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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2002

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-7170

IMCO Recycling Inc.

(Exact name of registrant as specified in its charter)

5215 North O’Connor Blvd., Suite 1500

Central Tower at Williams Square

Irving, Texas 75039

(Address of principal executive offices)

(972) 401-7200

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  X No  ¨

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes  x  No  ¨

        As of June 28, 2002 (the last business day of the Registrant’s most recently completed second fiscal quarter), the aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant was $124,331,330.

        Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of March 1, 2003.

Common Stock, $0.10 par value:  14,501,079 shares

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Registrant’s definitive proxy statement relating to its 2003 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

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PART I

This Annual Report on Form 10-K contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements should be read in conjunction with the cautionary statements and other important factors included in this Form 10-K. See ITEM 7. “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD-LOOKING STATEMENTS” for a description of important factors which could cause actual results to differ materially from those contained in the forward-looking statements. Forward-looking statements include statements about plans, objectives, goals, strategies, future events or performance, and assumptions underlying those statements. These forward-looking statements may be identified by words such as “anticipates,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” and similar expressions. The Company’s expectations, beliefs and projections are expressed in good faith and the Company believes it has a reasonable basis to make these statements, through management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved.

ITEM 1. BUSINESS

GENERAL

IMCO Recycling Inc. recycles aluminum and zinc. Except where the context otherwise requires, the term “Company” used in this Form 10-K means IMCO Recycling Inc. and its majority-owned subsidiaries. The Company is the largest aluminum recycler in the United States and believes that it is the largest aluminum recycler in the world. The Company’s processing of aluminum includes:

The Company converts scrap and dross into molten metal in furnaces at facilities owned or operated by it. While the aluminum is in molten form, the Company may blend in other metals to provide specific desirable qualities such as increased strength, formability and wear resistance. The Company then delivers the processed aluminum to customers in molten form or ingots.

The Company is also one of the world’s largest zinc recyclers. Its U.S. Zinc Corporation subsidiary uses furnaces to convert zinc scrap and dross into various value-added zinc products, such as zinc oxides, zinc dust and metal.

Most of the Company’s processing capacity is utilized to recycle customer-owned materials, for which the Company charges a fee (a service called “tolling”). During 2002, approximately 59% of the Company’s total pounds of metal melted involved tolling. The balance of the Company’s business involves the purchase of scrap and dross for processing and recycling by the Company for subsequent resale (“product sales” business).

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The Company’s aluminum business has benefited from the trend to include recycled materials in finished products and the increasing utilization of aluminum in automotive components. Similar trends have been experienced in recent years in domestic zinc recycling. Additionally, the use of recycled aluminum in manufacturing operations in Europe and Latin America is increasing.

Over the past decade, production of primary metal, aluminum recycling and imports have each accounted for roughly one-third of the total U.S. aluminum supply. Shipments to the transportation sector have risen in recent years because of the greater use of aluminum in vehicles. This sector continues to be the largest and fastest-growing market for aluminum. In 2001, the last year for which statistics are available, the transportation sector consumed approximately 37 percent of total U.S. aluminum supply, while containers and packaging, mainly the production of beverage cans, utilized some 23 percent of annual shipments; building and construction accounted for 15 percent. Exports, consumer durables, electrical and machinery and equipment are other important markets.

The Company’s aluminum customers include some of the world’s major aluminum producers and aluminum fabricators, diecasters, extruders, automotive companies and other processors. Most of the aluminum metal processed by the Company is used to produce products for the transportation, packaging and construction industries. Due to the increasing use of aluminum in automotive components, much of the Company’s recent growth has been directed toward serving the transportation sector. The Company’s principal aluminum customers include General Motors Corporation (GM), Alcoa Inc., (Alcoa), Ford Motor Company (Ford), Commonwealth Aluminum Corporation (Commonwealth), Alcan Inc., (Alcan), ARCO Aluminum Inc., BMW Group, Contech (a unit of SPX Corporation) and Daimler Chrysler Corporation.

