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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-27918
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CENTURY ALUMINUM COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3070826
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2511 GARDEN ROAD
BUILDING A, SUITE 200
MONTEREY, CALIFORNIA 93940
(ADDRESS OF REGISTRANT'S PRINCIPAL OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (831) 642-9300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $0.01 PAR VALUE PER SHARE NASDAQ
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 the registrant's knowledge, in a definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
As of April 25, 2003, 21,070,210 shares of common stock of the registrant
were issued and outstanding. Based upon the NASDAQ closing price on June 28,
2002, the aggregate market value of the common stock held by non-affiliates of
the registrant was $181,041,837.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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1
EXPLANATORY NOTE: The purpose of this amendment is to include the information
required under Part III, Items 10-13 of the report on Form 10-K for Century
Aluminum Company (the "Company" or "Century") for the year ended December 31,
2002, and not previously included in the Company's Annual Report on Form 10-K.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's Board of Directors consists of nine members, divided into
three classes: Class I, Class II and Class III. Directors in each such class are
elected to serve for three-year terms, with each class standing for election in
successive years.
CLASS I DIRECTORS WITH TERMS TO EXPIRE IN 2003
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OR DIRECTOR
NAME AND AGE EMPLOYMENT DURING PAST 5 YEARS; OTHER DIRECTORSHIPS SINCE
------------ --------------------------------------------------- -----
Roman A. Bninski ....................56 Partner, law firm of Curtis, Mallet-Prevost, Colt & 1996
Mosle LLP, New York, New York since 1984.
Stuart M. Schreiber ................49 Founder and Managing Director of Integis, Inc. since 1999
1997; former partner of Heidrick & Struggles from
1988 to 1997.
Willy R. Strothotte..................59 Chairman of the Board of Glencore International AG 1996
since 1994 and Chief Executive Officer from 1993 to
December 2001; Chairman of the Board of Xstrata AG
(formerly Sudelektra Holding AG) since 1990.
CLASS II DIRECTORS WITH TERMS TO EXPIRE IN 2004
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OR DIRECTOR
NAME AND AGE EMPLOYMENT DURING PAST 5 YEARS; OTHER DIRECTORSHIPS SINCE
------------ --------------------------------------------------- -----
John C. Fontaine (1) (2).............71 Of Counsel, law firm of Hughes Hubbard & Reed LLP 1996
since January 2000 and partner from July 1997 to
December 1999; President of Knight-Ridder, Inc. from
July 1995 to July 1997; Chairman of the Samuel H.
Kress Foundation.
Gerald A. Meyers.....................53 President and Chief Executive Officer of the Company 1995
since January 2003, President and Chief Operating
Officer of the Company from August 1995 to December
2002; former President and Chief Operating Officer of
Century Aluminum of West Virginia, Inc.
John P. O'Brien (1)(2)...............61 Managing Director of Inglewood Associates Inc. since 2000
1990 and Chairman of Allied Construction Products
since March 1993; Chairman and CEO of Jeffrey Mining
Products L.P. from October 1995 to June 1999;
Director of American Italian Pasta Co. from March
1997 through November 2002 and Director of
International Total Services, Inc. from August 1999
through January 2003.
2
CLASS III DIRECTORS WITH TERMS TO EXPIRE IN 2005
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OR DIRECTOR
NAME AND AGE EMPLOYMENT DURING PAST 5 YEARS; OTHER DIRECTORSHIPS SINCE
------------ --------------------------------------------------- -----
Craig A. Davis ......................62 Chairman of the Board of the Company since August 1995
1995; Chairman and Chief Executive Officer of the
Company from August 1995 to December 2002; Director
of Glencore International AG since December 1993 and
Executive of Glencore International AG from September
1990 to June 1996.
Robert E. Fishman, Ph.D. (2)(3)......51 Senior Vice President of Calpine Corporation since 2002
2001; President of PB Power, Inc. from 1998 to 2001
and Senior Vice President from 1991 to 1998.
William R. Hampshire (1).............75 Vice-Chairman of the Board of the Company since August 1995
1995; independent consultant since 1990; former
President and Chief Executive Officer of Howmet
Aluminum Corporation.
-----------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Dr. Fishman was elected to the Board in December 2002.
Mr. Strothotte was designated to serve as a director of the Company by
Glencore International AG.
Information regarding the Company's executive officers is included in Part
I, Item 4 of the Company's report on Form 10-K for the year ended December 31,
2002 under the heading "Executive Officers of the Registrant."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons owning more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission reports of ownership and changes in
ownership of equity securities of the Company. Such persons are also required to
furnish the Company with copies of all such forms.
Based solely upon a review of the copies of such forms furnished to the
Company and, in certain cases, written representations that no Form 5 filings
were required, the Company believes that, with respect to the 2002 fiscal year,
all required Section 16(a) filings were timely made, except that Mr. Peter C.
McGuire, an officer of the Company, inadvertently failed to report certain
restricted stock awarded to him in 2000 on his initial Form 3 filing, which was
otherwise timely filed upon his becoming a Section 16 reporting person.
