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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, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____ to ____
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Commission File Number: 0-25642
COMMONWEALTH INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3245741
(State of incorporation) (I.R.S. Employer Identification No.)
500 West Jefferson Street
19th Floor
Louisville, Kentucky 40202-2823
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (502) 589-8100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock; Stock Purchase Rights
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. |_|
The aggregate market value of the common stock held by
non-affiliates of the registrant as of March 10, 2000 was $141,942,000.
The number of shares outstanding of the registrant's common stock as of
March 10, 2000 was 16,611,835.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to stockholders of Commonwealth
Industries, Inc. for the year ended December 31, 1999 are incorporated by
reference into Parts I and II and portions of the definitive Proxy Statement
dated March 24, 2000 for the 2000 Annual Meeting of Stockholders to be held
April 28, 2000 are incorporated by reference into Part III.
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COMMONWEALTH INDUSTRIES, INC.
FORM 10-K
For the Year Ended December 31, 1999
INDEX
PART I Page
----
Item 1. Business.................................................................3
Item 2. Properties..............................................................11
Item 3. Legal Proceedings.......................................................11
Item 4. Submission of Matters to a Vote of Security Holders.....................11
Item E.O. Executive Officers of the Registrant....................................11
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters....12
Item 6. Selected Financial Data.................................................13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..............13
Item 8. Financial Statements and Supplementary Data.............................13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures...........................................13
PART III
Item 10. Directors and Executive Officers of the Registrant......................14
Item 11. Executive Compensation..................................................14
Item 12. Security Ownership of Certain Beneficial Owners and Management..........14
Item 13 Certain Relationships and Related Transactions..........................14
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K..........14
Signatures..............................................................20
PART I
Item 1. Business.
Commonwealth Industries, Inc. (the "Company") is one of North
America's leading manufacturers of aluminum sheet and, through its Alflex
Corporation subsidiary ("Alflex"), of electrical flexible conduit and prewired
armored cable.
The Company's aluminum sheet products are produced using the
conventional, direct -chill rolling ingot casting process at the Company's
multi-purpose aluminum rolling mill at Lewisport, Kentucky, one of the largest
in North America, and by the continuous casting process at its facilities
located in Uhrichsville, Ohio, and Carson, California. The Company operates
coating lines at the Lewisport mill and at Company facilities in Bedford, Ohio,
and Torrance, California. It also operates tube mills at the Bedford and Carson
locations. The electrical flexible conduit and prewired armored cable products
are manufactured at Alflex facilities in Long Beach, California and Rocky Mount,
North Carolina.
The aluminum sheet products manufactured by the Company are generally
referred to as common alloy products. They are produced in a number of aluminum
common alloys with thicknesses (gauge) of 0.008 to 0.250 inches, widths of up to
72 inches, and a variety of physical properties and packaging, in each case to
meet customer specifications. These products are sold to distributors and
end-users, principally for use in building and construction products such as
roofing, siding, windows and gutters; transportation equipment such as truck
trailers and bodies and automotive parts; and consumer durables such as
cookware, appliances and lawn furniture. The Bedford and Carson facilities also
fabricate aluminum sheet into welded tube products for various markets.
Substantially all of the Company's aluminum sheet products are produced in
response to specific customer orders. Production of aluminum sheet products in
1999 was 1.023 billion pounds or about 94% of capacity. In 1999, the North
American market for aluminum sheet products, excluding rigid container sheet,
foil and exports, was approximately 4.1 billion pounds.
Alflex manufactures metallic (aluminum and steel) and non-metallic
(plastic) electrical flexible conduit and prewired armored cable, utilizing
aluminum sheet manufactured by the Company. These products provide mechanical
protection for electrical wiring installed in buildings in accordance with local
building code requirements. Armored cable differs from electrical conduit in
that it is pre-wired by Alflex, whereas end-users must pull wire through
electrical conduit when conduit is installed. These products are used primarily
by electrical contractors in the construction, renovation and remodeling of
commercial and industrial facilities and multi-family dwellings. They also are
used in the heating, ventilating and air-conditioning ("HVAC"), original
equipment manufacturers ("OEM") and Do-It-Yourself ("DIY") markets. The products
include preassembled and prepackaged products for commercial and DIY markets and
commercial pre-fabricated wiring systems which provide significant savings in
labor and installation costs for end-users.
Historically, electrical wires were housed in rigid pipes in the walls
of buildings. Rigid pipe remains the most widely used means of protecting wiring
in commercial and other non-residential construction. Electrical flexible
conduit made from steel was introduced in the 1920s. Flexible conduit is
significantly easier to install than rigid pipe, resulting in cost savings to
the installer. Aluminum flexible conduit, introduced to the market by Alflex,
has in recent years become a significant factor due to its ease of installation,
lighter weight and ease of cutting compared to steel flexible conduit or rigid
pipe. In wet, harsh or corrosive environments, non-metallic or plastic jacketed
steel flexible conduit may be used. Armored cable (conduit with pre-installed
wire) made of steel or aluminum has captured an increasing share of the market
from rigid pipe due to its pre-assembly, ease of installation and overall cost
effectiveness.
