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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule Section 240.14a-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
Preliminary Copy
Dated May 16, 2003
[CENTURY ALUMINUM LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 24, 2003
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 24, 2002, at
the Executive Offices of the Company, 2511 Garden Road, Suite 200, Monterey,
California, for the following purposes:
1. To elect three (3) directors to serve for a term of three (3) years
expiring at the Annual Meeting of Stockholders to be held in 2006;
2. To consider and act upon a proposal to amend the Restated
Certificate of Incorporation of the Company to increase the maximum
number of directors authorized to serve on the Board of Directors
from nine (9) to eleven (11);
3. 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, 2003; and
4. 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 9, 2003, 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,
Gerald J. Kitchen
Executive Vice President,
General Counsel,
Chief Administrative Officer
and Secretary
Monterey, California
May __, 2003
--------------------------------------------------------------------------------
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 24, 2003
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 24, 2003, 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 card is May __, 2003.
VOTING RIGHTS AND VOTES REQUIRED
Only stockholders of record at the close of business on May 9, 2003, will
be entitled to notice of and to vote at the Annual Meeting. As of such record
date, the Company had outstanding 21,070,210 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 at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of common stock as of the
record date is required to approve the amendment to the Restated Certificate of
Incorporation of the Company to increase the maximum number of directors from
nine (9) to eleven (11). 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 9, 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 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.
NAME OF BENEFICIAL 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 .............................................. 125,723(5) *
Roman A. Bninski .............................................. 20,500(6) *
Craig A. Davis ................................................ 323,595(7) 1.5
Robert E. Fishman ............................................. 3,333(8) *
John C. Fontaine .............................................. 20,750(9) *
E. Jack Gates ................................................. 23,537(10) *
William R. Hampshire .......................................... 17,400(11) *
Gerald J. Kitchen ............................................. 119,010(12) *
Gerald A. Meyers .............................................. 195,920(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)... 985,933(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)
-3-
----------------------
(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.
1. ELECTION OF DIRECTORS
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. At the Annual Meeting, three Class I Directors will be elected
to serve until the third succeeding Annual Meeting of the Stockholders of the
Company in 2006. 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 three 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 I DIRECTORS WITH TERMS TO EXPIRE IN 2006
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OR DIRECTOR
NAME AND AGE EMPLOYMENT DURING PAST 5 YEARS; OTHER DIRECTORSHIPS SINCE
------------ --------------------------------------------------- -----
Roman A. Bninski ................. 57 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 (1)........... 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.
-4-
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)(3)........ 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)(3)......... 61 Managing Director of Inglewood Associates Inc. since 2000
1990; 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 to November 2002 and Director of International
Total Services, Inc. from August 1999 to January
2003.
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. (3)(4)... 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 (2).......... 75 Vice-Chairman of the Board of the Company since 1995
August 1995; independent consultant since 1990; former
President and Chief Executive Officer of Howmet
Aluminum Corporation.
-------------------------------------
(1) Member of Nominating Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) Dr. Fishman was elected to the Board in December 2002.
-5-
BOARD AND BOARD COMMITTEE MEETINGS; DIRECTORS' COMPENSATION
The entire Board of Directors met three times during 2002, and each
director attended all of those meetings in person or by telephone, with the
exception of Mr. Strothotte, who did not participate in the March 11, 2002 Board
of Directors meeting, and Dr. Fishman, who joined the Board on December 13, 2002
and attended one Board meeting in 2002. In addition, there was one meeting of
the Board's outside directors, Messrs. Fontaine, Hampshire, O'Brien and
Schreiber, and each of those directors attended the meeting in person or by
telephone. Dr. Fishman, who is also an outside director, was elected to the
Board after the date of the outside directors' meeting and therefore did not
attend. The Board of Directors has appointed an Audit Committee, a Compensation
Committee and a Nominating Committee to assist in handling the various functions
of the Board. 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 Audit Committee members are Messrs. Fishman, Fontaine and O'Brien.
During 2002, Mr. Bninski, an outside director, was also a member of the Audit
Committee. 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, approves the engagement of
independent auditors for non-audit services, monitors the independence of the
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 2002, the Audit Committee held four
meetings.
The members of the Compensation Committee are Messrs. Fontaine, Hampshire
and O'Brien. During 2002, Mr. Schreiber, an outside director, was also a member
of the Compensation Committee. 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 2002, the Compensation Committee held
three meetings.
The Nominating Committee members are Messrs. Fontaine, O'Brien and
Strothotte. The Nominating Committee, which met once in 2002, is responsible for
recruiting and recommending candidates for election to the Company's Board of
Directors. The Nominating Committee will consider nominees recommended by
stockholders and submitted in accordance with those provisions in the Company's
Restated By-laws which relate to stockholder proposals.
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.
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. One-third of the options vested on the grant date, and an additional
one-third will vest 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.
Mr. Strothotte was designated to serve as a director of the Company by
Glencore International AG.
-6-
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 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.
