UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
CENTURY ALUMINUM COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate Number of securities to which transaction applies: N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
[CENTURY ALUMINUM LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 25, 2002
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Century Aluminum Company (the
"Company") will be held at 9:00 a.m., local time, on Tuesday, June 25, 2002, at
the Executive Offices of the Company, 2511 Garden Road, Suite 200, Monterey,
California, for the following purposes:
1. To elect two directors to serve for a term of three years expiring at
the Annual Meeting of Stockholders to be held in 2005;
2. To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche LLP as the Company's independent auditors for the
fiscal year ending December 31, 2002; and
3. To transact such other business as may properly come before the Annual
Meeting or at any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on May 10, 2002, as
the record date for the determination of the stockholders entitled to notice of
and to vote at the Annual Meeting of Stockholders and at any adjournments or
postponements thereof.
By Order of the Board of Directors,
/s/ Gerald J. Kitchen
---------------------------------------
Gerald J. Kitchen
Executive Vice President,
General Counsel,
Chief Administrative Officer
and Secretary
Monterey, California
May 20, 2002
YOUR VOTE IS IMPORTANT
IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING, OR IF YOU DO
PLAN TO ATTEND BUT WISH TO VOTE BY PROXY, PLEASE COMPLETE, SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
CENTURY ALUMINUM COMPANY
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 25, 2002
GENERAL
This Proxy Statement is being furnished in connection with the solicitation
by the Board of Directors of Century Aluminum Company, a Delaware corporation
(the "Company"), of proxies for use at the Annual Meeting of Stockholders to be
held on June 25, 2002, commencing at 9:00 a.m., local time, at the Executive
Offices of the Company, 2511 Garden Road, Suite 200, Monterey, California, and
at any adjournments or postponements thereof. The matters to be considered and
acted upon at the meeting are described below in this Proxy Statement.
The principal executive offices of the Company are located at 2511 Garden
Road, Suite 200, Monterey, California 93940. The approximate mailing date of
this Proxy Statement and the accompanying proxy is May 20, 2002.
VOTING RIGHTS AND VOTES REQUIRED
Only stockholders of record at the close of business on May 10, 2002, will
be entitled to notice of and to vote at the Annual Meeting. As of such record
date, the Company had outstanding 20,554,302 shares of common stock. Each
stockholder is entitled to one vote for each share of common stock held. The
holders of a majority of the outstanding shares will constitute a quorum for the
transaction of business at the meeting. Shares of common stock present in person
or represented by proxy (including shares which abstain or do not vote with
respect to one or more of the matters presented for stockholder approval) will
be counted for purposes of determining whether a quorum exists at the meeting.
The affirmative vote of the holders of a plurality of the shares of common
stock present or represented at the meeting is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
common stock present or represented at the meeting and entitled to vote is
required for the ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the current fiscal year. Shares represented
by a properly signed proxy card received pursuant to this solicitation will be
voted in accordance with the instructions thereon. Abstentions will be treated
as shares that are present and entitled to vote for purposes of determining the
number of shares present and entitled to vote with respect to any particular
matter, but will not be counted as a vote in favor of such matter. Accordingly,
an abstention from voting on a matter will have the same legal effect as a vote
against the matter. If a broker or nominee holding stock in "street name"
indicates on the proxy that it does not have discretionary authority to vote as
to a particular matter, those shares will not be considered as present and
entitled to vote with respect to such matter.
A stockholder may revoke a proxy at any time before it is exercised by
submitting a later-dated proxy, notifying the Secretary of the Company in
writing, or voting in person at the meeting.
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 May 10, 2002 (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 executive officer of the Company named
in the Summary Compensation Table under the heading "Executive Compensation"
below, 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 described more fully in footnote
2 below.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENTAGE OF CLASS
Glencore International AG...................................... 9,320,089(2) 42.5
FMR Corp....................................................... 2,159,670(3) 10.5
Dimensional Fund Advisors Inc.................................. 1,372,300(4) 6.7
DePrince, Race & Zollo, Inc.................................... 1,214,425(5) 5.9
David W. Beckley............................................... 116,928(6) *
Roman A. Bninski............................................... 18,500(7) *
Craig A. Davis................................................. 322,940(8) 1.6
John C. Fontaine............................................... 18,750(9) *
E. Jack Gates.................................................. 16,434(10) *
William R. Hampshire........................................... 15,400(11) *
Gerald J. Kitchen.............................................. 132,597(12) *
Gerald A. Meyers............................................... 195,454(13) *
John P. O'Brien................................................ 17,000(14) *
Stuart M. Schreiber............................................ 14,000(15) *
Willy R. Strothotte............................................ 18,500(16) *
All directors and executive officers as a group (14 persons)... 956,431(17) 4.5
* Less than one percent.
(1) Each individual or entity has sole voting and investment power, except as
otherwise indicated.
(2) Based on 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 555, CH 6341, Baar, Switzerland.
(3) Based upon information as of April 30, 2002, set forth in a Schedule 13G
filing dated May 10, 2002, FMR Corp. has sole voting power with respect to
1,600,450 shares and sole investment power with respect to 2,159,670
shares. The business address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109. All of the shares reported as beneficially owned by
FMR Corp. have also been reported as beneficially owned by Edward C.
Johnson 3d, Chairman of FMR Corp., and Abigail P. Johnson, a director and
owner of 24.5% of the aggregate outstanding voting stock of FMR Corp.
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corp.,
is the beneficial owner of 1,545,550 shares reported as beneficially owned
by FMR Corp. in its capacity as investment manager for certain
institutional accounts.