The Company estimates that at December 31, 1999 it had a backlog of
firm orders for which product specifications have been defined of 255.5 million
pounds of aluminum sheet products with an aggregate sales price of $275.9
million, compared to an estimate of 305.9 million pounds with an aggregate sales
price of $292.2 million at December 31, 1998. Backlog is not a significant
factor for the Company's electrical products.
Aluminum Sheet Products
Manufacturing
The Company's aluminum sheet manufacturing facilities are comprised of
the rolling mills at Lewisport, Kentucky, Uhrichsville, Ohio, and Carson,
California, coating facilities at Lewisport, Bedford, Ohio, and Torrance,
California, and tube mills at Bedford and Carson.
The Lewisport mill uses the conventional, vertical direct-chill,
rolling ingot casting process. This process permits the production of
traditional aluminum sheet with strength, hardness, formability, finishing and
other characteristics preferred for many applications. The flexibility permitted
by this multi-purpose rolling mill enables the Company to target higher margin
products, manufacture a variety of products with consistent high quality and
respond quickly to shifts in market demand. In 1999, the Lewisport mill produced
617 million pounds of aluminum sheet products. At full capacity utilization,
unit costs of converting metal to aluminum sheet products at Lewisport are
believed to be among the lowest in the industry for plants using the
conventional process.
The Uhrichsville and Carson mills use low-cost, scrap-based twin-belt
mini-mill continuous casting production technology. This process permits the
efficient production of aluminum sheet alloys used in building and construction
and other applications not requiring the more complex alloys or the physical
characteristics better provided by the conventional casting method. The process
eliminates several steps associated with conventional casting, thereby reducing
manufacturing costs. Capital costs also are significantly lower than for mills
using the conventional casting process. Since 1993, the annual capacity of the
Uhrichsville and Carson mills has been increased by over 75% from approximately
250 million pounds to 445 million pounds in 1999. The increased capacity and a
continuous improvement strategy resulted in a significant reduction in sheet
production costs. The Company believes that its continuous cast mill in
Uhrichsville has the lowest conversion costs per pound in the world.
Aluminum Supply
Most of the aluminum metal used by the Company's rolling mills is
purchased, principally from or through aluminum scrap dealers or brokers, in the
form of aluminum scrap. The Company believes it is one of the largest users of
aluminum scrap other than beverage can scrap in the United States and that the
volume of its purchases assists it in obtaining scrap at competitive prices. The
Company's remaining requirements are met with purchased primary metal, including
metal produced in Russia to specifications that differ from the industry
standard for primary aluminum but that is appropriate for the Company's needs.
Casting and Rolling
At Lewisport, scrap, in some cases after processing in the Company's
recycling facilities, and primary aluminum are melted in induction or
reverbatory furnaces. Small amounts of copper, magnesium, manganese and other
metals are added to produce alloys with the desired hardness, formability and
other physical characteristics. The molten aluminum is then poured through a
mold surrounded by circulating water, which cools and solidifies into an ingot
about 24 inches thick and weighing as much as 40,000 pounds. The cooled ingot is
conveyed to the rolling mill area for further processing. During 1999, the
Company spent approximately $0.7 million and is planning to spend an estimated
additional $0.2 million during the 2000-2001 period to bring the south casting
facilities at Lewisport into compliance with more stringent clean air regulatory
regulations expected to come into effect in 2002. In addition, during 1999 the
Company spent approximately $4.2 million in the north casting facilities at
Lewisport to increase the Company's ability to utilize lower cost aluminum scrap
units.
The rolling ingots are heated to a malleable state in soaking pits or
tunnel furnaces. Then, in the next two stages--hot and cold rolling--the ingot
is passed between rolls under pressure, causing it to become thinner and longer.
The first rolling stage takes place in a "reversing" mill, so named because the
ingot is passed back and forth between the work rolls, reversing itself after
each pass. After it passes through the reversing mill the aluminum sheet moves
through a continuous multi-stand hot mill, and then is cooled and cold rolled to
its final thickness.
The Uhrichsville and Carson rolling mills employ a continuous casting
process in which molten aluminum is fed into a caster which produces a
continuous thin slab that is immediately hot rolled into semi-finished aluminum
sheet in a single manufacturing process. The aluminum sheet is then cooled and
cold rolled to its final thickness as in the conventional process. The
Uhrichsville and Carson mills use twin-belt thin-slab continuous casting, which
the Company believes is the most efficient and most productive form of
continuous casting.
The Company and IMCO Recycling, Inc ("IMCO") are parties to a Supply
Agreement under which IMCO serves as the major supplier of recycled aluminum for
the Company's Uhrichsville mill. Under the Supply Agreement, the Company
purchases aluminum scrap and delivers it to IMCO who then processes and converts
it into molten metal at its recycling and processing facility located adjacent
to the Company's mill. The Company is responsible for the treatment and disposal
of the waste generated as a result of IMCO's processing services on behalf of
the Company. The Supply Agreement expires March 31, 2009. The Company has an
option to purchase the IMCO facility and a right of first refusal if IMCO wishes
to sell the facility.
The Carson rolling mill processes its own scrap to produce molten
metal, utilizing current delacquering and melting technology.
The Company has paid a one-time license fee for certain technology used
in its continuous casting process. The license agreement allows the Company the
use of certain inventions, technical discoveries and apparatus of the licensor
in the manufacturing process.