ITEM 11. EXECUTIVE COMPENSATION
Directors' Compensation
Directors who are full-time salaried employees of the Company are not
compensated for their service on the Board or on any Board Committee.
Non-employee directors receive an annual retainer of $25,000 for their services,
except for the Vice-Chairman, who receives an annual retainer of $30,000. In
addition, each non-employee director received a fee of $1,000 during 2002 for
each Board or Board Committee meeting attended. At its meeting held on December
13, 2002, the Board authorized an increase in the meeting fee paid to each
non-employee director from $1,000 to $2,000 per meeting, effective January 1,
2003. The Board also authorized an increase in the meeting fee received by the
Chairman of the Audit Committee, who will receive $3,000 per Audit Committee
meeting attended. All directors are reimbursed for their travel and other
expenses incurred in attending Board and Board Committee meetings.
3
Under the Company's Non-Employee Directors Stock Option Plan, each director
who is not an employee of the Company received a one-time grant of options to
purchase 10,000 shares of common stock, and the Vice-Chairman received a
one-time grant of options to purchase 25,000 shares of common stock. Such grants
for Messrs. Bninski and Hampshire became effective upon the consummation of the
Company's initial public offering at an exercise price equal to the initial
public offering price, while grants to Messrs. Fishman, Fontaine, Schreiber,
Strothotte and O'Brien became effective upon their election as directors at an
exercise price equal to the market price of the Company's common stock at such
times. The options vested one-third on the grant date, with an additional
one-third vesting on each of the first and second anniversaries of the grant
date. In addition, the Non-Employee Directors Stock Option Plan provides for
annual grants of options to each non-employee director continuing in office
after the annual meeting of stockholders each year at an exercise price equal to
the market price of such shares on the date of the grant. During 2002,
non-employee directors each received options to purchase 2,000 shares. At the
Board meeting held on December 13, 2002, the Board approved an increase in the
annual options granted to non-employee directors from 2,000 to 3,000 options,
effective January 1, 2003.
Summary Compensation Table
The following table sets forth information with respect to the compensation
paid or awarded by the Company to the Chief Executive Officer and the four other
most highly compensated executive officers (collectively, the "Named Executive
Officers") for services rendered in all capacities during 2000, 2001 and 2002.
ANNUAL COMPENSATION
-----------------------------------
OTHER
ANNUAL
COMPEN-
NAME AND PRINCIPAL SATION ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) ($)(1) COMPENSATION ($)(2)
-------- ---- ---------- --------- -------- -------------------
Craig A. Davis (3) 2002 $ 729,000 $ 390,000 -0- $ 7,200
Chairman and Chief 2001 $ 695,179 $ 486,000 -0- $ 6,120
Executive Officer 2000 $ 651,598 $ 540,000 -0- $ 16,975
Gerald A. Meyers (4) 2002 $ 329,000 $ 115,000 $ 42,336 $ 9,005
President and Chief 2001 $ 312,689 $ 157,500 $ 31,038 $ 7,925
Operating Officer 2000 $ 294,812 $ 175,000 -0- $ 9,984
Gerald J. Kitchen 2002 $ 261,000 $ 85,000 -0- $ 10,665
Executive Vice 2001 $ 248,939 $ 122,500 $ 25,586 $ 9,585
President, General 2000 $ 233,683 $ 136,000 -0- $ 13,218
Counsel, Chief
Administrative
Officer and Secretary
David W. Beckley 2002 $ 259,000 $ 85,000 -0- $ 9,645
Executive Vice 2001 $ 246,720 $ 121,250 $ 25,589 $ 9,920
President and Chief 2000 $ 231,855 $ 134,500 $ 21,267 $ 8,950
Financial Officer
E. Jack Gates(5) 2002 $ 189,000 $ 80,000 -0- $ 8,016
Vice President 2001 $ 182,292 $ 129,914(6) -0- $ 82,456(7)
2000 $ 12,329(8) -0- -0- -0-
---------------
(1) Represents reimbursement of interest on funds borrowed to pay estimated
taxes due upon the vesting of performance share grants.
(2) All other compensation is comprised of the Company's matching contributions
under the Company's Defined Contribution Retirement Plan for each of the
Named Executive Officers. In 2002, those contributions were $7,200 for each
of Messrs. Davis, Meyers, Kitchen, Beckley and Gates. All other
compensation also includes Company paid life insurance premiums in 2002 in
the amounts of $1,805, $3,465, $2,445 and $816 for Messrs. Meyers, Kitchen,
Beckley and Gates, respectively.
(Footnotes continued on following page)
4
----------------------
(Footnotes continued from previous page)
(3) Mr. Davis was succeeded as Chief Executive Officer by Gerald A. Meyers
effective January 1, 2003, but he remains Chairman of the Board of
Directors.
(4) Mr. Meyers succeeded Craig A. Davis as Chief Executive Officer effective
January 1, 2003.
(5) Mr. Gates was elected Executive Vice President effective April 1, 2003.