(4) Based upon information as of December 31, 2001 set forth in a Schedule 13G
filing dated February 12, 2002, 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 securities. The business address of Dimensional is
1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(Footnotes continued on following page)
-2-
(Footnotes continued from previous page)
(5) Based upon information as of December 31, 2001, set forth in a Schedule 13G
filing dated February 14, 2002, DePrince, Race & Zollo, Inc. ("DePrince"),
an investment advisor, has sole voting and investment power with respect to
such shares. The business address of DePrince is 201 S. Orange Ave., Suite
850, Orlando, Florida 32801.
(6) Includes 80,000 shares which are subject to options presently exercisable.
(7) Includes 18,500 shares which are subject to options presently exercisable.
(8) Includes 150,000 shares which are subject to options presently exercisable.
Excludes 9,320,089 shares beneficially owned by Glencore International AG,
of which Mr. Davis is a director.
(9) Includes 250 shares owned jointly with Mr. Fontaine's wife. Also includes
18,500 shares which are subject to options presently exercisable.
(10) Includes 13,333 shares which are subject to options presently exercisable
or exercisable within 60 days.
(11) Includes 2,500 shares which are subject to options presently exercisable.
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 options presently exercisable.
(14) Includes 12,000 shares which are subject to options presently exercisable
or exercisable within 60 days.
(15) Includes 14,000 shares which are subject to options presently exercisable.
(16) Includes 18,500 shares which are subject to options presently exercisable.
Excludes 9,320,089 shares beneficially owned by Glencore International AG,
for which Mr. Strothotte serves as Chairman of the Board of Directors.
(17) Includes 505,666 shares which are subject to options presently exercisable.
Excludes 9,320,089 shares beneficially owned by Glencore International AG.
1. ELECTION OF DIRECTORS
The Company's Board of Directors consists of eight 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. At the Annual Meeting, two Class III Directors will be elected
to serve until the third succeeding Annual Meeting of the Stockholders of the
Company in 2005. If no direction is given to the contrary, all proxies received
by the Board of Directors will be voted "FOR" the election as director of each
of the nominees identified below. In the event that any nominee declines or is
unable to serve, the proxy solicited herewith may be voted for the election of
another person in his stead at the discretion of the proxies. Each of the
nominees hereinafter named has indicated his willingness to serve if elected,
and the Board of Directors has no reason to believe that any of the nominees
will not be available to serve. Set forth below is certain information
concerning the two nominees for election and the other directors of the Company
with unexpired terms of office. Each nominee is currently a director of the
Company.
NOMINEES FOR ELECTION OF 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 ......................61 Chairman and Chief Executive Officer of the Company 1995
since August 1995; Director of Glencore
International AG since December 1993 and Executive
of Glencore International AG from September 1990 to
June 1996; former Executive Vice President of Alumax
Inc.
William R. Hampshire (1).............74 Vice-Chairman of the Company since August 1995; 1995
independent consultant since 1990; former President
and Chief Executive Officer of Howmet Aluminum
Corporation.
-3-
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 (2) ................56 Partner, law firm of Curtis, Mallet-Prevost, Colt & 1996
Mosle LLP, New York, New York since 1984.
Stuart M. Schreiber (1) .............48 Founder and Managing Director, Integis, Inc. since 1999
1997; former partner, Heidrick & Struggles from 1988
to 1997.
Willy R. Strothotte..................58 Chairman of the Board of Glencore International AG 1996
since 1994 and Chief Executive Officer of Glencore
International AG from 1993 to 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).............70 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.....................52 President and Chief Operating Officer of the Company 1995
since August 1995; Operations Manager of Logan
Aluminum (joint venture between Alcan Aluminum
Limited and Atlantic Richfield Company) from
November 1988 to December 1992.
John P. O'Brien (1)(2)...............60 Managing Director of Inglewood Associates Inc. since 2000
1990 after serving as Southeast Regional Managing
Partner for Price Waterhouse from 1985 though 1990;
Chairman of Allied Construction Products and a
Director of American Italian Pasta Co. and
International Total Services, Inc.
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Mr. Davis will cease to be Chief Executive Officer effective January 1,
2003, at which time Mr. Meyers will become Chief Executive Officer. Mr. Davis
will remain Chairman of the Board of Directors through 2004.
-4-
BOARD AND BOARD COMMITTEE MEETINGS; DIRECTORS' COMPENSATION
The entire Board of Directors met four times during 2001, and each director
attended all of those meetings in person or by telephone. In addition, there
were three meetings of the Board's outside directors, Messrs. Fontaine,
Hampshire, O'Brien and Schreiber, and each of those directors attended all such
meetings in person or by telephone. Each director serving on a Board Committee
attended all meetings of the Board Committee(s) on which he served, either in
person or by telephone. The Board of Directors has appointed an Audit Committee
and a Compensation Committee to assist in handling the various functions of the
Board. The Board does not have a standing Nominating Committee.
The Audit Committee members are Messrs. Bninski, Fontaine and O'Brien. The
Audit Committee oversees the financial reporting process for which management is
responsible, reviews with the auditors the scope and results of the audit,
reviews with the Company's internal auditors the scope and results of the
Company's internal audit procedures, reviews the independence of the audit and
non-audit services provided by auditors, considers the range of audit and
non-audit fees, reviews and discusses with the Company's independent auditors
and management the effectiveness of the Company's system of internal accounting
controls, and makes inquiries into other matters within the scope of its duties.
In 2001, the Audit Committee held five meetings.
The members of the Compensation Committee are Messrs. Fontaine, Hampshire,
Schreiber and O'Brien. The Compensation Committee reviews and establishes the
compensation of the Company's executive officers and has oversight
responsibility for administering and awarding grants under the Company's 1996
Stock Incentive Plan. In 2001, the Compensation Committee held four meetings.