Finishing and Coating
After hot and cold rolling is complete, the aluminum sheet is leveled
to ensure required flatness and may be slit into narrower widths, embossed or
painted to customers' specifications.
The Company is an industry leader in the development and production of
superior quality coated aluminum products and operates at Lewisport the largest
coating line integrated with a United States rolling mill. Coating lines at the
Company's Bedford and Torrance facilities serve the Uhrichsville and Carson
rolling mills. In the coating process, aluminum sheet is chemically cleaned,
painted and then cured to produce a durable coated surface.
Packaging and Shipping
Finished products are shipped to customers by truck or rail in coils of
various size and weighing up to 30,000 pounds.
Electrical Products
Alflex fabricates its flexible conduit and armored cable at its Long
Beach, California and Rocky Mount, North Carolina facilities. The Rocky Mount
facility was completed in 1999 with production starting in the second quarter of
1999. This facility increased Alflex's capacity for cable products by
approximately 50%. Alflex purchases its aluminum sheet from the Company. Alflex
also uses significant amounts of copper and steel as raw materials.
Alflex fabricates its electrical products by slitting aluminum or steel
sheet on specialized narrow-width slitting equipment, after which the sheet is
coiled. The coils are then fed through proprietary forming machines to produce
the flexible conduit. For its cable products, Alflex draws copper into wire,
coats the wire with plastic insulation and, for certain products, wraps the
coated wire with paper or plastic. The protective armoring is then wrapped
around the cabled wire. To produce its non-metallic conduit, Alflex uses a
specialized co-extrusion process involving both rigid and flexible plastics
(PVC). After production, the conduit and cable products are cut to length and
packaged. Alflex designs and builds much of the equipment used to manufacture
its products.
During 1998, the Company executed a strategic alliance with BICCGeneral
whereby beginning in the second half of 1999, Alflex ceased drawing wire and
coating the wire with plastic insulation, and instead purchases all of its
copper wire requirements from BICCGeneral.
Alflex has designed its manufacturing processes to allow it to produce
a wide range of electrical flexible conduit and prewired armored cable products.
The Company believes this manufacturing flexibility has contributed
significantly to the growth in this business. Also, since the acquisition of the
Alflex business, the Company has increased Alflex's electrical conduit and cable
manufacturing capacity. Production volume increased from 519 million feet in
1997 to 613 million feet in 1999.
Customers and Markets
The Company's aluminum sheet products are sold to distributors as well
as end-users, principally in the building and construction, transportation and
consumer durables markets. The Company ceased manufacturing rigid container
sheet ("RCS") for the packaging market during 1999 in order to focus all of the
Company's resources on its core products.
The following table sets forth for 1999 and 1998 the percentage of
aluminum sheet net shipments contributed by each of these classes of customers
and the Company's estimate of its share of these markets in North America.
% of Net Shipments % Market Share
------------------ --------------
1999 1998 1999 1998
---- ---- ---- ----
Building and construction 41 39 34 32
Distribution 31 30 22 21
Transportation 13 12 18 17
Consumer durables and other 11 11 12 11
Rigid container sheet (packaging) 4 8 1 2
--- ---
100 100
=== ===
The building and construction sector is the largest end-use market
other than the packaging market for common alloy aluminum sheet products.
The Company believes it is the largest supplier of common alloy
aluminum sheet to distributors. Distributors, in some cases after slitting,
punching, leveling or other processing, resell the Company's products into
end-use markets, including the building and construction, transportation and
consumer durables markets.
The Company is one of the largest suppliers of aluminum sheet products
to North American manufacturers of transportation equipment, including truck
trailers and bodies, recreational vehicles and automobile parts.
The largest volume in the category of consumer durables and other
markets for the Company is reroll stock sold for further processing and
conversion for a variety of markets. Other major end-uses of this product
category are cookware, appliances and irrigation pipe.
Packaging is the largest single end-use of aluminum sheet, accounting
for about one-half of the estimated world-wide market. Much of this product is
produced by large, single-purpose rolling mills. As previously mentioned, the
Company exited the packaging market during 1999.
Market share estimates exclude heat-treated aluminum plate and sheet,
which the Company does not produce. The Company estimates that heat-treated
products constitute an immaterial portion of the end-use markets served by the
Company.
Company sales are made to customers located primarily throughout North
America. Sales outside North America have not been significant. No single
customer accounted for more than 10% of 1999 net sales.
Sales of aluminum sheet products are made through the Company's own
sales force which is strategically located to provide North American coverage.
An integrated computer system provides the Company's employees with on-line
access to inventory status, production schedules, shipping information and
pricing data to facilitate immediate response to customer inquiries.
Many of the Company's aluminum sheet markets are seasonal. Demand in
the building and construction and transportation markets is generally lower in
the fall and winter seasons than in the spring and summer. Such factors
typically result in higher operating income in the spring and summer months.
Alflex electrical products are sold primarily through independent sales
representatives to electrical distributors. Distributors represented
approximately 84% of Alflex net sales in 1999. The remaining sales are made to
the do-it-yourself ("DIY"), original equipment manufacturer ("OEM") and heating
ventilation and air conditioning ("HVAC") markets. The independent sales
representatives do not market Alflex's products exclusively, but they do not
sell products that are in direct competition with products manufactured and sold
by Alflex. Alflex serves over 6,000 customers.