(6) Includes $34,782 which represents the dollar value of a special stock grant
of 2,645 shares made by the Company to Mr. Gates on December 14, 2001,
based on the average sales price of the Company's common stock on the
NASDAQ National Market of $13.15 per share on January 2, 2002, the date the
shares vested. Also includes accrued dividend equivalents of $132 on such
shares which was paid to Mr. Gates upon vesting.
(7) Includes one-time relocation and related costs in the amount of $75,750
relating to Mr. Gates' relocation to Owensboro, Kentucky.
(8) Mr. Gates joined the Company in December 2000.
Fiscal Year End Option Value Table
The following table sets forth information regarding the aggregate number
and value of options held by the Named Executive Officers as of December 31,
2002.
NUMBER OF SHARES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED OPTIONS
AT DECEMBER 31, 2002 (#)(1) AT DECEMBER 31, 2002 ($)(2)
------------------------------ ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Craig A. Davis 150,000 0 $ 0 --
Gerald A. Meyers 100,000 0 $ 0 --
Gerald J. Kitchen 61,666 0 $ 0 --
David W. Beckley 80,000 0 $ 0 --
E. Jack Gates 13,333 6,667 $ 4,800 $ 2,400
-------------------
(1) The options shown in the table for Messrs. Davis, Meyers, Kitchen and
Beckley were granted in March 1996 at an exercise price of $13.00 per
share. The options became exercisable in three installments: one-third on
the date of grant and one-third on each of the first and second
anniversaries of the date of grant. The options shown in the table for Mr.
Gates were granted in December 2000 at an exercise price of $7.05 per
share. One-third became exercisable in June 2001, one-third became
exercisable in June 2002, and the remaining one-third will become
exercisable in June 2003.
(2) Value is calculated by multiplying: (i) the amount by which $7.41 (the last
reported sale price of the Company's common stock on the NASDAQ National
Market on December 31, 2002) exceeds the option exercise price, by (ii) the
number of shares underlying the respective options.
5
Long-Term Incentive Plan Awards Table
The following table sets forth information with respect to performance
shares awarded to the Named Executive Officers under the Company's 1996 Stock
Incentive Plan (the "Plan"). In accordance with guidelines adopted under the
Plan, performance shares were awarded for 1998, the two-year period from 1998
through 1999, and thereafter, for rolling three-year periods beginning with 1998
through 2000. Because the earnings before taxes targets established for the
two-year period ending in 1999 and the three-year periods ending in 2000, 2001
and 2002 were not met, all of the performance shares for those periods were
forfeited. In 2001, the Board of Directors approved an amendment to the
guidelines under the Plan that expanded the scope of the Company's performance
targets to include, in addition to the achievement of financial targets,
achievement of specific operating targets and long-term strategic targets
(collectively, the "Award Targets"). The new performance guidelines were
implemented beginning with the three-year period 2001 through 2003.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
PERFORMANCE ESTIMATED FUTURE COMMON STOCK PAYOUTS
OR OTHER UNDER NON-STOCK PRICE-BASED PLANS
PERIOD UNTIL
PERFORMANCE MATURATION OR THRESHOLD TARGET MAXIMUM
NAME SHARES (#)(1) PAYOUT (#) (#)(2) (#)(3)
Craig A. Davis 73,686 2001-2003 -0- 73,686 110,529
58,909 2002-2004 -0- 58,909 88,364
Gerald A. Meyers 32,440 2001-2003 -0- 32,440 48,660
25,166 2002-2004 -0- 25,166 37,749
Gerald J. Kitchen 19,765 2001-2003 -0- 19,765 29,648
15,586 2002-2004 -0- 15,586 23,379
David W. Beckley 19,564 2001-2003 -0- 19,564 29,346
15,420 2002-2004 -0- 15,420 23,130
E. Jack Gates 11,170 2001-2003 -0- 11,170 16,755
9,502 2002-2004 -0- 9,502 14,253
----------------------
(1) Performance shares represent shares of Company common stock that, upon
vesting, are issued to the award recipient. Except as described herein,
performance shares are forfeited if the award recipient is not employed
full-time by the Company at the end of the award cycle period. In the event
of death, disability or retirement, the award recipient will receive a pro
rata award based upon the number of weeks employed during the award cycle
period. To the extent dividends are paid on the Company's common stock,
dividend equivalents accrue on performance shares and are paid upon
vesting.
(2) Target payouts represent the target number of shares that will vest if the
Company achieves its Award Targets in their entirety for the period. The
Compensation Committee of the Board of Directors has retained full
discretion to modify awards under the guidelines. If Award Targets are not
achieved in their entirety, awards may be adjusted downward or eliminated
in their entirety. In addition, regardless of performance against Award
Targets, the Committee's discretion includes the right to determine that,
should circumstances warrant, no award would be payable.
(3) Maximum payouts represent the maximum number of shares that the
Compensation Committee is authorized to award if the Company exceeds all of
its Award Targets. In cases where the target is exceeded, the number of
shares vested in excess of the target number of shares is calculated by
converting the excess award into cash and reconverting the excess award
into shares at the greater of the share price calculated at the time of the
award or the average share price for the month preceding the month in which
the shares vest.