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 $26,000 for their services,
except that the Vice-Chairman receives an annual retainer of $31,000. In
addition, each non-employee director receives a fee of $1,000 for each Board or
Board Committee meeting attended. All directors are reimbursed for their travel
and other expenses incurred in attending Board and Board Committee meetings.
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
became effective upon the consummation of the Company's initial public offering
at an exercise price equal to the initial public offering price, except in the
cases of Messrs. Fontaine, Schreiber, Strothotte and O'Brien, whose grants
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 automatic annual grants to each
non-employee director continuing in office after the annual meeting of
stockholders in each year of options to purchase 2,000 shares of Company common
stock at an exercise price equal to the market price of such shares on the date
of the grant.
Mr. Strothotte was designated to serve as a director of the Company by
Glencore International AG.
-5-
EXECUTIVE COMPENSATION
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 1999,
2000 and 2001.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS/PAYOUTS
---------------------------------------- -----------------
OTHER
ANNUAL
COMPEN- ALL OTHER
NAME AND PRINCIPAL SATION RESTRICTED STOCK COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($)(1) AWARDS ($)(2) ($)(3)
--------------------- ---- ---------- ----------- -------- ----------------- -------------
Craig A. Davis 2001 $ 695,179 $ 486,000 -0- -0- $ 6,120
Chairman and Chief 2000 $ 651,598 $ 540,000 -0- -0- $ 16,975
Executive Officer 1999 $ 615,442 $ 800,000 -0- -0- $ 8,442
Gerald A. Meyers 2001 $ 312,689 $ 157,500 $ 31,038 -0- $ 7,925
President and Chief 2000 $ 294,812 $ 175,000 -0- -0- $ 9,984
Operating Officer 1999 $ 278,829 $ 350,000 -0- -0- $ 7,165
Gerald J. Kitchen 2001 $ 248,939 $ 122,500 $ 25,586 -0- $ 9,585
Executive Vice 2000 $ 233,683 $ 136,000 -0- -0- $ 13,218
President, General 1999 $ 221,064 $ 285,000 -0- -0- $ 6,888
Counsel, Chief
Administrative
Officer and Secretary
David W. Beckley 2001 $ 246,720 $ 121,250 $ 25,589 -0- $ 9,920
Executive Vice 2000 $ 231,855 $ 134,500 $ 21,267 -0- $ 8,950
President and Chief 1999 $ 220,611 $ 165,000 -0- -0- $ 6,888
Financial Officer
E. Jack Gates 2001 $ 182,292 $ 129,914(4) -0- -0- $ 82,456
Vice President 2000 $ 12,329(5) -0- -0- -0- -0-
(1) Represents reimbursement of interest expense incurred in connection with
funds borrowed to pay estimated taxes on the value of common shares issued
upon vesting of performance share grants.
(2) The Company made restricted share awards in March of 1996 in the following
amounts to the following Named Executive Officers: Craig A. Davis, 150,000;
Gerald A. Meyers, 100,000; Gerald J. Kitchen, 80,000; and David W. Beckley,
80,000. Restricted shares vested one-third on March 28, 1999, one-third on
March 28, 2000 and the final one-third vested on March 28, 2001. Dividend
equivalents accrued on restricted shares from the date of grant and became
payable upon vesting. The aggregate amount of accrued dividend equivalents
paid to the following Named Executive Officers upon the final vesting of
their restricted shares on March 28, 2001 was as follows: Craig A. Davis,
$50,000; Gerald A. Meyers, $33,334; Gerald J. Kitchen, $26,668; and David
W. Beckley, $26,668.
(3) 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 2001, those contributions were $6,120 for each
of Messrs. Davis, Meyers, Kitchen and Beckley and $5,744 for Mr. Gates. All
other compensation also includes Company paid life insurance premiums in
2001 in the amounts of $1,805, $3,465, $3,800 and $962 for Messrs. Meyers,
Kitchen, Beckley and Gates, respectively. Includes, for Mr. Gates, one-time
relocation and related costs in the amount of $75,750 relating to Mr.
Gates' relocation to Owensboro, Kentucky.
(4) 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 $132 on such
shares which was paid to Mr. Gates upon vesting.
(5) Mr. Gates joined the Company in December 2000.
-6-
Fiscal Year End Option Value Table
The following table sets forth information regarding the aggregate number
and value of options held by the Named Executive Officers as of December 31,
2001.
NUMBER OF SHARES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED OPTIONS
AT DECEMBER 31, 2001 (#)(1) AT DECEMBER 31, 2001 ($)(2)
------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Craig A. Davis 150,000 0 $54,000 --
Gerald A. Meyers 100,000 0 $36,000 --
Gerald J. Kitchen 61,666 0 $22,200 --
David W. Beckley 80,000 0 $28,800 --
E. Jack Gates 6,666 13,334 $42,062 $84,138
(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, and the remaining options
will become exercisable one-third in June 2002 and one-third in June 2003.
(2) Value is calculated by multiplying: (i) the amount by which the option
exercise price is less than $13.36, the last reported sale price of the
Company's common stock on the NASDAQ National Market on December 31, 2001,
by (ii) the number of shares underlying the respective options.
Long-Term Incentive Plan Awards Table
The following table sets forth information with respect to performance
shares awarded to Messrs. Craig A. Davis, Gerald A. Meyers, Gerald J. Kitchen,
David W. Beckley and E. Jack Gates 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 and 2001 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 OR ESTIMATED FUTURE COMMON STOCK PAYOUTS
OTHER PERIOD UNDER NON-STOCK PRICE-BASED PLANS
PERFORMANCE MATURATION OR ------------------------------------------------------
NAME SHARES (#)(1) PAYOUT THRESHOLD (#) TARGET (#)(4)(5) MAXIMUM (#)(5)
------------------------------------------------------
Craig A. Davis -0- 2000-2002(2) -- -- --
73,686 2001-2003 -0- 73,686 110,529
49,823 2002-2004 -0- 49,823 74,735
Gerald A. Meyers -0- 2000-2002(2) -- -- --
32,440 2001-2003 -0- 32,440 48,660
21,285 2002-2004 -0- 21,285 31,928
Gerald J. Kitchen -0- 2000-2002(2) -- -- --
19,765 2001-2003 -0- 19,765 29,618
13,182 2002-2004 -0- 13,182 19,773
(Table continued on following page)
-7-
(Table continued from previous page)
PERFORMANCE OR ESTIMATED FUTURE COMMON STOCK PAYOUTS
OTHER PERIOD
UNDER NON-STOCK PRICE-BASED PLANS
PERFORMANCE MATURATION OR ----------------------------------------------------
NAME SHARES (#)(1) PAYOUT THRESHOLD (#) TARGET (#)(4)(5) MAXIMUM (#)(5)
----------------------------------------------------
David W. Beckley -0- 2000-2002(2) -- -- --
19,564 2001-2003 -0- 19,564 29,618
13,042 2002-2004 -0- 13,042 19,563
E. Jack Gates 5,102 2000-2002 2,551(3) 5,102 7,653
11,170 2001-2003 -0- 11,170 16,755
8,037 2002-2004 -0- 8,037 12,056
(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. Dividend equivalents accrue on performance shares and are paid upon
vesting.
(2) In connection with their participation in the Enhanced Supplemental
Retirement Plan (see the description under the heading "Enhanced
Supplemental Retirement Plan" below), Messrs. Davis, Meyers, Kitchen and
Beckley relinquished their entitlement to performance shares under the Plan
for the three-year period 2000 through 2002.
(3) For Mr. Gates, the threshold payouts represent the minimum number of shares
that will vest during the three-year period from 2000 through 2002 if the
Company meets a minimum percentage of a target level of earnings before
taxes for the period or exceeds industry return on invested capital
criteria. If the Company does not meet either of these performance
criteria, no shares will vest.
(4) 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 Compensation Committee's discretion includes the right to
determine that, should circumstances warrant, no award would be payable.
For Mr. Gates only, the target payouts for the three-year period from 2000
through 2002 represent the target number of shares that will vest if the
Company meets 100% of the target level of earnings before taxes for the
period.
(5) 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. For Mr. Gates only, the maximum payouts for the
three-year period from 2000 through 2002 represent the maximum number of
shares that will vest if the Company reaches 125% of the target level of
earnings before taxes for the period. 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.
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
table on the following page 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 to participants under the enhanced
supplemental retirement plan described below.
-8-
PENSION PLAN TABLE
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, 2001, were approximately 9, 9, 6, 6 and 1,
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 benefit 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 they remain employed
by the Company from January 1, 2001, 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
intends to invest funds to meet the Enhanced SRP obligations through the
purchase of key-man life insurance policies on the lives of the participating
executives. The policies will be owned by the Company and will be placed in
Rabbi Trusts to secure the Company's payment obligations.
-9-
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 will
cease to be Chief Executive Officer effective January 1, 2003, but he will
remain Chairman of the Board of Directors through 2004. Mr. Davis' employment
agreement provides 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. 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 the 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 severance compensation 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
agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2001, the members of the 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.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
In 2001, 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 $20.0 million in 2001.
During 2001, the Company purchased from Glencore approximately 46% of its
alumina requirements for its interest in the Mt. Holly facility under a supply
contract which runs through January 31, 2008. In April 2001, the Company entered
into two five-year contracts with Glencore pursuant to which Glencore agreed to
supply the remaining 54% of the Company's alumina requirements at the Mt. Holly
facility and all of the Company's alumina requirements at its Ravenswood
facility beginning January 1, 2002. The Company's alumina purchases from
Glencore in 2001 were arms'-length transactions made at market prices.
The Company also sold primary aluminum to Glencore in 2001. Century is
party to a contract to sell to Glencore approximately 110 million pounds of the
Company's share of the primary aluminum produced at the Mt.
-10-
Holly facility each year through December 31, 2009. For the year ended December
31, 2001, the Company sold Glencore $89.7 million of its share of the primary
aluminum production at the Mt. Holly facility which constituted approximately
53% of the Company's total revenue from its interest in the Mt. Holly facility.
In addition, the Company had forward delivery commitments to sell 25.5 million
pounds of primary aluminum to Glencore at December 31, 2001. Including sales of
the Mt. Holly facility production described above, sales to Glencore aggregated
$111.5 million in 2001 or approximately 17% of the Company's total revenues. The
Company's primary aluminum sales to Glencore in 2001 were arms'-length
transactions made at market prices.
As of December 31, 2001, the Company had outstanding forward financial
sales contracts with Glencore for 232.5 million pounds of primary aluminum to
hedge production in 2002 through 2003. Current accounting standards provide for
cash flow hedge accounting treatment and the effective portion of the hedges are
recorded on the balance sheet in accumulated other comprehensive income. As of
December 31, 2001, the Company had recorded $8.3 million in other comprehensive
income related to such contracts. The Company intends to continue to enter into
hedging arrangements with Glencore in the future.
On April 2, 2001, Century completed the acquisition of NSA, Ltd. ("NSA")
and its 237,000 metric ton per year aluminum reduction facility in Hawesville,
Kentucky (the "Hawesville facility") from Southwire Company ("Southwire"), a
privately-held wire and cable manufacturing company based in Carrollton, Georgia
(the "Acquisition"). The cash purchase price for the Acquisition was $466.8
million, plus the assumption of approximately $7.8 million in industrial revenue
bonds (the "IRBs") related to the Hawesville Facility, and is subject to
adjustments for contingent considerations. In addition, Century may be required
to pay to Southwire up to an aggregate maximum of $7.0 million if the price of
primary aluminum on the London Metals Exchange exceeds specified levels during
the seven years following the closing date. The purchase price for the
Acquisition was determined through arms' length negotiations between Century and
Southwire.
Century financed a portion of the cash purchase price for the Acquisition
with $25 million in proceeds from the sale to Glencore of 500,000 shares of the
Company's Convertible Preferred Stock. The Convertible Preferred Stock was sold
to Glencore pursuant to the terms of a Convertible Preferred Stock Purchase
Agreement, dated as of March 30, 2001, between Century and Glencore. Each share
of the Convertible Preferred Stock has a liquidation preference of $50 and is
convertible at any time into Century common stock at a price of $17.92 per
share. The price and terms of the Convertible Preferred Stock were determined
through arms'-length negotiations between Century and Glencore.
Concurrently with the closing of the Acquisition, Century effectively sold
a 20% ownership interest in the Hawesville Facility and related rights to
Glencore pursuant to the terms of an Asset Purchase Agreement, dated April 2,
2001, between Century and Glencore (the "Glencore Agreement"). Under the terms
of the Glencore Agreement, Glencore's 20% ownership interest in the Hawesville
Facility consists of: (i) title to the recently added fifth potline at the
Hawesville Facility, (ii) a 20% undivided interest in all other assets of and
rights relating to the Hawesville Facility, other than its four original
potlines, and (iii) a 20% ownership interest in Century Aluminum of Kentucky LLC
("CAK"), a Delaware limited liability company which holds certain intangible
assets relating to the operation of the Hawesville Facility (including the
alumina and power supply contracts). Century retained an 80% interest in the
Hawesville Facility which consists of: (i) title to the original four potlines
at the Hawesville Facility, (ii) an 80% undivided interest in all other assets
of and rights relating to the Hawesville Facility, other than the fifth potline,
and (iii) an 80% interest in CAK.
The cash purchase price paid by Glencore to Century was $99.0 million.
Glencore also assumed direct responsibility for a pro rata portion of the IRBs
and a pro rata portion of any post-closing payments Century may be obligated to
make to Southwire pursuant to the Company's agreement with Southwire. In
addition, Glencore assumed responsibility for a pro rata portion of any
liabilities and obligations with respect to the Hawesville Facility after
closing and will share the benefit of the indemnities provided by Southwire
pursuant to the Company's agreement with Southwire. The purchase price and terms
were determined through arms'-length negotiations between the parties.
Century and Glencore entered into an Owners Agreement concurrently with the
closing of the sale to Glencore which, notwithstanding their separate ownership
of specific assets at the Hawesville Facility, provides that each party is
entitled to a pro rata portion of the aggregate production of the Hawesville
Facility and is obligated to pay its pro rata portion of the expenses of the
facility. In addition, the Owners Agreement provides that Glencore will pay to
Century a management fee equal to 0.75% of the value of the primary aluminum
produced for Glencore at the Hawesville facility as compensation for Century's
services as operator of the facility.
-11-
Mr. Craig A. Davis, Chairman and Chief Executive Officer 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.
Indebtedness of Management
The Company sponsors a program whereby it offers full-recourse loans to its
executives to pay their tax liability upon 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
2001, the following executives participated in the Company's Tax Loan program:
AGGREGATE TAX LOANS
MAXIMUM AGGREGATE AMOUNT OUTSTANDING AT
NAME POSITION OF TAX LOANS DURING 2001 5/15/02
------------------- --------------------------- -------------------------- --------------------
Gerald J. Kitchen Executive Vice President, $390,000 $359,000
General 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
In addition, as part of the Company's relocation assistance program, the
Company offers 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 in the
form of a demand note, which bore interest at six percent (6%) per annum and
which was repaid by Mr. Schneider in April 2002. The remaining $200,000 was in
the form of a promissory note 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.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
General
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of Messrs. John C. Fontaine, William R. Hampshire, John P. O'Brien and
Stuart M. Schreiber, all of whom are outside directors. The Committee reviews
and establishes compensation of the Company's executive officers and has
oversight responsibility for administering and awarding grants under the
Company's 1996 Stock Incentive Plan.
The Company has a policy of basing a significant portion of the
compensation of its executive officers on the operating performance of the
Company and its progress toward achieving its long term strategic objectives of
increasing and diversifying primary aluminum reduction capacity, lowering its
overall costs of production and improving its competitive position in the
industry.
-12-
Compensation Philosophy
The Company's compensation programs are designed to enable the Company and
its subsidiaries to attract and retain talented executives and management
personnel. In order to do this, the Company believes it must be able to provide
management personnel with opportunities for total compensation which are
competitive with compensation which would be available from employers with whom
the Company competes and companies that are seeking to hire and retain
management personnel of similar quality.
The Company's compensation programs are tied to the overall performance of
the Company, as well as business unit and individual performance. Compensation
is weighted towards annual incentive awards and long-term performance awards in
the form of stock options and performance share units in order to provide
"pay-for-performance" and to align management's and stockholders' interests in
the enhancement of stockholder value. The three principal components of the
Company's "pay-for-performance" executive compensation program are base salary,
annual incentive cash bonuses and long-term incentive compensation.
During 2001, the Committee undertook a thorough review of the Company's
compensation programs, its compensation philosophy and the considerations
involved in balancing the weight given to the Company's strategic goals,
individual performance, Company financial performance and shareholder return. In
its review, the Committee was assisted by outside consultants as well as by a
range of information gathered by management at the Committee's request. This
review indicated that in recent years, cash compensation (salary and bonuses) of
top management has been appropriate, ranking the Company in the mid-range of
companies the Committee considered comparable. However, the Committee also
determined that the Company's long-term compensation program has been too
inflexible to permit the Committee to reward performance it believes should have
been rewarded and that, accordingly, the total compensation of the Company's top
executives has badly lagged that of executives in comparable companies.
Base Salary
The Committee annually reviews the salaries of the Company's executives.
Base salary levels are set at levels comparable to and competitive with the
salary levels of executives of comparable aluminum and other metals corporations
and employers hiring equivalent executive personnel. Actual salary levels for
each individual vary based upon a subjective assessment of individual
performance, experience, level of responsibility, potential contribution to the
Company's future growth and profitability and the financial circumstances of the
Company. The Committee has not found it practicable to assign relative weights
to specific factors in determining base salary adjustments, and the specific
factors used may vary among individual executives. Effective August 1, 2001, the
Committee authorized increases in the Named Executive Officers' annual base
salaries in amounts ranging from 5.3% to 5.9% percent which, based on available
studies, were comparable to and competitive with the salary levels of equivalent
executive personnel of other comparable corporations.
Annual Incentive Awards
The Company has an incentive compensation plan. Under this plan, executive
officers (including the Chief Executive Officer) are eligible to receive each
year as a bonus, a percentage of their base salary. The plan provides for
suggested percentage ranges of 35% to 100% for the Named Executive Officers.
Actual awards are made by the Committee on the basis of individual and Company
performance and a subjective evaluation by the Committee of individual
performance. In assessing the executive officers' 2001 performance, the
Committee undertook to give appropriate consideration to the fact that, while
weak economic conditions beyond the executive officers' control depressed sales
and aluminum prices which resulted in a financial loss for the year, the
individual officers performed very well, which enabled the Company to achieve
its important strategic goal of completing the acquisition of Southwire
Company's Hawesville, Kentucky reduction facility. Annual incentive awards of
$486,000, $157,500, $122,500, $121,250 and $95,000 were paid to Messrs. Davis,
Meyers, Kitchen, Beckley and Gates, respectively, for 2001.
Long-term Incentive Compensation
The Committee believes that option grants and performance share awards
align executive interests with stockholder interests by creating a direct link
between compensation and stockholder return.
-13-
Option grants are made from time to time to executives whose contributions
have or will have a significant impact on the Company's long-term performance.
The Committee's determination of whether option grants are appropriate each year
is made with regard to competitive considerations, and each executive's actual
grant is based upon the criteria described in the preceding paragraphs. The size
of previous grants and the number of options held are not determinative of
future grants. No options were granted to the Named Executive Officers in 2001.
In 1998, the Committee established guidelines governing the granting of
performance shares (the "1998 Guidelines"). The guidelines provide for the award
of performance shares with performance cycles for successive three-year periods
of time. Each award is determined by creating a monetary award within a
percentage range of the executive's base salary, and converting the award into
performance shares based on the average closing price for the Company's common
stock for the month preceding that in which the grant is made. The percentage
ranges of base salary are 45% to 100% for the Named Executive Officers. Vesting
of performance shares is based on the Company's performance relative to
"earnings before taxes" targets, and actual shares vested can range between 0%
and 150% of the performance share award. Based upon 2001 performance,
performance shares for the period 1999 - 2001 were forfeited.
Three years of experience have demonstrated to the Committee that basing
the vesting of performance shares solely by reference to earnings before taxes
targets does not permit the Committee appropriately to recognize and compensate
management for achievements the Committee feels may contribute far more to
shareholder value than a single earnings test. For example, during the last
three years, management accomplished a major strategic restructuring of the
Company, which the Committee believes should have been rewarded with the vesting
of performance shares. The Company sold its non-profitable and capital intensive
rolled products business at a substantial financial gain, and it more than
doubled its primary production capacity (and significantly lowered its overall
cost of production) through its acquisition of an additional 23 percent interest
in the Mt. Holly, South Carolina reduction facility and the purchase of an 80
percent interest in the Hawesville, Kentucky reduction facility. Despite these
achievements, based on the 1998 Guidelines, only 70 percent awards were paid for
1998 and none for periods ending in 1999, 2000 or 2001.
The Committee believes the grant of performance shares continues to serve a
valuable corporate purpose and, accordingly, has broadened the goals that may be
used for purposes of determining whether performance shares may vest. However,
the Committee determined that it would not be appropriate to retroactively apply
alternative standards in order to permit recognition of management's past
performance through the vesting of performance shares that were awarded for
periods ending in 1999, 2000 or 2001 or for the period that will end in 2002.
As noted earlier, the Committee conducted an overall review of the
Company's executive compensation programs. The review highlighted the fact that
for certain executive officers, due to their ages and potential years of service
until normal retirement, the Company's defined benefit retirement program would
not provide benefits that are competitive with those paid to senior executives
of comparable companies. Accordingly, the Company adopted an Enhanced
Supplemental Retirement Income Benefit Plan (the "Enhanced SRP").
The Enhanced SRP is intended to enable selected senior executive officers
of the Company to achieve a retirement income approximating a designated
percentage of their final average compensation, as calculated under the
Company's defined benefit plan for salaried employees. Comparative compensation
data prepared by outside consultants indicates that approximately two-thirds of
comparable companies have such programs and that the average benefit level of
those companies is 60 percent of final average compensation. Messrs. Davis,
Meyers, Kitchen and Beckley have been selected to participate in this program at
50 percent of their estimated final average compensation. As a part of their
participation in this program, those executives are forfeiting rights they may
have had under the 1998 Guidelines to approximately 230,000 performance shares
under the three year programs ending in 2001 and 2002. The benefits payable to
Messrs. Davis, Meyers, Kitchen and Beckley under the Enhanced SRP are described
under "Enhanced Supplemental Retirement Plan" above.
In order to receive the maximum benefit of the Enhanced SRP, Executives
selected to participate in the plan are obligated to remain employed by the
Company for designated periods of time (four years in the case of Mr. Davis and
five years in the cases of Messrs. Meyers, Kitchen and Beckley). Should a
selected participant terminate his or her employment with the Company in fewer
than the requisite number of years (other than as a result of death or
disability or change in control), the benefits under the Enhanced SRP will be
reduced pro rata for each year of service less than the required number.
-14-
The Company intends to invest funds to meet the Enhanced SRP obligation
through the use of Company-purchased and owned life insurance on the lives of
the selected participants. The plan is designed so that the cash surrender
values and death benefits under the policies will approximately equal, on a
present value basis, the benefits the Company expects to pay out under the plan.
The Company-owned life insurance policies will be placed in trust, an
arrangement adopted by more than 80 percent of the respondent companies in the
survey conducted by the outside consultants, as described above.
Other Compensation and Benefit Matters
In 2001, the Committee made a special stock grant of 2,645 shares to Mr.
Gates.
The Committee also approved a proposal to permit the Company to make loans
to executives who have been awarded stock grants in order to enable the
executives to pay their income tax liability while retaining the shares granted.
Such loans would be full-recourse loans and would be secured by the pledge of
the executives' shares. The loans made to certain executives in 2001 are
described under "Indebtedness of Management" above.
Compensation of the Chief Executive Officer
Compensation of the Chief Executive Officer for 2001 was determined in
accordance with the criteria set forth above. See "Executive Compensation --
Summary Compensation Table." The Committee believes that the Chief Executive
Officer's compensation appropriately reflected his performance, the Company's
financial performance and its progress towards its long-term strategic
objectives.
Income Tax Consequences
For U.S. income tax purposes, the Company may deduct compensation paid as a
result of the exercise of all options granted to the named Executive Officers.
The Company may not, however, deduct portions of salary, bonus and other cash
and non-cash compensation in excess of $1 million paid to a Named Executive
Officer.
Respectfully Submitted,
The Compensation Committee
John C. Fontaine William R. Hampshire John P. O'Brien
Stuart M. Schreiber
-15-
PERFORMANCE GRAPH
The following line graph compares the Company's cumulative total return to
stockholders with the cumulative total return of the S&P 500 Index and the Media
General Aluminum Group Index during the period from December 31, 1996 through
December 31, 2001. These comparisons assume the investment of $100 on December
31, 1996 and the reinvestment of dividends.
CENTURY ALUMINUM COMPANY
Comparison of Cumulative Total Return to Stockholders
December 31, 1996 through December 31, 2001
[BAR GRAPH]
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
S&P 500 Index 100 133.36 171.47 207.56 188.66 166.24
Media General Aluminum
Group Index 100 101.02 99.11 196.60 156.24 167.99
Century Aluminum Company 100 79.24 56.32 91.76 70.86 84.30
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") is
comprised of Messrs. Roman A. Bninski, John C. Fontaine, and John P. O'Brien,
all of whom are independent directors, as that term is defined under National
Association of Securities Dealers listing standards. The Audit Committee
operates under a written charter adopted by the Board of Directors. In
accordance with its charter, the Audit Committee assists the Board of Directors
in fulfilling its responsibility for oversight of the quality and integrity of
the accounting, auditing and financial reporting practices of the Company.
-16-
The Audit Committee's job is one of oversight. The Company's management is
responsible for the preparation of the Company's financial statements and the
independent auditors are responsible for auditing those financial statements.
The Audit Committee and the Board recognize that management (including the
internal audit staff) and the independent auditors have more resources and time,
and more detailed knowledge and information regarding the Company's accounting,
auditing, internal control and financial reporting practices than the Audit
Committee does; accordingly, the Audit Committee's oversight role does not
include providing any expert or special assurance as to the financial statements
and other financial information provided by the Company to its shareholders and
others.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence, consistent with "Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence, including the performance of non-audit services, and satisfied
itself as to the auditors' independence. The Audit Committee also discussed with
management, the internal auditors and the independent auditors, the quality and
adequacy of the Company's internal controls and the internal audit function's
organization, responsibilities, budget and staffing. The Audit Committee
reviewed with both the independent and the internal auditors their audit plans,
audit scope, and identification of audit risks.
The Audit Committee met with and discussed with the independent auditors
all matters required to be discussed under generally accepted auditing
standards, including those described in "Statement on Auditing Standards No. 61,
Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Audit Committee also discussed the results of the
internal audit examinations.
The Audit Committee met with and discussed with management and the
independent auditors the interim financial information contained in each
quarterly earnings announcement in 2001 prior to its public release and the
audited financial statements of the Company as of and for the year ended
December 31, 2001.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the year ended December 31, 2001, for filing with the Securities and
Exchange Commission. The Audit Committee also recommended the reappointment,
subject to shareholder approval, of the independent auditors and the Board
concurred in such recommendation.
Respectfully Submitted,
The Audit Committee
Roman A. Bninski John C. Fontaine John P. O'Brien
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 2001 fiscal year,
all required Section 16(a) filings were timely made.
-17-
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP ("Deloitte") to act as the Company's independent
auditors for the current fiscal year, subject to the ratification of such
appointment by the affirmative vote of the holders of a majority of shares of
common stock present in person or by proxy and entitled to vote at the Annual
Meeting. If no direction is given to the contrary, all proxies received by the
Board of Directors will be voted "FOR" ratification of the appointment of
Deloitte & Touche LLP as the Company's independent auditors for the current
fiscal year.
Audit Fees. The aggregate fees for professional services rendered by
Deloitte in connection with their audit of the Company's consolidated financial
statements and reviews of the consolidated financial statements included in the
Company's Quarterly Reports on Form 10-Q for 2001 was approximately $870,000.
Financial Information Systems Design and Implementation Fees. There were no
professional services rendered by Deloitte in 2001 related to financial
information systems design and implementation.
All Other Fees. The aggregate fees for all other services rendered by
Deloitte in 2001 was approximately $2,277,000 and can be sub-categorized as
follows:
Attestation Fees. The aggregate fees for attestation services rendered
by Deloitte for matters such as comfort letters and consents related to
SEC and other registration statements, audits of employee benefit
plans, due diligence pertaining to acquisitions and consultation on
accounting matters or transactions was approximately $1,425,000.
Other Fees. The aggregate fees for all other services, such as
consultation related to tax planning, advice and compliance (including
acquisition related activity), assistance with a business interruption
insurance claim, and evaluation and design of various employee benefit
matters rendered by Deloitte in 2001 was approximately $852,000.
The Audit Committee considered whether the provision of services described
above under "All Other Fees" is compatible with maintaining the independence of
Deloitte. See "Audit Committee Report" above.
Representatives of Deloitte are expected to be present at the Annual
Meeting and will be available to respond to appropriate questions from
stockholders and make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE CURRENT FISCAL YEAR.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
know of any other matters which may come before the Annual Meeting, nor has the
Company received notice of any matter by the deadline prescribed by Rule
14a-4(c) under the Exchange Act. If any other matters properly come before the
meeting, the accompanying proxy confers discretionary authority with respect to
any such matters, and the persons named in the accompanying proxy intend to vote
in accordance with their best judgment on such matters.
All expenses in connection with the solicitation of proxies will be borne
by the Company. In addition to this solicitation, officers, directors and
regular employees of the Company, without any additional compensation, may
solicit proxies by mail, telephone or personal contact. Morrow & Co., Inc. has
been retained to assist in the solicitation of proxies for a fee of $4,000, plus
reasonable out-of-pocket expenses. The Company will, upon request, reimburse
brokerage houses and other nominees for their reasonable expenses in sending
proxy materials to their principals.
-18-
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy materials for the Annual
Meeting in 2003 should be addressed to the Company's Secretary, 2511 Garden
Road, Suite 200, Monterey, California 93940, and must be received no later than
January 20, 2003. In addition, the Company's By-laws currently require that for
business to be properly brought before an annual meeting by a stockholder,
regardless of whether included in the Company's proxy statement, the stockholder
must give written notice of his or her intention to propose such business to the
Secretary of the Company, which notice must be delivered to, or mailed and
received at, the Company's principal executive offices not less than forty-five
(45) days prior to the date on which the Company first mailed its proxy
materials for the prior year's Annual Meeting (which cut-off date will be April
5, 2003 in the case of the Annual Meeting in 2003). Such notice must set forth
as to each matter the stockholder proposes to bring before the Annual Meeting:
(i) a brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the meeting, (ii) the name and
address of the stockholder proposing such business, (iii) the class and number
of shares which are beneficially owned by the stockholder, and (iv) any material
interest of the stockholder in such proposal. The By-laws further provide that
the chairman of the Annual Meeting may refuse to permit any business to be
brought before an Annual Meeting without compliance with the foregoing
procedures.
By Order of the Board of Directors,
/s/ Gerald J. Kitchen
-------------------------------------
Gerald J. Kitchen
Executive Vice President,
General Counsel,
Chief Administrative Officer
and Secretary
Monterey, California
May 20, 2002
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED HEREBY,
UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K AND 10-K/A FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (WITHOUT EXHIBITS). REQUESTS
SHOULD BE MADE TO MR. GERALD J. KITCHEN, EXECUTIVE VICE PRESIDENT, GENERAL
COUNSEL, CHIEF ADMINISTRATIVE OFFICER AND SECRETARY, 2511 GARDEN ROAD, SUITE
200, MONTEREY, CALIFORNIA 93940.
-19-
CENTURY ALUMINUM 000000 0000000000 0 0000
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MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1
ADD 2
ADD 3
ADD 4
ADD 5
ADD 6
HOLDER ACCOUNT NUMBER
C 1234567890 J N T
[BAR CODE]
Use a black pen. Mark with an X inside the grey areas as shown in this
example. [X]
[ ] Mark this box with an X if you have made changes to your name or address
details above.
ANNUAL MEETING PROXY CARD
A. ELECTION OF DIRECTORS FOR TERM TO EXPIRE IN 2005
1. The Board of Directors recommends a vote FOR the listed nominees.
FOR WITHHOLD
01 - Craig A. Davis [ ] [ ]
02 - William R. Hampshire [ ] [ ]
B. ISSUES
The Board of Directors recommends a vote FOR the following proposals.
FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment of Deloitte &
Touche LLP as auditors for fiscal year 2002. [ ] [ ] [ ]
3. In their discretion, upon such other matters as
may properly come before the meeting. [ ] [ ] [ ]
Mark this box with an X if you plan to attend the annual meeting. [ ]
C. AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Please sign exactly as name or names appear on this proxy. When signing as
attorney, executor, administrator, trustee, custodian, guardian or corporation
officer, give full title. If more than one trustee, all should sign.
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Signature 1 - Please keep signature within the box
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Signature 2 - Please keep signature within the box
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Date (dd/mm/yyyy)
/ /
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1 U P X A695
PROXY - CENTURY ALUMINUM COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING, JUNE 25,
2002
The undersigned appoints Gerald J. Kitchen and Peter C. McGuire the proxies
(each with power to act alone and with power of substitution) of the undersigned
to vote at the Annual Meeting of Stockholders of Century Aluminum Company to be
held at the executive offices of the Company, Monterey, CA at 9:00 a.m., local
time, on Tuesday, June 25, 2002, and at any adjournment, all shares of stock
which the undersigned is entitled to vote thereat upon all matters properly
brought before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)