The Company’s zinc customers include some of the world’s major tire and rubber producers and galvanizers, steel companies and other processors, including Michelin Tire, The Sherwin-Williams Company, (Sherwin-Williams), Aztec Manufacturing Company, Goodyear Tire & Rubber Co. and Dow AgroSciences LLC.

INTERNET ADDRESS AND SEC FILINGS

The Company’s Internet website address is http://www2.imcorecycling.com. The Company makes available on its Internet website for no charge its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after the materials are electronically filed with or furnished to the Securities and Exchange Commission (SEC).

GROWTH OF BUSINESS

General. Since its formation in 1988, the Company has increased its number of facilities and capacity through acquisitions, construction of new facilities and expansion of existing facilities. Implementation of this growth strategy was accelerated during the mid-1990s.

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The following table shows the Company’s growth since 1993:

* Includes the Company’s facilities in Swansea, Wales, Monterrey, Mexico and Pindamonhangaba, Brazil, as well as two facilities in Germany.

** Does not include 600 million pounds at two facilities located in Germany (VAW-IMCO).

Recent International Developments. During 2002, the Company’s growth was principally focused on its international operations:

CERTAIN FACTORS

For descriptions of certain factors affecting the Company, including commitments and contingencies which subject the Company to certain continuing risks, we refer you to the following sections of this Form 10-K:

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SEGMENT REPORTING

The Company has two business segments that meet the reporting requirements of Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information.” See NOTE M—“SEGMENT INFORMATION” of Notes to Consolidated Financial Statements. The aluminum segment represents all of the Company’s aluminum melting, processing, alloying, brokering and salt cake activities. The zinc segment represents all of the Company’s zinc melting, processing and brokering activities.

PRODUCTS AND SERVICES

Aluminum. The Company recycles new and old scrap aluminum and delivers the recycled metal to customers as molten aluminum or ingots. The Company’s U.S. customers include most of the major aluminum producers and aluminum diecasters, extruders, automotive companies and other processors of aluminum products. In Europe, the Company supplies recycled aluminum to major aluminum producers and automotive companies.

The Company manufactures specification aluminum alloy products at four dedicated U.S. facilities for automotive equipment manufacturers and their suppliers. In addition, two other plants manufacture a variety of aluminum products that are ultimately used as metallurgical additions in the steel making process, such as slag conditioners, deoxidizers, steel desulfurizers and hot topping compounds. The major force behind increased demand for recycled aluminum in recent years has been aluminum’s increasing use in auto and truck components, including body structures.

Zinc. Zinc is used in diecastings, in brass-making as an alloying metal with copper and in chemical compounds to produce rubber, ceramics, paints and fertilizer. However, its most unique quality is its natural ability to metallurgically bond with iron and steel and protect these metals from corrosion. The Company manufactures three value-added zinc products: zinc oxide, zinc dust and zinc metal:

Foreign Expansion. The Company continues to evaluate expansion opportunities in foreign countries where market conditions warrant. The Company anticipates further capacity expansion at its facilities in Germany and plans to enter into another long-term contract in the United Kingdom. General political and economic conditions in foreign countries may affect the business prospects and results of operations of the Company. Foreign operations are generally subject to risks, including foreign currency exchange rate fluctuations, environmental regulations, changes in the methods and amounts of taxation, foreign exchange controls and government restrictions on the repatriation of hard currency.

SALES AND LONG-TERM AGREEMENTS

Aluminum-General. The Company’s principal aluminum customers use recycled aluminum to produce can sheet, building, automotive and other aluminum products. GM accounted for approximately 11% of the Company’s

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consolidated revenues during fiscal 2002. No other customer accounted for more than 10% of revenues in either 2001 or 2000.