6
Pension Plan Table
The Company maintains a non-contributory defined benefit pension plan for
salaried employees of the Company who meet certain eligibility requirements. The
following table shows estimated annual benefits payable upon retirement in
specified compensation and years of service classifications. The figures shown
include supplemental benefits payable to the Named Executive Officers, exclusive
of benefits payable under the enhanced supplemental retirement plan described
below.
YEARS OF CREDITED SERVICE
--------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35 40
------------ -------- --------- --------- --------- --------- --------- --------- ---------
$ 100,000 $ 7,500 $ 15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
$ 200,000 $ 15,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $ 105,000 $ 120,000
$ 300,000 $ 22,500 $ 45,000 $ 67,500 $ 90,000 $ 112,500 $ 135,000 $ 157,500 $ 180,000
$ 400,000 $ 30,000 $ 60,000 $ 90,000 $ 120,000 $ 150,000 $ 180,000 $ 210,000 $ 240,000
$ 500,000 $ 37,500 $ 75,000 $ 112,500 $ 150,000 $ 187,500 $ 225,000 $ 262,500 $ 300,000
$ 600,000 $ 45,000 $ 90,000 $ 135,000 $ 180,000 $ 225,000 $ 270,000 $ 315,000 $ 360,000
$ 700,000 $ 52,500 $ 105,000 $ 157,500 $ 210,000 $ 262,500 $ 315,000 $ 367,500 $ 420,000
$ 800,000 $ 60,000 $ 120,000 $ 180,000 $ 240,000 $ 300,000 $ 360,000 $ 420,000 $ 480,000
$ 900,000 $ 67,500 $ 135,000 $ 202,500 $ 270,000 $ 337,500 $ 405,000 $ 472,500 $ 540,000
$1,000,000 $ 75,000 $ 150,000 $ 225,000 $ 300,000 $ 375,000 $ 450,000 $ 525,000 $ 600,000
$1,100,000 $ 82,500 $ 165,000 $ 247,500 $ 330,000 $ 412,500 $ 495,000 $ 577,500 $ 660,000
$1,200,000 $ 90,000 $ 180,000 $ 270,000 $ 360,000 $ 450,000 $ 540,000 $ 630,000 $ 720,000
$1,300,000 $ 97,500 $ 195,000 $ 292,500 $ 390,000 $ 487,500 $ 585,000 $ 682,500 $ 780,000
$1,400,000 $105,000 $ 210,000 $ 315,000 $ 420,000 $ 525,000 $ 630,000 $ 735,000 $ 840,000
The plan provides lifetime annual benefits starting at age 62 equal to
twelve (12) multiplied by the greater of: (i) 1.5% of final average monthly
compensation multiplied by years of credited service (up to 40 years), or (ii)
$22.25 multiplied by years of credited service (up to 40 years), less the total
monthly vested benefit payable as a life annuity at age 62 under plans of a
predecessor. Final average monthly compensation means the highest monthly
average for 36 consecutive months in the 120-month period ending on the last day
of the calendar month completed at or prior to a termination of service.
Participants' pension rights vest after a five-year period of service. An early
retirement benefit (actuarially reduced beginning at age 55) and a disability
benefit are also available.
The compensation covered by the plan includes all compensation, subject to
certain exclusions, before any reduction for 401(k) contributions, subject to
the maximum limits under the Internal Revenue Code of 1986, as amended (the
"Code"). The years of credited service for Messrs. Davis, Meyers, Kitchen,
Beckley and Gates at December 31, 2002, were approximately 10, 10, 7, 7 and 2,
respectively.
Enhanced Supplemental Retirement Plan
The Company adopted an enhanced supplemental retirement benefit plan (the
"Enhanced SRP") in 2001 in order to permit selected senior executives to achieve
estimated levels of retirement income when, due to the executive's age and
potential years of service at normal retirement age, benefits under the
Company's existing qualified and nonqualified defined benefit pension plans are
projected to be less than a specified percentage of the executive's estimated
final average annual pay. Messrs. Davis, Meyers, Kitchen and Beckley were
selected to participate in this plan at fifty percent (50%) of their estimated
final average compensation during each executive's final five years of service.
The Company believes this level of retirement benefits is commensurate with
retirement benefits paid to senior executives of comparable companies. Under the
Enhanced SRP, these senior executives will be entitled to receive an annual
supplemental retirement benefit in the following amounts if, from January 1,
2001, they remain employed by the Company for a period of four years in the case
of Mr. Davis and five years in the cases of Messrs. Meyers, Kitchen and Beckley:
Craig A. Davis, $425,000; Gerald A. Meyers, $200,000; Gerald J. Kitchen,
$145,000; and David. W. Beckley, $145,000.
If an executive's employment is terminated prior to the end of the
requisite period, the annual supplemental retirement benefit will be reduced pro
rata for each year of employment less than the required four or five years.
However, an executive will receive the full benefit in the event of disability,
change in control or termination of employment without cause. The Company has
invested funds to meet the Enhanced SRP obligations through the
7
purchase of key-man life insurance policies on the lives of the participating
executives. The policies are owned by the Company and have been placed in
a Rabbi Trust to secure the Company's payment obligations.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with each of Messrs. Craig
A. Davis, Gerald A. Meyers, Gerald J. Kitchen and David W. Beckley, effective
January 1, 2002, providing for terms of employment of three years. Under the
agreements, the base salaries of Messrs. Meyers, Kitchen and Beckley may not be
reduced below $340,000, $258,000 and $255,250, respectively. Mr. Davis was
succeeded as Chief Executive Officer by Gerald A. Meyers effective January 1,
2003, but he remains Chairman of the Board of Directors. Mr. Davis' employment
agreement provided for a base salary of $718,500 for 2002 and $500,000 for 2003
and 2004. The agreements provide that the base salaries may be subject to
increases established from time to time by the Board of Directors. In addition,
the executives are eligible for bonuses in accordance with the Company's annual
incentive plan and stock option grants and performance share awards under the
Company's 1996 Stock Incentive Plan. The agreements also provide that the
executives will receive, in addition to the Enhanced SRP described above,
unfunded supplemental executive retirement benefits in addition to any benefits
received under the Company's qualified retirement plans. The supplemental
benefit for each executive will be equal to the amount that would normally be
paid under the Company's qualified retirement plans if there were no limitations
under Sections 415 and 401(a)(17) of the Code and as if the executives were
fully vested in the qualified retirement plan benefits. In the event of
termination of employment "without cause," the terminated executive will be
entitled to receive termination payments equal to 100% of his base salary and
bonus (based on the highest annual bonus payment within the prior three years)
for the remainder of the term of the agreement (with a minimum of one year's
salary plus bonus). Any termination payments under the employment agreements may
not be duplicated under the severance compensation agreements described below.
SEVERANCE COMPENSATION ARRANGEMENTS
The Company has entered into severance compensation agreements with each of
Messrs. Craig A. Davis, Gerald A. Meyers, Gerald J. Kitchen and David W.
Beckley. The agreements provide that if within 36 months following a change in
control of the Company, the executive's employment is terminated either: (i) by
the Company for other than cause or disability, or (ii) by such executive for
good reason, then such executive will receive a lump sum payment equal to three
times the aggregate of the highest base salary and the highest bonus received by
such executive in any of the most recent five years. Also, in the event of a
change in control, the exercisability of stock options and the vesting of
performance shares held by such executives will be accelerated.
The Code imposes certain excise taxes on, and limits the deductibility of,
certain compensatory payments made by a corporation to or for the benefit of
certain individuals if such payments are contingent upon certain changes in the
ownership or effective control of the corporation or the ownership of a
substantial portion of the assets of the corporation, provided that such
payments to the individual have an aggregate present value in excess of three
times the individual's annualized includible compensation for the base period,
as defined in the Code. The agreements provide for additional payments to the
executives in order to fully offset any excise taxes payable by an executive as
a result of the payments and benefits provided in the severance compensation
agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, the members of the Board's Compensation Committee were Messrs.
John C. Fontaine, William R. Hampshire, John P. O'Brien and Stuart M. Schreiber.
Mr. Hampshire served as President and Chief Operating Officer of Century
Aluminum of West Virginia, Inc. (formerly Ravenswood Aluminum Corporation and a
subsidiary of the Company) from April 1992 through January 1993. As of March 25,
2003, Mr. Schreiber no longer serves on the Company's Compensation Committee due
to anticipated changes in the independence standards for compensation committee
members. The Company expects that the remaining members of the Compensation
Committee will meet the revised independence standards once implemented.
8
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's common stock as of April 14, 2003, (except
as otherwise noted) by (i) each person known by the Company to be the beneficial
owner of five percent or more of the outstanding shares of common stock, (ii)
each director of the Company, (iii) each Named Executive Officer, and (iv) all
directors and executive officers of the Company as a group. All of the issued
and outstanding shares of the Company's convertible preferred stock are held by
Glencore International AG, as set forth more fully in footnote 2 below.
NAME OF BENEFICIAL OWNER AMOUNT AND NATURE OF
OWNER BENEFICIAL OWNERSHIP(1) PERCENTAGE OF CLASS
------------------------ ----------------------- -------------------
Glencore International AG...................................... 9,320,089(2) 41.5
FMR Corp....................................................... 2,065,860(3) 9.8
Dimensional Fund Advisors Inc.................................. 1,533,300(4) 7.3
David W. Beckley............................................... 125,694(5) *
Roman A. Bninski............................................... 20,500(6) *
Craig A. Davis................................................. 323,561(7) 1.5
Robert E. Fishman.............................................. 3,333(8) *
John C. Fontaine............................................... 20,750(9) *
E. Jack Gates.................................................. 23,513(10) *
William R. Hampshire........................................... 17,400(11) *
Gerald J. Kitchen.............................................. 118,986(12) *
Gerald A. Meyers............................................... 195,888(13) *
John P. O'Brien................................................ 19,000(14) *
Stuart M. Schreiber............................................ 16,000(15) *
Willy R. Strothotte............................................ 20,500(16) *
All directors and executive officers as a group (15 persons)... 985,313(17) 4.6
-----------------------
* Less than one percent.
(1) Each individual or entity has sole voting and investment power, except as
otherwise indicated.
(2) Based upon information set forth in a Schedule 13D filing dated April 12,
2001, Glencore International AG beneficially owns such shares through
affiliates, including Glencore AG, which directly owns 9,320,089 shares,
including 7,925,000 shares of common stock and 500,000 shares of Century's
convertible preferred stock (the "Convertible Preferred Stock"). The
Convertible Preferred Stock is convertible at any time, at the option of
the holder, into 1,395,089 shares of Century common stock. The business
address of each of Glencore International AG and Glencore AG is
Baarermattstrasse 3, P.O. Box 777, CH 6341, Baar, Switzerland.
(3) Based upon information as of December 31, 2002, as set forth in a Schedule
13G filing dated February 13, 2003, FMR Corp. has sole voting power with
respect to 1,605,140 shares and sole investment power with respect to
2,065,860 shares. The business address of FMR Corp. is 82 Devonshire
Street, Boston, Massachusetts 02109.
(4) Based upon information as of December 31, 2002, set forth in a Schedule 13G
filing dated February 12, 2003, Dimensional Fund Advisors Inc.
("Dimensional"), a registered investment advisor, has sole voting and
investment power with respect to such shares. All of these shares are owned
by advisory clients of Dimensional and Dimensional disclaims beneficial
ownership of all such shares. The business address of Dimensional is 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(5) Includes 80,000 shares which are subject to presently exercisable options.
(6) Includes 20,500 shares which are subject to options presently exercisable
or exercisable in 60 days.
(7) Includes 150,000 shares which are subject to presently exercisable options.
Excludes 9,320,089 shares beneficially owned by Glencore International AG,
of which Mr. Davis is a director.
(8) Includes 3,333 shares which are subject to options presently exercisable.
(9) Includes 250 shares owned jointly with Mr. Fontaine's wife. Also includes
20,500 shares which are subject to options presently exercisable or
exercisable within 60 days.
(Footnotes continued on following page)
9
-------------------------
(Footnotes continued from previous page)
(10) Includes 20,000 shares which are subject to options presently exercisable
or exercisable within 60 days.
(11) Includes 4,500 shares which are subject to options presently exercisable or
exercisable within 60 days. Also includes 5,400 shares owned by Mr.
Hampshire's wife.
(12) Includes 61,666 shares which are subject to options presently exercisable.
(13) Includes 100,000 shares which are subject to presently exercisable options.
(14) Includes 14,000 shares which are subject to options presently exercisable
or exercisable within 60 days.
(15) Includes 16,000 shares which are subject to options presently exercisable
or exercisable within 60 days.
(16) Includes 20,500 shares which are subject to options presently exercisable
or exercisable within 60 days. Excludes 9,320,089 shares beneficially owned
by Glencore International AG, of which Mr. Strothotte is the Chairman.
(17) Includes 530,166 shares which are subject to options presently exercisable
or exercisable within 60 days. Excludes 9,320,089 shares beneficially owned
by Glencore International AG.
Information regarding the shares authorized for issuance under the
Company's equity compensation plans is included in Part II, Item 5 of the
Company's report on Form 10-K for the year ended December 31, 2002, under the
heading "Equity Compensation Plan Information."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2002, the Company purchased primary aluminum and alumina from Glencore
International AG and its subsidiaries (collectively, "Glencore"). Such
purchases, which were made at market prices, aggregated $ 97.5 million in 2002.
During 2002, the Company purchased from Glencore under separate supply
agreements all of its alumina requirements for the Ravenswood facility and its
49.67% interest in the Mt. Holly facility under separate supply agreements. The
supply agreements for Ravenswood and 54% of the Company's requirements for Mt.
Holly run through 2006. The supply agreement for the remaining 46% of the
Company's requirements for Mt. Holly runs through January 31, 2008. The
Company's alumina purchases from Glencore in 2002 were made on an arms'-length
basis at market prices.
The Company sold primary aluminum to Glencore in 2002. For the year ended
December 31, 2002, net sales to Glencore amounted to $107.6 million, including
gains and losses realized on the settlement of financial contracts. Sales of
primary aluminum to Glencore amounted to 15.1% of the Company's total revenues
in 2002. The Company's primary aluminum sales to Glencore in 2002 were made on
an arms'-length basis at market prices.
Throughout 2002, Century was party to a contract to sell Glencore
approximately 110 million pounds of primary aluminum produced at the Mt. Holly
facility each year through December 31, 2009, at a fixed price (the "Fixed Price
Agreement"). In January 2003, the Company and Glencore agreed to terminate the
Fixed Price Agreement for delivery of metal for the years 2005 through 2009.
Subsequently, the Company and Glencore entered into a new contract for delivery
to Glencore of 110 million pounds per year of primary aluminum for the years
2005 through 2009 from the Mt. Holly facility at prices based on the then
current market. The price remains fixed for the years 2003 and 2004. In
consideration for the above, the Company received $35 million from Glencore.
Exclusive of the Fixed Price Agreement, the Company had forward delivery
commitments to sell 0.3 million pounds of primary aluminum to Glencore at
December 31, 2002.
As of December 31, 2002, the Company had outstanding forward financial
sales contracts with Glencore for 181.0 million pounds of primary aluminum to
hedge production in 2003. Current accounting standards provide for cash flow
hedge accounting treatment and the effective portion of the unrealized gains and
losses on the hedges are recorded in the balance sheet in accumulated other
comprehensive income. As of December 31, 2002, the Company had recorded $12.9
million in other comprehensive income related to such contracts. The Company
intends to continue to enter into hedging arrangements with Glencore in the
future.
10
On April 1, 2003, the Company completed the acquisition of the 20% interest
in the Hawesville, Kentucky primary aluminum reduction facility which was owned
by Glencore, together with Glencore's pro rata interest in certain related
assets (collectively, the "20% Hawesville Interest"). Century paid a purchase
price of approximately $105 million for the 20% Hawesville Interest (subject to
adjustment based on working capital levels), which it financed with
approximately $65 million of available cash and a six-year $40 million
promissory note payable to Glencore (the "Hawesville Note"). Amounts outstanding
under the Hawesville Note bear interest at a rate of 10% per annum and are
secured by a first priority security interest in the 20% Hawesville Interest.
Until the Hawesville Note matures on April 1, 2009, the Company will make
principal and interest payments semi-annually, with principal payments based on
the average closing prices for aluminum quoted on the London Metals Exchange for
the six month period ending two weeks prior to each payment date. The Company's
obligations under the Hawesville Note are guaranteed by each of its consolidated
subsidiaries, including Hancock Aluminum LLC ("Hancock"), a wholly-owned
subsidiary of the Company which holds the 20% Hawesville Interest.
Century's purchase of the 20% Hawesville Interest was effected pursuant to
the terms of an Asset Purchase Agreement, dated as of April 1, 2003, among
Glencore Ltd., Glencore Acquisition I LLC, Hancock and the Company (the "Asset
Purchase Agreement"). The terms of the Asset Purchase Agreement, including the
purchase price paid for the 20% Hawesville Interest, were determined through
arms'-length negotiations between the parties and approved by an independent
committee of the Board.
Glencore originally purchased the 20% Hawesville Interest from Century in
April 2001 when Century acquired the Hawesville facility and related assets from
Southwire Company ("Southwire"), a privately-held wire and cable manufacturing
company. The cash purchase price paid by Glencore to Century in 2001 was $97.8
million. Glencore also assumed direct responsibility for a pro rata portion of
certain liabilities and obligations related to the Hawesville facility,
including: (i) delivery obligations under the Molten Aluminum Supply Agreement,
dated April 1, 2001, between Century and Southwire, (ii) debt service
obligations related to $7.8 million in industrial revenue bonds ("IRBs") assumed
by Century in connection with the Hawesville Acquisition, (iii) any post-closing
payments due Southwire pursuant to the terms of the Company's agreement with
Southwire, and (iv) certain other post-closing liabilities and obligations
(including environmental) related to the Hawesville facility (collectively, the
"Assumed Liabilities").
Upon the Company's acquisition in April 2003 of the 20% Hawesville Interest
from Glencore, the Company assumed all of Glencore's obligations related to the
Assumed Liabilities. The Company also issued a promissory note to Glencore to
secure any payments Glencore makes as guarantor of a letter of credit the
Company posted in April 2001 in support of the IRBs.
In connection with this acquisition, the Company and Glencore also entered
into a 10-year contract commencing January 1, 2004, under which Glencore will
purchase 45 million pounds per year of primary aluminum produced at the
Ravenswood and Mt. Holly facilities at prices based on then-current markets.
Mr. Craig A. Davis, Chairman of the Company, is a director of Glencore
International AG and was an executive of Glencore International AG and Glencore
AG from September 1990 until June 1996.
Mr. Willy R. Strothotte, a director of the Company, is Chairman of the
Board of Directors of Glencore International AG and served as its Chief
Executive Officer from 1994 through 2001.
Mr. Roman A. Bninski, a director of the Company, is a partner of Curtis,
Mallet-Prevost, Colt & Mosle LLP, which furnishes legal services to the Company
and Glencore.