Alflex maintains registered trademarks on certain of its flexible
conduit and armored cable systems, including Ultratite, Galflex, the Alflex name
and its design, Electrician's Choice, Computer Blue, Duraclad, Armorlite and
PowerSnap. While Alflex considers these trademarks to be important to its
business, it does not believe it is dependent upon the trademarks for the
continuation of its business.
Competition
The Company competes in the production and sale of common alloy
aluminum sheet products with some 20 other aluminum rolling mills in North
America and with imported products.
Aluminum Company of America ("Alcoa") and Alcan Aluminium Ltd.
("Alcan") have a significantly larger share of the total United States market
for aluminum sheet products, including packaging and aluminum foil. However, in
the market for common alloy aluminum sheet products other than can sheet and
aluminum foil, the market share leaders are Alcoa, Alcan and the Company.
During 1999, Alcoa announced that it was purchasing Reynolds Metal
Company and Alcan announced that it was merging with Pechiney of France and
Algroup of Switzerland. Both transactions are expected to be completed in 2000
and the Company believes that the effect of these transactions on competition
can not be determined at this time.
The Company competes with other rolled products suppliers on the basis
of quality, price, timeliness of delivery and customer service.
Aluminum also competes with other materials such as steel, plastic
and glass for various applications.
Alflex competes with national and regional competitors and imported
products, both in the electrical flexible conduit and prewired armored cable
industry and in the pipe and wire industry. Competition is principally on the
basis of product availability and features, price and customer service.
Research and Development
The Company conducts research and development activities at its rolling
mills as part of its ongoing operations to improve product quality and reduce
manufacturing costs. Outside consultants also are utilized.
Alflex focuses its research and development activities on the
development of new products and the improvement of its conduit and cable
manufacturing processes through the development of proprietary manufacturing
equipment and the reduction of waste.
The estimated amounts spent during 1999, 1998 and 1997 on
Company-sponsored research and development activities were $1.4 million, $0.9
million and $0.8 million, respectively.
Environmental Matters
The Company's operations are subject to increasingly stringent
environmental laws and regulations governing air emissions, wastewater
discharges, the handling, disposal and remediation of hazardous substances and
wastes and employee health and safety. These laws can impose joint and several
liability for releases or threatened releases of hazardous substances upon
statutorily defined parties, including the Company, regardless of fault or the
lawfulness of the original activity or disposal. The Company believes it is
currently in material compliance with applicable environmental laws and
regulations.
Future regulations, under the Clean Air Act and otherwise, will impose
stricter emission requirements on the aluminum industry. While the Company
believes that current pollution control measures at most of the emission sources
at its facilities will meet these anticipated future requirements, additional
measures at some of the Company's facilities, including Lewisport as discussed
above under "Aluminum Sheet Products-Casting and Rolling", may be required.
The Company has been named as a potentially responsible party at
seven federal superfund sites and has completed closure activities at two of the
sites for past waste disposal activity associated with closed recycling
facilities. A trust fund exists to fund the activity at one of the sites
undergoing closure and was established through contributions from two other
parties in exchange for indemnification from further liability. The Company is
reimbursed from the trust fund for approved closure and postclosure expenditures
incurred at the site. The balance remaining in the trust fund at December 31,
1999 was approximately $0.4 million. In determining the adequacy of the
Company's aggregate environmental contingency accrual, the assets of the trust
fund were taken into account. At the five other federal superfund sites, the
Company is a minor contributor and has satisfied its obligations at two of the
sites and expects to resolve its liability at the remaining three sites for a
nominal amount. The Company is under orders by agencies in three states for
environmental remediation at four sites, two of which are currently operating
and two of which have been closed. Based on currently available information, the
Company estimates the range of possible remaining expenditures with respect to
the above matters is between $9 million and $13 million.
The Company acquired its Lewisport rolling mill and an aluminum smelter
at Goldendale, Washington ("Goldendale"), from Lockheed Martin in 1985. In
connection with the transaction, Lockheed Martin indemnified the Company against
expenses relating to environmental matters arising during the period of Lockheed
Martin's ownership of those facilities.
Environmental sampling at Lewisport has disclosed the presence of
contaminants, including polychlorinated biphenyls (PCBs), in a closed Company
landfill. The Company has not yet determined the extent of the contamination or
the nature and extent of remedial measures that may be required. Accordingly,
the Company cannot at present estimate the cost of any remediation that may be
necessary. Management believes the contamination is covered by the Lockheed
Martin indemnification, which Lockheed Martin disputes.
The aluminum smelter at Goldendale was operated by Lockheed Martin
until 1985 and by the Company from 1985 to 1987 when it was sold to Columbia
Aluminum Corporation ("Columbia"). Past aluminum smelting activities at
Goldendale have resulted in environmental contamination and regulatory
involvement. A 1993 Settlement Agreement among the Company, Lockheed Martin and
Columbia allocated responsibility for future remediation at 11 sites at the
Goldendale smelter. If remediation is required, estimates by outside consultants
of the probable aggregate cost to the Company for these sites range from $1.3
million to $7.2 million. The apportionment of responsibility for other sites at
Goldendale is left to alternative dispute resolution procedures if and when
these locations become the subject of remedial requirements.