Customarily, agreements with customers in the aluminum recycling industry have been short-term. These usually result from a bidding process where aluminum producers and metal traders offer to sell materials or to have materials tolled. Consequently, the Company historically has maintained no significant backlog of orders.

Aluminum-Long-Term Arrangements. The Company has long-term arrangements for its recycling services with Alcoa, Alcan, Commonwealth, GM, Aluminum Norf GmbH, Tomra Latasa, PBR Automotive, and Nemak, S.A. The remaining terms of these arrangements as of December 31, 2002 ranged from 1 year to 9 years, although many of the arrangements provided for extensions. Amounts melted under multi-year arrangements represented approximately 33% of the Company’s total aluminum volume for 2002. Many of the agreements for these arrangements contain cost escalation and cross-indemnity provisions, including provisions obligating the Company to indemnify the customer for certain environmental liabilities that the customer may incur. See NOTE L—“OPERATIONS” of Notes to Consolidated Financial Statements.

The Company plans to seek similar dedicated long-term arrangements with customers in the future. Increased emphasis on dedicated facilities and dedicated arrangements with customers carries the inherent risk of increased dependence on a single or few customers with respect to a particular Company facility. In such cases, the loss of such a customer, or the reduction of that customer’s business level, could have a material adverse effect on the Company’s financial condition and results of operation, and any timely replacement of volumes could prove difficult.

Zinc. Most of the Company’s zinc products are sold directly to end-users. No single zinc customer accounted for more than 10% of the Company’s consolidated revenues in 2002. Most of the Company’s agreements with zinc customers are for a term of one year or less. The Company historically has maintained no significant backlog of orders for zinc products.

General. The primary metals industry and the metals recycling industry are subject to cyclical fluctuations, depending upon the level of demand in metal consuming industries. Reduced industrial demand and declines in U.S. production have adversely affected the Company’s results of operations since 2000. See ITEM 7. “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”

The Company sells to both domestic and international customers. Sales to customers in foreign locations accounted for approximately 9%, 11% and 15% of consolidated revenues in 2002, 2001 and 2000 respectively. Aluminum shipments to customers located in Canada accounted for approximately 7%, 8% and 8% of consolidated revenues in 2002, 2001 and 2000, respectively. See NOTE M—“SEGMENT INFORMATION” of Notes to Consolidated Financial Statements.

THE RECYCLING/MANUFACTURING PROCESS

Aluminum. The Company uses two types of furnace technology: rotary and reverberatory. Rotary (or barrel-like) furnaces are able to pour a batch of melted aluminum recovered from old scrap and then immediately switch to other types of material, and afterwards, switch back again. Reverberatory furnaces are stationary and use both radiation and convection heating to melt the material being processed. Each of these furnace technologies has advantages over the other, depending on the type of material processed.

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The recovered metal is poured directly into an ingot mold or hot metal crucible for delivery to customers. Some of the Company’s plants deliver molten aluminum in crucibles directly to their customers’ manufacturing facilities. As of December 31, 2002, the Company had the capacity to provide approximately 80% of its domestic processed aluminum in molten form. The molten aluminum is poured from the crucible into the customer’s furnace, saving the customer the time and expense of remelting aluminum ingots. The Company normally charges an additional fee for transportation and handling of molten aluminum.

Alloying. At the Company’s metal alloying facilities in Coldwater, Michigan, Saginaw, Michigan and Shelbyville, Tennessee, additional materials are blended with molten aluminum to produce a metal alloy. The alloyed aluminum is shipped in either molten or ingot form to its customers. These alloying facilities generate dross, which is then recycled at one of the Company’s other aluminum recycling facilities.

By-products. A by-product of processing aluminum materials in reverbatory furnaces is aluminum dross, which is sent to the Company’s rotary furnaces for processing. The recycling process from the Company’s rotary furnaces produces a by-product called “salt cake,” which is formed from the contaminants and coatings on aluminum scrap and dross, and the salts added during the aluminum recycling process. Salt cake is composed of salts, metallic aluminum, aluminum oxide and small amounts of other materials.