(3) Mr. Davis was succeeded as Chief Executive Officer by Gerald A. Meyers
effective January 1, 2003; however, he will remain Chairman of the Board of
Directors through 2004.
(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 $75,750
relating to Mr. Gates' relocation to Owensboro, Kentucky.
(8) Mr. Gates joined the Company in December 2000.
-7-
Fiscal Year End Option Value Table
The following table sets forth information regarding the aggregate number
and value of options held by the Named Executive Officers as of December 31,
2002.
NUMBER OF SHARES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED OPTIONS
AT DECEMBER 31, 2002 (#)(1) AT DECEMBER 31, 2002 ($)(2)
------------------------------ -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Craig A. Davis 150,000 0 -- --
Gerald A. Meyers 100,000 0 -- --
Gerald J. Kitchen 61,666 0 -- --
David W. Beckley 80,000 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.
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 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
ESTIMATED FUTURE COMMON STOCK PAYOUTS
PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLANS
OTHER PERIOD ---------------------------------------------
PERFORMANCE MATURATION OR TARGET
NAME SHARES (#)(1) PAYOUT THRESHOLD (#) (#)(2) MAXIMUM (#)(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
(Table continued on following page)
-8-
(Table continued from previous page)
ESTIMATED FUTURE COMMON STOCK PAYOUTS
PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLANS
OTHER PERIOD ---------------------------------------------
PERFORMANCE MATURATION OR TARGET
NAME SHARES (#)(1) PAYOUT THRESHOLD (#) (#)(2) MAXIMUM (#)(3)
---------------------------------------------
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.
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.
-9-
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, 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 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 Rabbi Trusts to
secure the Company's payment obligations.
-10-
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; however, he will remain Chairman of the Board of Directors through 2004.
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.
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
-11-
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 is 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.
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.
-12-
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.
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 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 5/9/03
------------------- --------------------------- ------------------------ ---------------------
Gerald J. Kitchen Executive Vice President, $ 390,000 $ 287,000
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
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 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 per annum until July
15, 2003, and thereafter at a rate of eight percent 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 Executive
Officer 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.
-13-
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 and John P. O'Brien,
all of whom are independent directors. During 2002, Mr. Stuart M. Schreiber, an
outside director, was also a member of the Committee. 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.
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.
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, 2002, the
Committee authorized increases in the Named Executive Officers' annual base
salaries in amounts ranging from 3.1% to 4.6% percent, which recognized
excellent management performance but which also took into account the impact of
weaker than expected primary aluminum prices on the Company's financial results.
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' 2002 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 and
declining equity markets prevented management from completing one of its
strategic goals, the individual officers performed very well. Annual incentive
awards of $390,000, $115,000, $85,000, $85,000 and $80,000 were paid to Messrs.
Davis, Meyers, Kitchen, Beckley and Gates, respectively, for 2002.
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.
-14-
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 2002.
In 2001, the Committee modified its guidelines governing the granting of
performance shares. 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. Awards for the 2001-2003 and
2002-2004 performance cycles were granted in 2002. See "Long-Term Incentive
Plans--Awards in Last Fiscal Year." Vesting of performance shares is based on
the Company's performance relative to achievement of strategic, operating and
financial targets, and actual shares vested can range between 0% and 150% of the
performance share award. The modified guidelines govern performance share awards
with performance cycles ending in 2003 and beyond. Under the guidelines
governing performance share awards for the performance cycle ending in 2002,
vesting was based upon "earnings before taxes" targets. Based upon 2002
financial results, performance shares for the period 2000-2002 were forfeited.
Other Compensation and Benefit Matters
In 2001, the Committee 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. In accordance with recent
changes in law, the Company has terminated this loan program, and no new loans
will be made to executives.
Compensation of the Chief Executive Officer
Mr. Davis served as the Chief Executive Officer through December 31, 2002.
Mr. Meyers was elected to fill that position effective January 1, 2003. Mr.
Davis' compensation as Chief Executive Officer for 2002 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
-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, 1997 through
December 31, 2002. These comparisons assume the investment of $100 on December
31, 1997 and the reinvestment of dividends.
CENTURY ALUMINUM COMPANY
Comparison of Cumulative Total Return to Stockholders
December 31, 1997 through December 31, 2002
[COMPARISON OF CUMULATIVE TOTAL RETURN TO STOCKHOLDERS CHART]
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------- -------- -------- -------- -------- --------
S&P 500 Index 100.00 128.58 155.64 141.46 124.65 97.10
Media General
Aluminum Group Index 100.00 98.10 194.61 154.65 166.29 117.47
Century Aluminum
Company 100.00 71.08 115.80 89.43 106.58 59.81
AUDIT COMMITTEE REPORT
The following report of the Audit Committee shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall this information be incorporated by reference into any
future filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, each as amended, except to the extent that the Company specifically
incorporates it by reference into a filing.
The Audit Committee of the Board of Directors (the "Audit Committee") is
comprised of Messrs. Robert E. Fishman, 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. During 2002, Mr. Roman A.