The Company has been named as a potentially responsible party at three
third-party disposal sites relating to Lockheed Martin operations, for which
Lockheed Martin has assumed responsibilitiy.
The Company's aggregate loss contingency accrual for environmental
matters was $9.6 million at December 31, 1999, which covers all environmental
loss contingencies that the Company has determined to be probable and reasonably
estimable. It is not possible, however, to predict the amount or timing of cost
for future environmental matters which may subsequently be determined. Although
the outcome of any such matters, to the extent they exceed any applicable
accrual, could have a material adverse effect on the Company's consolidated
results of operations or cash flows for the applicable period, the Company
believes that such outcome will not have a material adverse effect on the
Company's consolidated financial condition, results of operations or cash flows.
The Company has incurred and will continue to incur capital and
operating expenditures for matters relating to environmental control and
monitoring. Capital expenditures of the Company for environmental control and
monitoring for 1999 and 1998 were $1.5 million and $2.1 million, respectively.
All other environmental expenditures of the Company, including remediation
expenditures, for 1999, 1998 and 1997 were $2.3 million, $1.0 million, and $3.1
million, respectively.
The Company has planned environmental capital expenditures for 2000 and
2001 of $0.4 million and $1.0 million, respectively, which includes the amounts
which may be spent to meet future clean air requirements at Lewisport as
discussed above under "Aluminum Sheet Products-Casting and Rolling".
Employees
At December 31, 1999, the Company employed 2,331 persons, of whom 1,647
were full-time non-salaried employees including 781 at Lewisport represented by
the United Steel Workers of America ("USW") and 228 at the Uhrichsville and
Bedford facilities represented by the Glass, Molders, Pottery, Plastic & Allied
Workers International, AFL-CIO, CLC union ("GMP"). Current collective bargaining
agreements with the USW and the GMP expire in July 2003 and December 2000,
respectively. The Company believes its relationships with its employees are
good.
The Company provides gain sharing plans for certain of its non-salaried
employees. Contributions to the plans are generally based upon a formula which
compares actual performance results to targets agreed upon by management and in
some cases the bargaining units. In addition, the Company provides defined
contribution 401(k) plans for certain non-salaried and salaried employees.
Item 2. Properties.
The following table sets forth certain information with respect to the
Company's principal operating properties. Substantially all of these properties
collateralize borrowings under the Company's senior secured bank credit
facility.
Location Nature Square Feet Status
-------- ------ ----------- ------
Louisville, Kentucky Administrative offices 30,000 Leased
Lewisport, Kentucky Rolling mill and coating 1,700,000 Owned
facility
Uhrichsville, Ohio Rolling mill 285,000 Owned
Carson, California Rolling mill and tube mill 103,000 Owned
Bedford, Ohio Coating facility and tube mill 164,000 Leased
Torrance, California Coating facility 60,000 Leased
Long Beach, California Alflex administrative offices 154,000 Leased
and manufacturing facility
Rancho Dominquez, Alflex distribution center 111,000 Leased
California
Rocky Mount, North Alflex manufacturing facility 105,000 Owned
Carolina and distribution center
Item 3. Legal Proceedings.
The Company is a party to non-environmental legal proceedings and
administrative actions all of which are of an ordinary routine nature incidental
to the business. In the opinion of management such proceedings and actions
should not, individually or in the aggregate, have a material adverse effect on
the Company's consolidated financial condition, results of operations or cash
flows.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
fourth quarter ended December 31, 1999.
Item E.O. Executive Officers of the Registrant.
The executive officers of the Company as of March 19, 2000 were:
Name Age Position with the Company
---- --- -------------------------
Mark V. Kaminski 44 President, Chief Executive Officer and Director
Donald L. Marsh, Jr. 53 Executive Vice President, Chief Financial Officer
and Secretary
Robert R. Beal 48 Vice President Communications and Computing Services
Henry Del Castillo 60 Vice President Finance
Gregory P. Givan 47 Vice President and Treasurer
Katherine R. Gould 36 Vice President Organizational Development
William G. Toler 43 Vice President Materials and Corporate Development
John F. Barron 48 Controller and Assistant Secretary
Lenna R. Macdonald 37 Principal Legal Counsel and Assistant Secretary
Mr. Kaminski joined the Company in 1987 as Marketing Manager. In 1989
he was promoted to Vice President of Operations and in 1991 he became President
and Chief Executive Officer. He is a director of the Indiana University
Athletics Board and Secat, Inc.
Mr. Marsh joined the Company in March 1996. Prior to that time he was
Senior Vice President of Castle Energy Corporation.
Mr. Beal has been with the Company since 1987 and was elected to his
present position in January 1998. His most recent previous position was Manager
of Process Engineering.
Mr. Del Castillo joined the Company in October 1997 as Alflex Business
Unit Controller and was elected to his present position in November 1999. From
1995 to 1997 he was Chief Financial Officer of Wherehouse Entertainment Inc., a
retail music and video chain undergoing financial restructuring. From 1981 to
1995 he served in a number of financial management positions, including Chief
Financial Officer, at Powerine Oil Company, an independent oil refiner.