11
Indebtedness of Management
Until July 30, 2002, the Company sponsored a program whereby it offered
full-recourse loans to its executives to pay their tax liability upon the award
of stock grants or the vesting of performance shares (the "Tax Loans"). Each Tax
Loan is secured by the vested or awarded shares which gave rise to the tax
liability and must be repaid on the earlier of: (i) January 2, 2017 (the "Due
Date"), (ii) on a pro rata basis, upon the sale of any shares securing the Tax
Loan prior to the Due Date, or (iii) one hundred and twenty (120) days following
the termination of the executive's employment. The Company pays the interest on
the Tax Loan for each executive, which is equal to the applicable short-term
federal funds rate, compounded semi-annually. During 2002, the following
executives participated in the Company's Tax Loan program:
MAXIMUM AGGREGATE AMOUNT AGGREGATE TAX LOANS
NAME POSITION OF TAX LOANS DURING 2002 OUTSTANDING AT 4/25/03
---- -------- ------------------------ ----------------------
Gerald J. Kitchen Executive Vice President, General $ 390,000 $287,000
Counsel, Chief Administrative
Officer and Secretary
Daniel J. Krofcheck Vice President and Treasurer $ 81,732 $ 81,732
Peter C. McGuire Vice President and Associate $ 68,992 $ 68,992
General Counsel
Steve Schneider Vice President $ 7,724 $ 7,724
Prior to July 30, 2002, as part of the Company's relocation assistance
program, the Company offered eligible employees full-recourse loans for the
purpose of paying applicable relocation expenses, including expenses related to
the purchase of a home. In 2001, Steve Schneider, a Vice President of the
Company, obtained $345,000 in loans from the Company in connection with the
commencement of his employment with the Company in July 2001. Of that total,
$145,000 was evidenced by a demand note, which bore interest at a rate of six
percent (6%) per annum and which was repaid by Mr. Schneider in April 2002. The
remaining $200,000 was borrowed by Mr. Schneider pursuant to the terms of a
promissory note, which is secured by a deed of trust on Mr. Schneider's home.
The promissory note bears interest at a rate of six percent (6%) per annum until
July 15, 2003, and thereafter at a rate of eight percent (8%) per annum. All
unpaid principal and accrued interest due under the promissory note will be
immediately due and payable upon the earlier of: (i) July 15, 2006, or (ii) the
termination of Mr. Schneider's employment with the Company.
In order to comply with the requirements of Section 402 of the
Sarbanes-Oxley Act of 2002, the Company eliminated its Tax Loan and relocation
loan programs effective July 30, 2002. Any loans outstanding under those
programs as of such date will be repaid in accordance with their original terms.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K/A to be
signed on its behalf by the undersigned, thereunto duly authorized.
CENTURY ALUMINUM COMPANY
By: /s/ DAVID W. BECKLEY
--------------------------
David W. Beckley
Executive Vice President
and Chief Financial Officer
Dated: April 30, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K/A has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ CRAIG A. DAVIS Chairman April 30, 2003
-----------------------------------------
Craig A. Davis
/s/ WILLIAM R. HAMPSHIRE. Vice-Chairman April 30, 2003
-----------------------------------------
William R. Hampshire
/s/ GERALD A. MEYERS President, Chief Executive Officer and April 30, 2003
----------------------------------------- Director (Principal Executive Officer)
Gerald A. Meyers
/s/ DAVID W. BECKLEY Executive Vice President and Chief April 30, 2003
----------------------------------------- Financial Officer (Principal Financial
David W. Beckley Officer and Principal Accounting Officer)
/s/ ROMAN A. BNINSKI Director April 30, 2003
-----------------------------------------
Roman A. Bninski
/s/ JOHN C. FONTAINE Director April 30, 2003
-----------------------------------------
John C. Fontaine
/s/ WILLY R. STROTHOTTE Director April 30, 2003
-----------------------------------------
Willy R. Strothotte
/s/ JOHN P. O'BRIEN Director April 30, 2003
-----------------------------------------
John P. O'Brien
/s/ STUART M. SCHREIBER Director April 30, 2003
-----------------------------------------
Stuart M. Schreiber
/s/ ROBERT E. FISHMAN Director April 30, 2003
-----------------------------------------
Robert E. Fishman
13
CERTIFICATION
I, Gerald A. Meyers, Chief Executive Officer of Century Aluminum Company
(Century), certify that:
1. I have reviewed this annual report on Form 10-K/A of Century;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Century as of, and for, the periods presented in this annual report;
4. Century's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for Century and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to Century, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) evaluated the effectiveness of Century's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. Century's other certifying officer and I have disclosed, based on our
most recent evaluation, to Century's auditors and the audit committee of
Century's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect Century's ability to record, process,
summarize and report financial data and have identified for Century's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in Century's internal controls; and
6. Century's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 30, 2003
/s/ GERALD A. MEYERS
------------------------------
Name: Gerald A. Meyers
Title: Chief Executive Officer
14
CERTIFICATION
I, David W. Beckley, Executive Vice President and Chief Financial Officer of
Century Aluminum Company (Century), certify that:
1. I have reviewed this annual report on Form 10-K/A of Century;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Century as of, and for, the periods presented in this annual report;
4. Century's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for Century and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to Century, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) evaluated the effectiveness of Century's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. Century's other certifying officer and I have disclosed, based on our
most recent evaluation, to Century's auditors and the audit committee of
Century's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect Century's ability to record, process,
summarize and report financial data and have identified for Century's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in Century's internal controls; and
6. Century's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 30, 2003
/s/ DAVID W. BECKLEY
-----------------------------------
Name: David W. Beckley
Title: Executive Vice President and
Chief Financial Officer
15