After recovery of some metallic aluminum through a materials separation process, the Company disposes of its salt cake and certain airborne contaminants (or baghouse dust) in landfills that are used exclusively by the Company or that are permitted specifically to handle the types of waste materials generated by the Company. Salt cake is not listed as a “hazardous waste” under the Resource Conservation and Recovery Act of 1976 (“RCRA”) or as a “hazardous substance” under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”). The Company owns and operates a lined landfill at its Morgantown, Kentucky facility. Its design exceeds current requirements for salt cake disposal and meets RCRA Subchapter “C” hazardous waste standards.

The Company also owns and operates a facility adjacent to its Morgantown, Kentucky plant to further process salt cake through the use of a materials separation process, and then extract additional aluminum that is left after the melting process. The facility’s process involves crushing the salt cake and separating metallic aluminum out of the salt cake. The residual non-metallic product is then landfilled in the Company’s Morgantown, Kentucky landfill.

Certain of the Company’s other facilities also process salt cake and other by-products from the aluminum recycling process into aluminum concentrates, aluminum oxide and salt brine.

Zinc.

Zinc oxide is produced by melting top dross, a low iron-content zinc by-product of continuous galvanizing, and re-melt die cast, a high zinc-content alloy, in a sweat or premelt furnace.

Zinc dust with extra low lead content is preferred by the domestic industrial paint industry. It is produced by converting primary zinc into a molten form using an electro-thermal furnace. Regular zinc dust is produced by processing

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bottom dross, an iron-bearing zinc residue created during the galvanizing process, and re-melt die cast in a pot or ladle.

Zinc metal is produced by placing pieces of oxidized zinc-bearing metals into a ball mill where the Company separates out the oxidic zinc. The zinc oxide is then sold as fertilizer additives. After the ball mill process, the metallic zinc-bearing material is melted, refined, poured into molds and shipped to galvanizers.

The recycling process at the Company’s Coldwater, Michigan zinc plant involves melting continuous galvanizers’ top dross in an electric induction furnace which is then transferred to a reactor which removes the impurities (iron and zinc oxide, which are sold as by-products). The remaining molten zinc is poured into a reverberatory holding furnace from which it is blended and cast into ingots, which are either sold or returned to the customer.

OPERATIONS

Aluminum. In its aluminum tolling operations, the Company accepts new and old scrap owned by its customers and processes this material for a tolling charge per pound of incoming weight. In order to retain control of their metal supplies, customers have often desired to toll, rather than sell, their scrap materials. Tolling requires no metal inventory to be purchased or held by the Company. In addition, tolling limits the Company’s exposure to the risk of fluctuating metal prices since the Company does not own the material processed. For the year ended December 31, 2002, approximately 65% of the Company’s total pounds of aluminum processed involved tolling. Compared to product sales transactions, tolling decreases the Company’s exposure to the risk of fluctuating metal prices and working capital requirements. See ITEM 7. “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”

The Company also enters into metal brokerage transactions under which the Company buys metal from primary and other producers and then sells the metal to end-users. These transactions involve buying and selling metal without processing it. Additionally, in order to facilitate acquiring metal for its production process, the Company occasionally enters into “swap” transactions whereby the Company agrees to exchange its recycled finished goods for scrap raw materials.

When purchasing metals in the open market for its product sales business, the Company attempts to reduce the risk of fluctuating metal prices by hedging anticipated sales of aluminum and zinc and by avoiding large inventories, except to the extent judged necessary to allow its plants to operate without interruption. See ITEM 7A. “QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.”

Zinc. The Company’s zinc operations primarily consist of product sales business. The Company’s product sales from its zinc operations represent approximately 97% of its total zinc production; the remainder is from tolling transactions.

General. The Company believes that its production network of processing plants has been a positive factor in achieving higher overall facility operating rates. Many of the Company’s facilities are located strategically close to its major customers’ production facilities. The Company’s network of facilities in the U.S. also enables it to better allocate processing work among its facilities, thereby maximizing utilization of available capacity. To achieve reductions in energy consumption and increases in

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productivity, the Company began in 2000 to retrofit its older rotary furnaces with new natural gas burner technology. This initiative was substantially completed in early 2002.

Throughout 2002, the Company continued to provisionally suspend operations at its Wendover, Utah aluminum facility due to adverse market conditions. The Company intends to keep the Wendover plant idle during 2003 or until market conditions improve.

COMPETITION

General. The aluminum and zinc recycling industries are fragmented and highly competitive. The Company believes that its position as the largest U.S. recycler of secondary aluminum and zinc is a positive competitive factor.

The international recycling business is also fragmented and very competitive. However, the Company believes it will be able to compete effectively in certain international areas because of its furnace and processing technology. The Company intends to expand internationally only when it has long-term commitments from customers. The expansions into Brazil and Mexico are examples of this strategy.

Aluminum. The principal factors of competition in the aluminum segment are price, recovery rates, environmental and safety regulatory compliance, and types of services (for example, the ability to deliver molten aluminum). Freight costs also limit the geographic areas in which the Company can compete effectively.

The major aluminum producers, some of which are the Company’s largest customers, have generally discontinued processing dross, instead focusing their resources on other aspects of aluminum production. Both new and old scrap is processed by the secondary recycling industry and major producers. In times of lower demand, the major producers process a greater portion of the available old scrap. The Company competes both with other secondary recyclers and their customers when purchasing and processing scrap for product sales business.

The amount of the Company’s aluminum tolling business can vary depending upon the extent that the major aluminum producers’ internally process their own scrap. The aluminum producers generally vary their rate of internal recycling depending upon furnace availability, inventory levels, the price of aluminum and their own internal demand for metal. The major aluminum producers are larger and have greater financial resources than the Company. One of these major producers did expand its recycling operations during 2002, which in turn reduced demand for certain of the Company’s services. Declines in can stock demand for major producers during 2002 also adversely affected the Company’s tolling business.

Zinc. The principal factors of competition in the zinc segment are price, customer service and delivery schedules. Competition is regionally focused due to high freight costs.

For zinc oxide, the Company’s major competitors are Zinc Corporation of America, a subsidiary of Horsehead Industries, Inc. and Zochem, a subsidiary of Hudson Bay Mining & Smelting, Ltd. For zinc dust, the Company’s major competitors are Purity Zinc Metals Company, Ltd. and Meadowbrook Company, a subsidiary of T.L. Diamond Company, Inc. For zinc metal, the Company considers both primary and secondary zinc producers to be competitors.

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SOURCE AND AVAILABILITY OF RAW MATERIALS AND ENERGY

Aluminum. The lower level of manufacturing activity in the U.S. during the past three years has had a negative impact on the Company’s operations. Certain Company facilities have operated at reduced levels because of a lack of raw materials available for processing. In the case of product sales business, the primary sources of aluminum for recycling and alloying are both major aluminum producers and metal traders. Many of the Company’s aluminum suppliers are also customers of the Company.

Zinc. A significant portion of the Company’s zinc products is produced from secondary materials provided by the galvanizing and scrap metals industries. These industries, like aluminum, have operated at lower levels during the past three years, reducing the availability of profitable processing opportunities. The Company also purchases primary zinc to produce high-grade zinc and for metals brokerage purposes.

The Company purchases its zinc raw materials from numerous suppliers. Many of the “hot dip” galvanizers, which supply the Company with approximately 45% of its aggregate zinc raw materials, are also customers of the Company. The Company’s zinc brokerage unit also procures raw materials for use in the Company’s zinc manufacturing operations. The availability of zinc dross is dependent upon the demand for galvanized steel, which has historically paralleled fluctuations in customer demand in the automotive, appliance and construction industries.

General. The Company’s operations are fueled by natural gas, which represents the second largest component of its operating costs. In an effort to acquire the most favorable natural gas costs, the Company has secured some of its natural gas at fixed price commitments. The Company purchases the majority of its natural gas on a spot-market basis. Most of the Company’s long-term metals supply arrangements with its customers contain provisions to reflect fluctuations in natural gas prices. See ITEM 7. “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and ITEM 7A. “QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.” The Company believes it will continue to have access to adequate energy supplies to meet its needs for the foreseeable future.

SEASONALITY

Aluminum. UBC collections have historically been highest in the summer months and lowest in the winter months. The automotive industry has historically experienced a decline in molten metal deliveries during periods when its production facilities cease production to perform new model changeovers and during the holidays in December.

Zinc. Historically, demand for the Company’s zinc products used by paint manufacturers and those used in fertilizers has been somewhat higher in the summer months.

TRANSPORTATION

The Company receives incoming metal by rail and truck. Most of the Company’s plants own their own rail siding or have access to rail lines nearby. The Company owns and leases various trucks and trailers to support its business. Customarily, the transportation costs of scrap materials to be tolled are paid by the Company’s customers, while the transportation costs of metal purchased and sold by the Company may be paid by either customers or the Company. The Company contracts with third-party transportation firms for hauling some of its solid waste for disposal.

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EMPLOYEES

As of December 31, 2002, the Company had 1,627 employees, consisting of 421 employees engaged in administrative and supervisory activities and 1,206 employees engaged in production and maintenance. Labor relations with employees have been satisfactory. A few of the Company’s production facilities are represented by collective bargaining groups:

ENVIRONMENTAL MATTERS

General. The Company’s operations are subject to environmental laws, regulations and ordinances in the plants’ locales of operations. While the Company believes that current environmental control measures at its facilities comply in all material respects with current legal requirements, additional measures at some of the Company’s facilities may be required. See ITEM 3. “LEGAL PROCEEDINGS.”

The Company’s operations generate certain discharges and emissions, including in some cases off-site dust and odors, which are subject to the Federal Clean Air Act and other environmental laws. From time to time, operations of the Company have resulted, or may result, in certain noncompliance with applicable requirements under environmental laws. The Company may also incur liabilities for off-site disposals of salt cake and other materials. In addition, historical or current operations at, or in the vicinity of, the Company’s facilities, may have resulted in soil or groundwater contamination. See ITEM 3. “LEGAL PROCEEDINGS” and ITEM 7. “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”

Due to relatively high costs and limited coverage, the Company does not carry environmental impairment liability insurance. The Company made capital expenditures for environmental control facilities of $2,021,000 in 2002, most of which was related to air pollution control equipment for its Loudon, Tennessee, Morgantown, Kentucky, and Uhrichsville, Ohio facilities. Environmental expenditures for 2003 and 2004, which primarily relate to the Company’s landfills and air pollution control equipment, are currently estimated to be approximately $3,200,000 and $4,700,000, respectively.

Aluminum. The processing of scrap generates solid waste in the form of salt cake and baghouse dust. This material is disposed of at off-site landfills or at the Company’s permitted disposal sites at two of its facilities. If salt cake were ever classified as a hazardous waste or substance under RCRA or CERCLA, the Company would have to modify its handling and disposal practices. The Company might then also have to obtain a RCRA Subchapter “C” permit for its Morgantown, Kentucky landfill, obtain other permits (including transportation permits), and landfill additional amounts of salt cake with third parties not under the Company’s direct control.

Based on current annual processing volumes, planned utilization rates and remaining landfill capacity, the estimated remaining life of the Company’s landfill at its Sapulpa, Oklahoma plant is four years. The

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Company estimates that phase two of its Morgantown, Kentucky landfill cell has a remaining useful life of approximately one year. Remaining landfill life at Morgantown is estimated by using independent aerial photography and engineering calculations based on that photography. When the current Morgantown landfill was originally permitted, it was anticipated that there would be three phases to this landfill site. The Company is currently operating in the second phase. A planned expansion at this landfill in 2004 (the third phase) is anticipated to provide an additional six years of useful life.

Landfill closure costs for Company-owned landfills are currently estimated to be approximately $8,500,000. The current balance of landfill closure accrued costs is $3,100,000. This amount is included in the balance sheet classification “other long-term liabilities.” The Company is currently providing for this expenditure by accruing, on a current basis, these estimated costs as the landfills are used. In addition, the Company is reviewing the recently issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, which will change the method of accounting for landfill closure costs.

Zinc. Several of the zinc manufacturing processes create various by-products which are either sold to downstream processors or re-used internally. There are virtually no by-products requiring disposal.

ITEM 2. PROPERTIES

RECYCLING AND PROCESSING FACILITIES

The Company’s principal aluminum segment facilities are located in:

These facilities recycle aluminum, manufacture specification aluminum alloy products and manufacture aluminum products used in steelmaking.

The Company’s zinc segment facilities are located in:

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In addition, the Company’s former joint venture in Germany operates two aluminum recycling and foundry alloy plants. See ITEM 7. “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—VAW-IMCO.”

The average operating rates for all of the Company’s wholly-owned facilities for 2002, 2001 and 2000 were 74%, 81% and 89%, respectively, of stated capacity. During 2002, the Company temporarily suspended operations at its Wendover, UT facilities and currently anticipates that this facility will remain idle during 2003 due to poor market conditions.

The Company believes that its facilities are suitable and adequate for its operations. Substantially all of the Company’s U.S. plants are mortgaged to secure senior indebtedness of the Company. See ITEM 7. “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”

Under a long-term supply agreement, Commonwealth has an option to purchase the Company’s Uhrichsville, Ohio facility, first exercisable in 2008. However, in the event of a “change of control” of the Company (as defined in the supply agreement), the exercise date of this option would be accelerated to the date of the “change of control” event. The exercise price is based on varying multiples of earnings before interest, taxes, depreciation and amortization (EBITDA) for the facility (five times EBITDA in the case of a non-change of control event exercise). In addition, the Company granted Commonwealth a right of first refusal in the event the Company desires to sell the facility in a non-change of control situation. In the event of a change of control of Commonwealth, then Commonwealth’s option and right of first refusal would automatically terminate.

The potential purchase price for Commonwealth’s exercise of these rights may be above or below the fair value of the Uhrichsville plant. Should Commonwealth exercise these rights, there can be no assurance that the production or earnings attributable to the Uhrichsville facility could be replaced, and the Company’s cash flows and net earnings could be adversely affected.

In addition, under its long-term supply agreement with the Company, GM has an option to acquire the Company’s Saginaw, Michigan facility, which is exercisable under certain conditions beginning in 2006. If the Company’s supply agreement with GM were terminated, GM would have to pay the Company an amount which approximates the carrying value of the plant at the time of termination, and GM would have an option to take ownership of the Saginaw facility.

SOLID WASTE DISPOSAL

All of the waste generated from the Company’s salt cake processing facility at its Morgantown site is deposited in a landfill adjacent to this facility. Management anticipates that this landfill, assuming it is expanded as scheduled, will serve the Company’s landfilling needs for the majority of the salt cake generated by facilities owned by the Company in the Eastern United States for the next 7 years, based on current utilization. The Company also owns a landfill at its Sapulpa, Oklahoma plant, which is estimated to have four years of useful life remaining based on planned utilization. The Goodyear, Arizona facility recycles its own salt cake and sells the by-products to third parties. See ITEM 1. “BUSINESS—ENVIRONMENTAL MATTERS.”

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ADMINISTRATIVE

In Irving, Texas, the Company leases approximately 40,000 square feet of office space for its principal executive, financial and management functions. This lease expires in June 2007.

In Houston, Texas, the Company owns approximately 30,000 square feet of office space for financial and management functions for its zinc operations. The Company also has three zinc brokerage and sales offices that it leases, located in California, Texas, and Pennsylvania.

ITEM 3. LEGAL PROCEEDINGS

In 1997, the Illinois Environmental Protection Agency (“IEPA”) notified the Company that two of the Company’s zinc subsidiaries are potentially responsible parties (“PRP”) pursuant to the Illinois Environmental Protection Act for the cleanup of contamination at a site in Marion County, Illinois to which these subsidiaries, among others, in the past sent zinc oxide for processing and resale. These subsidiaries have joined a group of PRPs that are planning to negotiate with the IEPA regarding the cleanup of the site. The site has not been fully investigated and final cleanup costs have not yet been determined.

On February 15, 2001, the State of Michigan filed a lawsuit against the Company in the State Circuit Court for the 30th District, Ingham County, Michigan. The lawsuit arises out of disputes between the Company’s Alchem Aluminum Inc. subsidiary and Michigan environmental authorities concerning air emission control permits at the subsidiary’s aluminum specialty alloy production facilities in Coldwater, Michigan. The plaintiff claims injunctive relief and penalties for alleged noncompliance with and violations of federal and state environmental laws. The suit seeks compliance by the Company as well as potentially substantial monetary penalties. The Company has filed an answer to the complaint and is in the discovery stage of the process. A motion for summary disposition has been filed raising legal and factual defenses to portions of the State’s complaint. The Company believes it has meritorious defenses to the claims and plans a vigorous defense. At this time, the Company is not able to determine the amount of damages, if any, it may incur.

On April 27, 2001, the U. S. Environmental Protection Agency, Region V, issued to the Company a Notice of Violation (“NOV”) alleging violations of the federal Clean Air Act, primarily for violations of the Michigan State Implementation Plan at the Company’s Coldwater facilities. The NOV addresses the same instances of alleged noncompliance raised in the State of Michigan lawsuit, alleging that the Company purportedly failed to obtain appropriate preconstruction air quality permits prior to conducting modifications to the Alchem production facilities and exceeded permitted emission levels from the two Company facilities located in Coldwater. In September 2001, the Company filed its response with Region V of the Environmental Protection Agency. The Company believes that the federal action mirrors the State action. Therefore, resolution of the federal action depends upon the ultimate resolution of the State’s case.

The Company was a defendant in a personal injury case in state court in Missouri. In August 2001, the trial court entered a final judgment against the Company for $4,000,000. On January 10, 2003, the Company posted a security bond of approximately $4,223,000. The Company is also currently involved in litigation with certain of its former insurance carriers and brokers with regards to the ultimate liability in this

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matter, and management currently believes that the Company will be reimbursed (subject to deductible limitations) for its losses as to this matter.

The Company is also a party from time to time to what it believes is routine litigation and proceedings considered part of the ordinary course of its business. The Company believes that the outcome of such proceedings would not have a material adverse effect on the Company’s financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders of the Company during the quarter ended December 31, 2002.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company are listed below, together with brief accounts of their experience and certain other information. Executive officers are appointed by the Board of Directors.

Don V. Ingram has served as a director of the Company since 1988 and as Chairman of the Board since 1994. He was elected Chief Executive Officer of the Company in February 1997 and assumed the role of President in May 2000. Mr. Ingram played a major role in the formation of the Company in 1986.

Richard L. Kerr joined International Metal Co., a predecessor of the Company, in April 1984. He was named Chief Operating Officer of the Company in 1991. In 1994, he became President of the Company’s Metals Division. In 1997 he became President of the Company, and in May 2000, he assumed the role of

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Executive Vice President and Pre