Mr. Givan joined the Company in July 1997. From 1987 until 1997 he was
Second Vice President, Corporate Finance and most recently Director, Corporate
Finance and Risk Management and Assistant Treasurer of Providian Corp., a
financial services company.
Mr. Toler has been with the Company since 1980 and was elected to his
present position in November 1999. His most recent previous position was Vice
President Finance and Administration.
Ms. Gould joined the Company in July 1998. From 1996 through 1998 she
was Human Resource Manager of Gordonstone Coal Management, a joint venture
between ARCO Coal Australia and Mitsui. Prior to 1996 she held operations and
human resource management positions with Comalco Limited, an Australia-based
aluminum company.
Mr. Barron joined the Company in February 1997. From 1986 to 1996 he
held the position of Senior Vice President and Assistant Comptroller of Bank One
Kentucky, N.A.
Ms. Macdonald joined the Company in August 1999. From December 1998 to
1999 she served as Real Estate Counsel for Vencor, Inc. From 1993 to 1998 she
held in-house counsel positions with Bank One Corporation, including with its
subsidiary Banc One New Hampshire Asset Management Corporation as Assistant
General Counsel and Litigation Group Manager.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol CMIN. On March 10, 2000, there were 157 holders of record of
the Company's Common Stock. The Company estimates that there were a total of
4,300 stockholders on that date, including beneficial owners. Since becoming
publicly owned in March 1995, the Company has paid quarterly cash dividends on
its Common Stock of $0.05 per share.
The following table sets out the high and low sales prices for the
Common Stock for each quarterly period indicated, as quoted in the Nasdaq
National Market:
1999 High Low
---- ---- ---
First Quarter $12.63 $ 8.25
Second Quarter 14.75 7.38
Third Quarter 18.38 12.25
Fourth Quarter 14.63 9.63
1998
----
First Quarter $17.44 $13.75
Second Quarter 17.75 9.00
Third Quarter 10.75 5.50
Fourth Quarter 10.13 6.38
Item 6. Selected Financial Data.
The information captioned "Consolidated Selected Financial Data"
included on page 10 of the Company's annual report to stockholders for the year
ended December 31, 1999 is incorporated herein by reference. This information
sets forth selected consolidated statement of operations, operating and balance
sheet data for the years indicated. The financial information is derived from
the audited consolidated financial statements of the Company for such years.
This information should be read in conjunction with, and is qualified by
reference to, the consolidated financial statements of the Company and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" also incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information captioned "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included on pages 11 through 16
of the Company's annual report to stockholders for the year ended December 31,
1999 is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information under the subcaption "Risk Management" included in the
information captioned "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included on pages 11 through 16 of the
Company's annual report to stockholders for the year ended December 31, 1999 is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The following consolidated financial statements of the Company and
report of independent auditors included on pages 17 through 42 of the Company's
annual report to stockholders for the year ended December 31, 1999 are
incorporated herein by reference.
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
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 Item 401 (other than paragraph (b) thereof)
and Item 405 of Regulation S-K may be found under the caption Election of
Directors of the Company's Proxy Statement dated March 24, 2000 for the Annual
Meeting of Stockholders to be held on April 28, 2000 (the "Proxy Statement") and
is incorporated herein by reference. The information required by Item 401(b) of
Regulation S-K may be found under Item E.O. above.
Item 11. Executive Compensation.
The information required by Item 402 of Regulation S-K may be found
under the caption Executive Compensation in the Proxy Statement and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 403 of Regulation S-K may be found
under the caption Beneficial Ownership of Common Stock in the Proxy Statement
and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 404 of Regulation S-K may be found
under the caption Election of Directors--Compensation and Other Transactions
with Directors; Management Development and Compensation Committee Interlocks and
Insider Participation in the Proxy Statement and is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) List of Financial Statements filed
The following consolidated financial statements of the Company and
report of independent auditors included in the Company's annual report to
stockholders for the year ended December 31, 1999 were incorporated by reference
in Part II, item 8 of this report:
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a) (2) List of Financial Statement Schedules filed
The following report of independent accountants and financial statement
schedule should be read in conjunction with the Company's consolidated financial
statements.
Supplemental Schedule II - Valuation and Qualifying Accounts is filed
on page 20 of this report.
Report of Independent Accountants on the Company's financial statement
schedule filed as a part hereof for the years ended December 31, 1999, 1998 and
1997 is filed on page 19 of this report.
Financial statement schedules other than listed above have been omitted
since they are either not required or not applicable or the information is
otherwise included.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter
ended December 31, 1999.
(c) Exhibits
3.1 Restated Certificate of Incorporation, effective
April 18, 1997(incorporated by reference to
Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997).
3.2 By-laws, dated April 17, 1997.
3.3 Stockholder Protection Rights Agreement, dated as of
March 6, 1996, including forms of Rights Certificate,
Election to Exercise and Certificate of Designation
and Terms of Participating Preferred Stock of the
Company (incorporated by reference to Exhibits (1),
(2) and (3) to the Company's Registration Statement
No.
0-25642 on Form 8-A).
