1934, which information is incorporated herein by
reference. It is currently anticipated that the Proxy Statement will be
publicly available and mailed to stockholders in April 1996. Certain
information as to executive officers is included herein under Part I,
ITEM 1. "BUSINESS - EXECUTIVE OFFICERS."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears under the caption "Remuneration
of Directors and Officers" in the Proxy Statement, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears under the caption "Voting and
Principal Stockholders" in the Proxy Statement, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears under the captions
"Compensation Committee Report to Stockholders - Compensation Committee
Interlocks and Insider Participation" and "Remuneration of Directors and
Officers -- Directors Compensation" in the Proxy Statement, which
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Consolidated Financial Statements: See index to Consolidated
Financial Statements and Financial Statement Schedules on Page 19
hereof.
2. Consolidated Financial Statement Schedules: See index to
Consolidated Financial Statements and Financial Statement Schedules
on Page 19 hereof.
3. EXHIBITS:
34
3.1 Certificate of Incorporation of IMCO Recycling Inc., as amended,
filed as Exhibit 4.6 to the Company's Registration Statement on
Form S-2 (No. 33-48571) and incorporated herein by reference.
3.2 By-laws of IMCO Recycling Inc., as amended, filed as Exhibit 4.7
to the Company's Registration Statement on Form S-2 (No.
33-48571) and incorporated herein by reference.
4.1 Specimen Stock Certificate of the Common Stock, $0.10 par value,
of IMCO Recycling Inc., filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-2 (No. 33-48571) and
incorporated herein by reference.
10.1 Note Purchase Agreement, dated as of December 15, 1988, by and
among IMCO Recycling Inc., The Mutual Life Insurance Company of
New York, and MONY Life Insurance Company of America, filed as
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (the "1993 Form 10-K"), and
incorporated herein by reference.
10.2 Amendment, dated as of May 3, 1990, to Note Purchase Agreements
by and among IMCO Recycling Inc., The Mutual Life Insurance
Company of New York, MONY Life Insurance Company of America, and
MONY Legacy Life Insurance Company, filed as Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (the "1994 Form 10-K"), and incorporated
herein by reference.
10.3 Second Amendment, dated as of October 1, 1990, to Note Purchase
Agreements by and among IMCO Recycling Inc., The Mutual Life
Insurance Company of New York, MONY Life Insurance Company of
America, and MONY Legacy Life Insurance Company, filed as
Exhibit 10.3 to the Company's 1994 Form 10-K and incorporated
herein by reference.
10.4 Third Amendment, dated as of May 10, 1991, to Note Purchase
Agreements, by and among IMCO Recycling Inc., The Mutual Life
Insurance Company of New York, and MONY Life Insurance Company
of America, filed as Exhibit 10.4 to the Company's 1994 Form
10-K and incorporated herein by reference.
10.5 Fourth Amendment, dated as of November 27, 1991, to Note
Purchase Agreements by and among IMCO Recycling Inc., The Mutual
Life Insurance Company of New York, and MONY Life Insurance
Company of America, filed as Exhibit 10.5 to the Company's 1994
Form 10-K and incorporated herein by reference.
10.6 Amended and Restated Registration Agreement, dated September 30,
1988, among IMCO Recycling Inc., Merrill Lynch Interfunding
Inc., Don V. Ingram, Larry Thrasher, and PTX Partners, filed as
Exhibit 10.6 to the Company's 1993 Form 10-K and incorporated
herein by reference.
35
10.7 Amendment No. 1 to Amended and Restated Registration Agreement,
dated as of December 30, 1988, filed as Exhibit 10.7 to the
Company's 1994 Form 10-K and incorporated herein by reference.
10.8 Amendment, dated as of September 5, 1990, to Registration
Agreement between Merrill Lynch Interfunding Inc. and Don V.
Ingram, filed as Exhibit 10.8 to the Company's 1994 Form 10-K
and incorporated herein by reference.
10.9 IMCO Recycling Inc. Amended and Restated Stock Option Plan,
filed as Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992 (the
"1992 Form 10-K") and incorporated herein by reference.
10.10 Employment Agreement, effective as of April 1, 1991, by and
between IMCO Recycling Inc. and Richard L. Kerr, filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991 (the "1991 Form
10-K") and incorporated herein by reference.
10.11 Addendum to Employment Agreement-Stock Option, dated as of
April 1, 1987, by and among International Metal Co., Frontier
Texas Corporation, and Richard L. Kerr, filed as Exhibit
10.11 to the Company's 1994 Form 10-K and incorporated herein
by reference.
10.12 Employment Agreement, effective as of April 1, 1991, by and
between IMCO Recycling Inc. and Thomas W. Rogers, filed as
Exhibit 10.17 to the Company's 1991 Form 10-K and incorporated
herein by reference.
10.13 Employment Agreement, effective as of March 1, 1990 by and
between IMCO Recycling Inc. and Paul V. Dufour, filed as
Exhibit 10.15 to the Company's 1993 Form 10-K and incorporated
herein by reference.
10.13A Amendment to Employment Agreement, dated February 19, 1993,
by and between IMCO Recycling Inc. and Paul V. Dufour, filed as
Exhibit 10.18 to the Company's 1992 Form 10-K and incorporated
herein by reference.
10.14 Employment Agreement, effective as of April 1, 1991, by and
between IMCO Recycling Inc., and C. Lee Newton, filed as
Exhibit 10.17 to the Company,s 1993 Form 10-K and incorporated
herein by reference.
10.15 Employment Agreement, effective as of January 13, 1995, by
and between IMCO Recycling Inc. and Frank H. Romanelli, filed
as Exhibit 10.15 to the Company's 1994 Form 10-K and
incorporated herein by reference.
10.16 Assignment, dated September 16, 1986, from Clarence W. Haack
and Genevieve Haack to International Metal Co., filed as
Exhibit 10.16 to the Company's 1994 Form 10-K and incorporated
herein by reference.
*10.17 Agreement, dated as of August 26, 1995, between IMCO
Recycling Inc., Rockwood, Tennessee Facility, and
International Union, United Steelworkers of America.
36
10.18 Form of Stock Purchase Warrant between IMCO Recycling Inc.
and Don V. Ingram for the purchase of 50,000 shares of Common
Stock, filed as Exhibit 10.18 to the Company's 1994 Form 10-K
and incorporated herein by reference.
10.19 Split-Dollar Life Insurance Agreement, dated as of November
5, 1990, between Thomas W. Rogers and IMCO Recycling Inc.,
filed as Exhibit 10.19 to the Company's 1994 Form 10-K and
incorporated herein by reference (The Company is a party to
two virtually identical Split-Dollar Life Insurance Agreements
with Paul V. Dufour, C. Lee Newton, Richard L. Kerr and Frank
Romanelli. These agreements have been omitted since they are
substantially identical to Mr. Rogers' in all material
respects).
10.20 Stock Purchase Agreement among the former shareholders of
Interamerica Zinc, Inc. and IZI Acquisition Co., effective as
of January 1, 1992, filed as Exhibit (1) to the Company's
Current Report on Form 8-K, dated January 13, 1992, and
incorporated herein by reference.
10.21 Escrow Agreement, dated January 13, 1992, among IZI
Acquisition Company, Society Bank Michigan, and the former
shareholders of Interamerica Zinc, Inc., filed as Exhibit (2)
to the Company's Current Report on Form 8-K dated January 13,
1992, and incorporated herein by reference.
10.22 Supply Agreement between Barmet Aluminum Corporation and the
Company, dated March 2, 1992, filed as Exhibit 10.25 to the
Company's 1991 Form 10-K and incorporated herein by reference.
10.23 Right of First Refusal Agreement between Barmet Aluminum
Corporation and the Company, dated March 2, 1992, relating to
Barmet's Indiana recycling plant, filed as Exhibit 10.23 to
the Company's 1994 Form 10-K and incorporated by reference.
*10.24 Agreement, effective as of December 1, 1995, between IMCO
Recycling of Ohio Inc. and the United Mine Workers of America.
10.25 Consulting Agreement, dated as of May 31, 1985, between Don V.
Ingram and Frontier Texas Corporation, filed as Exhibit 10.25
to the Company's 1994 Form 10-K and incorporated herein by
reference.
10.26 IMCO Recycling Inc. 1992 Stock Option Plan, as amended December
15, 1994, filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1995, and incorporated herein by reference.
10.27 IMCO Recycling Inc. 1992 Bonus Participation Plan filed as
Exhibit 10.32 to the 1992 Form 10-K and incorporated herein by
reference.
10.28 Agreement, dated as of March 29, 1994, between IMCO Recycling
of California, Inc. and the International Brotherhood of
Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and
Helpers, filed as Exhibit 10.33 to the Company's 1993
37
Form 10-K and incorporated herein by reference.
10.29 Agreement, effective as of January 1, 1994, between IMCO
Recycling Inc. and Aluminum Company of America, filed as Exhibit
10.34 to the Company's 1993 Form 10-K and incorporated herein by
reference.
10.30 Agreement and Plan of Merger, dated September 20, 1994, among
IMCO Recycling Inc., IMCO Recycling of Tennessee, Inc., Phoenix
Smelting Corporation, and the shareholders of Phoenix Smelting
Corporation, filed as Exhibit 1 to the Company's Current Report
on Form 8-K, dated September 20, 1994, and incorporated herein
by reference.
10.31 Registration Rights Agreement, dated September 20, 1994, among
IMCO Recycling Inc. and the shareholders of Phoenix Smelting
Corporation, filed as Exhibit 2 to the Company's Current Report
on Form 8-K dated September 20, 1994, and incorporated herein by
reference.
10.32 Loan Agreement, dated September 20, 1994, between IMCO Recycling
Inc. and Texas Commerce Bank, National Association, filed as
Exhibit 3 to the Company's Current Report on Form 8-K, dated
September 20, 1994, and incorporated herein by reference.
10.33 Negative Pledge Agreement, dated September 20, 1994, between
IMCO Recycling Inc. and Texas Commerce Bank, National
Association, filed as Exhibit 4 to the Company's Current Report
on Form 8-K, dated September 20, 1994, and incorporated herein
by reference.
*10.34 First Amendment to Loan Documents, dated as of May 31, 1995, by
and between IMCO Recycling Inc. and Texas Commerce Bank National
Association.
10.35 First Amendment to processing agreement by and among the Rigid
Packaging division of Aluminum Company of America, the Company
and Metal Resources Inc., filed as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1995, and incorporated herein by reference.
10.36 Agreement and Plan of Merger, dated as of October 1, 1995, among
IMCO Recycling Inc., IMCO Recycling of Illinois Inc., Alumar
Associates, Inc. and the Shareholders, filed as Exhibit 1 to
the Company's Current Report on Form 8-K, dated October 3,
and incorporated herein by reference.
10.37 Registration Rights Agreement, dated as of October 1, 1995,
among IMCO Recycling Inc. and the Shareholders, filed as
Exhibit 2 to the Company's Current Report on Form 8-K, dated
October 3, 1995, and incorporated herein by reference.
*10.38 Second Amendment to Loan Documents, dated as of November 3,
1995, by and between IMCO Recycling Inc. and Texas Commerce
National Association.
*10.39 Note Purchase Agreement, dated as of November 29, 1995, by
and between IMCO Recycling Inc. and The Mutual Life Insurance
Company of New York.
38
*10.40 Fifth Amendment, dated as of November 29, 1995, to Note
Purchase Agreements by and among IMCO Recycling Inc., The
Mutual Life Insurance Company of New York, and MONY Life
Insurance Company of America.
*21 Subsidiaries of IMCO Recycling Inc., as of March 15, 1996.
*23 Consent of Ernst & Young LLP.
*27 Financial Data Schedule.
*Filed herewith
(b) Reports on Form 8-K filed in fourth quarter 1995:
1. The Company filed a current report on Form 8-K dated October 3,
1995, under "Item 2 - Acquisition or Disposition of Assets,"
reporting the Company's acquisition of Alumar Associates, Inc.
and under "Item 5 - Other Events," reporting the acquisition of
the Bedford, Indiana assets.
(c) See sub-item (a) above.
(d) See sub-item (a) above.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 25, 1996 IMCO Recycling Inc.
By: /s/ Robert R. Holian
---------------------------
Robert R. Holian
Vice President and
Controller, Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, This
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Don V. Ingram Director, Chairman of the Board March 25, 1996
- -----------------------
Don V. Ingram
/s/ Jack M. Brundrett Director March 25, 1996
- -----------------------
Jack M. Brundrett
/s/ Ralph L. Cheek Director March 25, 1996
- -----------------------
Ralph L. Cheek
/s/ John J. Fleming Director March 25, 1996
- -----------------------
John J. Fleming
/s/ Richard Hanselman Director March 25, 1996
- -----------------------
Richard Hanselman
/s/ Thomas James Director March 25, 1996
- -----------------------
Thomas James
/s/ Don Navarro Director March 25, 1996
- -----------------------
Don Navarro
/s/ Jack C. Page Director March 25, 1996
- -----------------------
Jack C. Page
/s/ Frank H. Romanelli Director, President & Chief March 25, 1996
- ----------------------- Executive Officer
Frank H. Romanelli
/s/ Paul V. Dufour Executive Vice President March 25, 1996
- ----------------------- Finance and Administration
Paul V. Dufour (Principal Financial Officer)
40
/s/ Robert R. Holian Vice President and Controller March 25, 1996
- ----------------------- (Principal Accounting Officer)
Robert R. Holian
41