Bninski, an outside director, was also a member of the Audit Committee. 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.
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 stockholders 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.
-16-
The Audit Committee met with and discussed with management and the
independent auditors the interim financial information contained in each
quarterly earnings announcement in 2002 prior to its public release and the
audited financial statements of the Company as of and for the year ended
December 31, 2002.
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, 2002, for filing with the Securities and
Exchange Commission. The Audit Committee also recommended the reappointment,
subject to stockholder approval, of the independent auditors and the Board
concurred in such recommendation.
Respectfully Submitted,
The Audit Committee
Robert E. Fishman 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 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.
2. AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE MAXIMUM NUMBER OF DIRECTORS
The Board of Directors has adopted a resolution proposing and declaring
advisable the amendment of Article Fifth of the Company's Restated Certificate
of Incorporation (the "Charter") to increase the maximum number of directors
authorized to serve on the Board from nine to eleven (the "Charter Amendment").
At the same meeting, the Board adopted a resolution authorizing the amendment of
the Company's Restated By-laws to make the provisions relating to the number of
authorized directors therein consistent with the increase proposed in the
Charter Amendment. The Amendment to the Restated By-laws will only be effective
if the Company's stockholders approve the proposed Charter Amendment.
Article Fifth of the Charter currently provides that the number of
directors authorized to serve on the Board shall be not less than three nor more
than nine, with the exact number of directors serving on the Board to be fixed
by the Board from time to time. The Board currently has nine directors. Upon
approval by the stockholders, the proposed amendment to the Charter would permit
the Board to increase the number of directors authorized to serve on the Board
to eleven. The Board believes that the proposed increase would provide the
Company with the flexibility to recruit up to two additional directors with
business experience and knowledge that would be beneficial to the Company. In
addition, the proposed increase would afford the Company greater flexibility to
comply with recent or proposed changes to the independence standards applicable
to the Board and certain of its committees.
-17-
If the Charter Amendment is approved by the stockholders, the Charter would
be amended by replacing the first sentence of Article Fifth, paragraph (1) with
the following:
"The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors consisting of not less than three
(3) nor more than eleven (11) directors."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
CHARTER AMENDMENT.
3. 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 2002 was approximately $622,000.
Financial Information Systems Design and Implementation Fees. There were no
professional services rendered by Deloitte in 2002 related to financial
information systems design and implementation.
All Other Fees. The aggregate fees for all other services rendered by
Deloitte in 2002 was approximately $1,106,000 and can be sub-categorized as
follows:
Attestation Fees. The aggregate fees for attestation services rendered by
Deloitte for matters such as audits of employee benefit plans, due
diligence pertaining to a contemplated acquisition and consultation on
accounting matters or transactions was approximately $460,000.
Other Fees. The aggregate fees for all other services such as
consultation related to tax planning, advice and compliance (including
due diligence pertaining to a contemplated acquisition), and evaluation
and design of various employee benefit matters rendered by Deloitte in
2002 was approximately $646,000.
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 2004 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, 2004. In addition, the Company's Restated 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 11, 2004 in the case of the Annual Meeting in 2004). 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 Restated 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,
Gerald J. Kitchen
Executive Vice President,
General Counsel,
Chief Administrative Officer
and Secretary
Monterey, California
May __, 2003
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, 2002, 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-
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PROXY - CENTURY ALUMINUM COMPANY
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING, JUNE 24,
2003
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 24, 2003, 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.)
[CENTURY ALUMINUM LOGO] PRELIMINARY TRUST CARD
DATED MAY 16, 2003
MR A SAMPLE
DESIGNATION (IF ANY)
HOLDER ACCOUNT NUMBER
[UPC CODE]
[BAR CODE]
[ ] Mark this box with an X if you have made changes to your name or address
details above.
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ANNUAL MEETING PROXY CARD
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A ELECTION OF CLASS I DIRECTORS FOR TERM TO EXPIRE IN 2006
1. The Board of Directors recommends a vote FOR the listed nominees.
FOR WITHHELD
01 - Roman A. Bninski [ ] [ ]
02 - Stuart M. Schreiber [ ] [ ]
03 - Willy R. Strothotte [ ] [ ]
B PROPOSALS
The Board of Directors recommends a vote FOR the following proposals.
FOR AGAINST ABSTAIN
2. Proposal to amend the Restated Certificate of [ ] [ ] [ ]
Incorporation of the Company to increase the
maximum number of directors authorized to serve
on the Board of Directors from 9 to 11.
FOR AGAINST ABSTAIN
3. Proposal to ratify the appointment of [ ] [ ] [ ]
Deloitte &Touche LLP as auditors for fiscal
year 2003.
4. By signing below, the undersigned authorizes the proxies to vote, in their
discretion, upon such other matters as may properly come before the meeting.
Please 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.
Signature 1 - Please keep signature within the box [ ]
Signature 2 - Please keep signature within the box [ ]
Date (mm/dd/yyyy) [ ][ ]/[ ][ ]/[ ][ ][ ][ ]