10.1 Executive Incentive Compensation Plan, as amended
December 4, 1995(incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.2 Long-term Executive Incentive Compensation Plan
(incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-87294 on
Form S-1).
10.3 1999 Executive Incentive Plan (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
March 31, 1999).
10.4 Salaried Employees Pension Plan (incorporated by
reference to Exhibit 10.4 to the Company's
Registration Statement No. 33-87294 on Form S-1).
10.5 Salaried Employees Performance Sharing Plan
(incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement No. 33-87294 on
Form S-1).
10.6 1995 Stock Incentive Plan, as amended and restated
April 23, 1999 (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999).
10.7 1997 Stock Incentive Plan, as amended and restated
April 23, 1999 (incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999).
10.8 Form of Severance Agreements between the Company and
Mark V. Kaminski, Scott T. Davis, Donald L. Marsh,
Jr., James K. O'Donnell, William G. Toler and John J.
Wasz (incorporated by reference to Exhibit 10.7 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.9 Deferred Compensation Plan (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996).
10.10 Second Amended and Restated Credit Agreement among
the Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, and
National Westminster Bank PLC, as agent, dated as of
December 19, 1997 (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997).
10.10.1 Amendment No. 1, dated as of December 22, 1998, to
Second Amended and Restated Credit Agreement among
the Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, and
National Westminster Bank PLC, as agent, dated as of
December 19, 1997 (incorporated by reference to
Exhibit 10.9.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998).
10.10.2 Agreement, of Resignation, Appointment and
Acceptance, dated as of August 18, 1999 among the
Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, National
Westminster Bank, as resigning agent, and Bank One,
Indiana, NA, as successor agent.
10.10.3 Joinder Agreement, dated as of October 29, 1999 among
the Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, and Bank
One, Indiana, NA, as administrative agent.
10.10.4 Joinder Agreement, dated as of December 31, 1999
among the Company, subsidiaries of the Company, the
several lenders from time to time parties thereto,
and Bank One, Indiana, NA, as administrative agent.
10.11 Amended and Restated Pledge and Security Agreement
entered into by the Company and its subsidiaries,
collectively, in favor of National Westminster Bank
PLC, as agent, dated November 29, 1996 (incorporated
by reference to Exhibit 10.9 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1996).
10.12 Amendment No. 1, dated as of December 19, 1997, to
the Amended and Restated Pledge and Security
Agreement entered into by the Company and its
subsidiaries, collectively, in favor of National
Westminster Bank PLC, as agent, dated November 29,
1996 (incorporated by reference to Exhibit 10.11 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.13 Receivables Purchase Agreement among Commonwealth
Financing Corp., the Company, Market Street Funding
Corporation and PNC Bank, National Association, dated
as of September 29, 1997 (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997).
10.14 Supply agreement by and among Commonwealth Aluminum
Corporation, IMCO Recycling of Ohio Inc. and IMCO
Recycling Inc., effective as of April 1, 1999
(incorporated by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999).
10.15 Indenture dated as of September 20, 1996 between the
Company, the Subsidiary Guarantors named therein and
Harris Trust and Savings Bank, Trustee (incorporated
by reference to Exhibit 4.2 to the Company's
Registration Statement No. 333-13661 on Form S-4).
10.15.1 First Supplemental Indenture, dated as of November
12, 1996, to Indenture dated as of September 20, 1996
(incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.15.2 Second Supplemental Indenture, dated as of October
16, 1998, to Indenture dated as of September 20, 1996
(incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1998).
10.15.3 Third Supplemental Indenture, dated as of
December 31, 1999, to Indenture dated as of
September 20, 1996.
13 Portions of the annual report to stockholders for the
year ended December 31, 1999 which are expressly
incorporated by reference in this filing.
21 Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule.
Report of Independent Accountants
Board of Directors
Commonwealth Industries, Inc.
Our audits of the consolidated financial statements referred to in our
report dated January 20, 2000 appearing on page 42 of the 1999 Annual Report to
Stockholders of Commonwealth Industries, Inc. and subsidiaries (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the consolidated financial
statement schedule listed in Item 14 (a) (2) of this Form 10-K. In our opinion,
this consolidated financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Louisville, Kentucky
January 20, 2000
Supplemental Schedule II
Commonwealth Industries, Inc.
Valuation and Qualifying Accounts
December 31, 1999, 1998 and 1997
(in thousands)
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions of Period
----------- --------- --------- ---------- ---------- ----------
Allowance for uncollectible accounts
December 31,1999 $2,484 $ 591 $ - $1,125 $1,950
December 31,1998 2,348 1,131 - 995 2,484
December 31,1997 2,235 242 - 129 2,348
Allowance for obsolete stores inventory
December 31,1999 $1,100 $ 121 $ - $ - $1,221
December 31,1998 1,100 - - - 1,100
December 31,1997 1,000 100 - - 1,100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized on March 24, 2000.
COMMONWEALTH INDUSTRIES, INC.
By /s/ Mark V. Kaminski
-----------------------
Mark V. Kaminski, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Paul E. Lego
- -------------------------
Paul E. Lego Chairman of the Board March 24, 2000
/s/ Mark V. Kaminski
- -------------------------
Mark V. Kaminski President, Chief Executive Officer and Director March 24, 2000
(Principal Executive Officer)
/s/ Catherine G. Burke
- -------------------------
Catherine G. Burke Director March 24, 2000
/s/ C. Frederick Fetterolf
- --------------------------
C. Frederick Fetterolf Director March 24, 2000
/s/ John E. Merow
- --------------------------
John E. Merow Director March 24, 2000
/s/ Victor Torasso
- --------------------------
Victor Torasso Director March 24, 2000
/s/ Donald L. Marsh, Jr.
- --------------------------
Donald L. Marsh, Jr. Executive Vice President, Chief Financial March 24, 2000
Officer and Secretary (Principal Financial
Officer)
/s/Henry Del Castillo
- -------------------------- Vice President Finance March 24, 2000
Henry Del Castillo (Principal Accounting Officer)
/s/ John F. Barron
- --------------------------
John F. Barron Controller and Assistant Secretary March 24, 2000
Exhibit Index
-------------
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation, effective
April 18, 1997(incorporated by reference to
Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997).
3.2 By-laws, dated April 17, 1997.
3.3 Stockholder Protection Rights Agreement, dated as of
March 6, 1996, including forms of Rights Certificate,
Election to Exercise and Certificate of Designation
and Terms of Participating Preferred Stock of the
Company (incorporated by reference to Exhibits (1),
(2) and (3) to the Company's Registration Statement
No.
0-25642 on Form 8-A).
10.1 Executive Incentive Compensation Plan, as amended
December 4, 1995(incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.2 Long-term Executive Incentive Compensation Plan
(incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-87294 on
Form S-1).
10.3 1999 Executive Incentive Plan (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
March 31, 1999).
10.4 Salaried Employees Pension Plan (incorporated by
reference to Exhibit 10.4 to the Company's
Registration Statement No. 33-87294 on Form S-1).
10.5 Salaried Employees Performance Sharing Plan
(incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement No. 33-87294 on
Form S-1).
10.6 1995 Stock Incentive Plan, as amended and restated
April 23, 1999 (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999).
10.7 1997 Stock Incentive Plan, as amended and restated
April 23, 1999 (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999).
10.8 Form of Severance Agreements between the Company and
Mark V. Kaminski, Scott T. Davis, Donald L. Marsh,
Jr., James K. O'Donnell, William G. Toler and John J.
Wasz (incorporated by reference to Exhibit 10.7 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.9 Deferred Compensation Plan (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996).
10.10 Second Amended and Restated Credit Agreement among
the Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, and
National Westminster Bank PLC, as agent, dated as of
December 19, 1997 (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997).
10.10.1 Amendment No. 1, dated as of December 22, 1998, to
Second Amended and Restated Credit Agreement among
the Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, and
National Westminster Bank PLC, as agent, dated as of
December 19, 1997 (incorporated by reference to
Exhibit 10.9.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998).
10.10.2 Agreement, of Resignation, Appointment and
Acceptance, dated as of August 18, 1999 among the
Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, National
Westminster Bank, as resigning agent, and Bank One,
Indiana, NA, as successor agent.
10.10.3 Joinder Agreement, dated as of October 29, 1999 among
the Company, subsidiaries of the Company, the several
lenders from time to time parties thereto, and Bank
One, Indiana, NA, as administrative agent.
10.10.4 Joinder Agreement, dated as of December 31, 1999
among the Company, subsidiaries of the Company, the
several lenders from time to time parties thereto,
and Bank One, Indiana, NA, as administrative agent.
10.11 Amended and Restated Pledge and Security Agreement
entered into by the Company and its subsidiaries,
collectively, in favor of National Westminster Bank
PLC, as agent, dated November 29, 1996 (incorporated
by reference to Exhibit 10.9 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1996).
10.12 Amendment No.1, dated as of December 19, 1997, to the
Amended and Restated Pledge and Security Agreement
entered into by the Company and its subsidiaries,
collectively, in favor of National Westminster Bank
PLC, as agent, dated November 29, 1996 (incorporated
by reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1997).
10.13 Receivables Purchase Agreement among Commonwealth
Financing Corp., the Company, Market Street Funding
Corporation and PNC Bank, National Association, dated
as of September 29, 1997 (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997).
10.14 Supply agreement by and among Commonwealth Aluminum
Corporation, IMCO Recycling of Ohio Inc. and IMCO
Recycling Inc., effective as of April 1, 1999
(incorporated by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999).
10.15 Indenture dated as of September 20, 1996 between the
Company, the Subsidiary Guarantors named therein and
Harris Trust and Savings Bank, Trustee (incorporated
by reference to Exhibit 4.2 to the Company's
Registration Statement No. 333-13661 on Form S-4).
10.15.1 First Supplemental Indenture, dated as of November
12, 1996, to Indenture dated as of September 20, 1996
(incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.15.2 Second Supplemental Indenture, dated as of October
16, 1998, to Indenture dated as of September 20, 1996
(incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1998).
10.15.3 Third Supplemental Indenture, dated as of
December 31, 1999, to Indenture dated as of
September 20, 1996.
13 Portions of the annual report to stockholders for
the year ended December 31, 1999 which are expressly
incorporated by reference in this filing.
21 Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule.