Exhibit 13
                                                                    ---------- 

Portions of the annual report to  stockholders  for the year ended  December 31,
1998 which are expressly  incorporated by reference in this filing follow.  Such
items are  proceeded by an index which shows the location in this Annual  Report
on Form 10-K where such items are  incorporated by reference and the location of
the item in the annual report to  stockholders  for the year ended  December 31,
1998.


                                     INDEX
                                     -----
Reference   Incorporation                                         Page number
letter in   location in                                           in annual
this        this                                                  report to
Exhibit     Form 10-K         Description of Item                 stockholders
--------    -------------     ----------------------------        ------------
  (A)       Part II, item 6   Consolidated Selected                  page 10
                                 Financial Data

  (B)       Part II, item 7   Management's Discussion and            pages 11
                                 Analysis of Financial Condition     thru 16
                                 and Results of Operations

            Part II, item 7A  Quantitative and Qualitative           pages 14
                                 Disclosures About Market Risk       thru 15

  (C)       Part II, item 8   Consolidated Balance Sheet             page 17

            Part II, item 8   Consolidated Statement of Income       page 18

            Part II, item 8   Consolidated Statement of              page 18
                                 Comprehensive Income

            Part II, item 8   Consolidated Statement of              page 19
                                 Changes in Stockholders'
                                 Equity

            Part II, item 8   Consolidated Statement of              page 20
                                 Cash Flows

            Part II, item 8   Notes to Consolidated                  pages 21
                                 Financial Statements                thru 34

            Part II, item 8   Report of Independent Auditors         page 35

The items follow:
<PAGE>
                                                            Exhibit 13 item (A)
                                                            -------------------

                          COMMONWEALTH INDUSTRIES, INC.
                      Consolidated Selected Financial Data
                      (in thousands except per share data)
<TABLE>
<CAPTION>

                                                                                   Year ended December 31,
                                         ------------------------------------------------------------------------------------------
                                              1998                1997                 1996               1995               1994
                                         ------------      --------------       -------------      -------------      -------------
<S>                                        <C>               <C>                   <C>                <C>                <C>    
Statement of Income Data:
Net sales                                   $ 967,949         $ 1,090,777           $ 739,218          $ 671,501          $ 496,529
Gross profi                                    69,455              88,043              49,312             64,750             41,406
Operating income                               21,421              41,593              19,262             42,240             20,262
Income before extraordinary loss                  143               9,122              14,756             33,787             22,091
Net income                                        143               7,941              13,401             33,787             22,091

Net income per share data:
     Basic
         Income before extraordinary loss      $ 0.01              $ 0.78              $ 1.45             $ 3.32
         Extraordinary loss                         -               (0.10)              (0.13)                 -
                                         ------------      --------------       -------------      -------------
         Net income                            $ 0.01              $ 0.68              $ 1.32             $ 3.32
                                         ============      ==============       =============      =============

     Diluted
         Income before extraordinary loss      $ 0.01              $ 0.78              $ 1.45             $ 3.31
         Extraordinary loss                         -               (0.10)              (0.13)                 -
                                         ------------      --------------       -------------      -------------
         Net income                            $ 0.01              $ 0.68              $ 1.32             $ 3.31
                                         ============      ==============       =============      =============

     Cash dividends paid per share             $ 0.20              $ 0.20              $ 0.20             $ 0.15

Operating Data:
Depreciation and amortization                $ 34,728            $ 34,710            $ 22,452           $ 18,600           $ 17,397
Capital expenditures                         $ 33,650            $ 21,736            $ 14,841           $ 15,153           $ 19,662
Commonwealth Aluminum business unit:
     Net sales                              $ 846,696           $ 964,012           $ 704,400          $ 671,501          $ 496,529
     Shipments (pounds)                       884,169             990,207             712,480            587,932            568,970
Alflex business unit:
     Net sales                              $ 121,253           $ 126,765            $ 34,818
     Shipments (feet)                         517,380             521,711             136,936

Balance Sheet Data:
Working capital                             $ 115,192           $ 112,924           $ 207,061          $ 153,292          $ 134,026
Total assets                                  648,399             667,421             794,582            420,684            439,454
Total debt                                    125,000             125,650             342,250             48,375                  -
Total stockholders' equity                    326,529             330,473             227,223            213,063            242,690
</TABLE>
<PAGE>
                                                     Exhibit 13 item (B)
                                                     -------------------

                          COMMONWEALTH INDUSTRIES, INC.
 Management's Discussion and Analysis of Financial Condition and Results of
 Operations

         The following is a discussion of the consolidated  financial  condition
and results of operations of the Company for each of the years in the three-year
period  ended  December  31,  1998,  and  certain  factors  that may  affect the
Company's  prospective  financial  condition.  This  section  should  be read in
conjunction  with the consolidated  financial  statements of the Company for the
year ended  December 31, 1998 and the notes  thereto.  The following  discussion
contains statements which are forward-looking rather than historical fact. These
forward-looking  statements  are made pursuant to the safe harbor  provisions of
the  Private  Securities  Litigation  Reform Act of 1995 and  involve  risks and
uncertainties that could render them materially  different,  including,  but not
limited to, the effect of global economic conditions,  the impact of competitive
products and pricing,  product development and  commercialization,  availability
and cost of critical raw materials,  the rate of technological  change,  product
demand  and  market  acceptance  risks,   capacity  and  supply  constraints  or
difficulties and other risks as detailed in the Company's various Securities and
Exchange Commission filings.

Overview
         The Company  manufactures  non-heat  treat  coiled  aluminum  sheet for
distributors and the transportation,  construction and consumer durables end use
markets and  electrical  flexible  conduit and  prewired  armored  cable for the
non-residential construction and renovation markets. The Company's principal raw
materials are aluminum scrap, primary aluminum,  copper and steel. Trends in the
demand for  aluminum  sheet  products in the United  States and in the prices of
aluminum  primary  metal,  aluminum  scrap and  copper  commodities  affect  the
business of the Company.  The Company's  operating  results also are affected by
factors specific to the Company,  such as the margins between selling prices for
its products and its cost of raw material ("material margins") and its unit cost
of converting raw material into its products  ("conversion cost"). While changes
in  aluminum  and  copper  prices  can cause the  Company's  net sales to change
significantly  from period to period,  net income is more  directly  impacted by
fluctuations in material margins.
         Although the demand for aluminum sheet  products is cyclical,  over the
longer term demand has continued to increase,  reflecting general population and
economic  growth and the advantages of aluminum's  light weight,  high degree of
formability, resistance to corrosion and recyclability.
         The price of aluminum metal affects the price of the Company's products
and in the  longer  term can  have an  effect  on the  competitive  position  of
aluminum in relation to  alternative  materials.  The price of primary  metal is
determined  largely by  worldwide  supply and  demand  conditions  and is highly
cyclical.  The price of primary aluminum in world markets greatly influences the
price of aluminum  scrap,  the Company's  principal  raw  material.  Significant
movements  in the price of primary  aluminum  can affect the  Company's  margins
because aluminum sheet prices do not always move  simultaneously nor necessarily
to the same  degree as the  primary  markets.  The  Company  seeks to manage its
material margins by focusing on higher margin products and by sourcing the scrap
and primary metal markets in the most cost-effective  manner,  including the use
of futures contracts and options to hedge anticipated raw material  requirements
based on firm-priced sales and purchase orders.
         During  1998,  net  sales  of the  Company's  aluminum  sheet  products
declined by 11% from the year 1997.  Lower sales and shipment volume were caused
by production  problems and lower productivity in connection with the expiration
of the  Company's  collective  bargaining  agreement on July 31 at the Company's
Lewisport, Kentucky aluminum rolling mill, as well as weather-related production
outages at its mill in  Uhrichsville,  Ohio.  Although the Lewisport  mill never
actually  suffered a strike,  mill operations were affected  nonetheless as both
labor and  management  prepared for the  possibility.  While overall  demand for
aluminum  sheet  products  remained  strong,  material  margins  had been  under
pressure for the past two years until the latter part of 1998. Stronger aluminum
material margins followed after the Company  successfully  implemented two price
increases, the first beginning in April 1998 and the second in June 1998. Higher
material  margins  during the latter part of 1998 also  reflected  the Company's
efforts to enhance  product  mix and  improve  the metal  blending  process.  In
addition,  although  aluminum  shipment  volume has not  completely  returned to
historic  levels,  steadily  increasing  volume  since  the  completion  of  the
Company's new,  five-year  labor  agreement in September 1998 has contributed to
improved  conversion  costs,  as have other programs to enhance  productivity at
Lewisport  and the  Company's  other mills.  One such program which was begun in
February  1998  at the  Lewisport  rolling  mill,  was  the  elimination  of all
discretionary  overtime hours to reduce the operating cost  concurrent  with the
reduced sales volume.
         Demand  for  the  Company's   electrical  conduit  and  cable  products
continued to exceed the Company's capacity to supply these products during 1998.
While the Company has been adding additional  electrical cable armoring capacity
since the second quarter of 1997,  this capacity only reached full production in
the latter part of 1998 due to substantial  labor turnover and the time involved
in employee  skills  training.  The strong  market for  electrical  conduit also
allowed the Company to concentrate on higher margin  products  during 1998, even
though net sales  volume was down  slightly  from the prior  year.  Value  added
products  such as MC cable  represented  a higher  ratio of Alflex's  1998 sales
compared to the prior year.  In  addition,  the Company  announced in the fourth
quarter of 1998 the decision to open a new plant in Rocky Mount,  North Carolina
during  the second  quarter  of 1999.  This move will  increase  production  and
enhance the Company's  competitive  position by placing that capacity  closer to
attractive markets along the eastern seaboard.
         On September 20, 1996,  the Company  acquired  CasTech  Aluminum  Group
Inc.,  ("CasTech")  in a  transaction  that was accounted for under the purchase
method  of  accounting  at  a  cost  of  $285  million.  Concurrently  with  the
acquisition,  the Company prepaid its existing indebtedness and that of CasTech.
The acquisition and prepayments were financed with a $325 million senior secured
bank credit  facility (which has  subsequently  been reduced - see note 7 to the
consolidated  financial  statements) and the proceeds from the issue and sale of
$125 million principal amount of 10 3/4% Senior Subordinated Notes Due 2006.

Results of Operations for 1998, 1997 and 1996
         Net  Sales.  Net  sales  for  1998  decreased  11%  to  $967.9  million
(including  $121.3  million  from  the  Company's  Alflex  electrical   products
subsidiary)  from $1.1 billion  (including  $126.8 million from Alflex) in 1997.
The  decrease is due to reduced  sales  volume at the  Lewisport  mill which was
partially  offset by volume  increases at the Company's other  facilities.  Unit
sales volume of aluminum products  decreased 11% to 884.2 million pounds in 1998
from 990.2 million pounds in 1997.  Aluminum sales volume for 1998 decreased due
to the  reasons  outlined in the  "overview"  section.  Additionally  1998 sales
volumes at the Company's  continuous  cast aluminum sheet  operations  were only
slightly  above  last  year's  level  due to  tighter  inventory  management  by
customers  and  unusually  wet weather  that  reduced  construction  activity in
various parts of the United States in the first half of 1998.  Alflex unit sales
volume was 517.4 million feet for 1998 compared to 521.7 million feet for 1997.
         In 1997 net sales grew 48% to $1.1 billion  (including  $126.8  million
from Alflex) from $739.2 million  (including $34.8 million from Alflex) in 1996.
The increase is due to the CasTech acquisition along with increased sales volume
at all facilities. Unit sales volume of aluminum products increased 39% to 990.2
million  pounds in 1997 from 712.5  million  pounds in 1996.  Alflex  unit sales
volume was 521.7  million feet for 1997 compared to 136.9 million feet for 1996.
Giving pro forma effect for the 1996 CasTech acquisition, the Company's aluminum
rolling  mills  generated  5% growth in  shipments  during 1997 while its Alflex
electrical  products  subsidiary  achieved 8% growth.  These gains reflected the
Company's  ability to complete  the  integration  of  CasTech's  operations  and
systems  successfully,  optimizing the product mix between the Company's  plants
and  achieving  the  operating  synergies  envisioned at the time of the CasTech
acquisition.
         Gross Profit. Gross profit decreased 21% (to 7.2% of net sales) in 1998
after a 79%  increase  (to 8.1% of net  sales) in 1997.  The 1998  decrease  was
attributable  to  decreased  sales  volume due to the  reasons  outlined  in the
"overview"  section.  The Company's unit manufacturing  costs for 1998 increased
compared  to 1997 as a result of the lower  volumes  which more than  offset any
efficiencies  due to mill  optimization  practices.  Material margins which were
higher in 1998 than in 1997 partially  offset the impact of lower  volumes.  The
1997 increase was attributable to the CasTech acquisition,  increased unit sales
volumes and lower manufacturing unit costs which more than offset lower material
margins.
         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses  increased 3.8% in 1998.  Contributing  to the increase
were increases at Alflex associated with the infrastructure  required to support
the growth of this business  segment,  costs incurred in acquisitions  which did
not  materialize,  expenses  incurred at the Lewiport mill in  anticipation of a
possible  strike  and  certain  expenses  relating  to the  Company's  Year 2000
remediation effort. The realization of various operating synergies envisioned at
the time of the CasTech acquisition  continued to contribute to holding the 1998
increase  down.  The 1997  figure was up 45.5% over 1996,  primarily  due to the
CasTech  acquisition.  Contributing  to the increase was  corporate  relocation,
severance and other costs related to the integration of the  businesses.  Giving
pro  forma  effect  for the  1996  CasTech  acquisition,  selling,  general  and
administrative expenses declined 3.4% in 1997 compared to 1996.
         Amortization  of  Goodwill.  Goodwill,  which  relates  to the  CasTech
acquisition, was flat in 1998 versus 1997, after increasing $3.3 million in 1997
compared to 1996 reflecting a full year of amortization in 1997 versus a partial
year in 1996.
         Operating  Income.  Operating  income decreased by 48% in 1998 to $21.4
million,  compared with a 1997 increase of 115.9% to $41.6 million, in each case
reflecting the factors mentioned above.
         Interest Expense,  Net. Interest expense in 1998 decreased 27% to $22.2
million  from $30.5  million in 1997.  The  decrease in the  Company's  interest
expense  is due to the  reduction  in  borrowing  resulting  from the  Company's
September 1997 equity  offering  coupled with reduced  interest rates due to the
accounts receivable  securitization facility also implemented in September 1997.
Both transactions are described in the "Liquidity and Capital Resources" section
which  follows.  The  increase in  interest  expense in 1997 over 1996 is due to
borrowings associated with the CasTech acquisition.
         Income Tax Expense  (Benefit).  Income tax expense  (benefit)  in 1998,
1997 and 1996  reflect  the use of the  Company's  net  operating  loss  ("NOL")
carryforwards  to offset  taxable  income for federal  income tax  purposes.  At
December 31, 1998,  the Company had  remaining  available NOL  carryforwards  of
approximately  $81  million.  These NOL  carryforwards  will  expire in  various
amounts  through  2008.  The amount of taxable  income that can be offset by NOL
carryforwards  arising  prior to the initial  public  offering of the Company in
March 1995 is subject to an annual limitation of approximately $9.6 million plus
certain gains included in taxable income which are  attributable  to the Company
prior to the initial public offering.
         The Company  recognized  an income tax benefit of $0.6  million in 1998
compared to income tax expense of $2.4 million in 1997. The change is due to the
decrease in the Company's taxable income and a $1.5 million favorable adjustment
recorded  in the first  quarter  of 1998 to the prior  year's tax  expense.  The
adjustment  resulted from the filing of amended  federal  income tax returns for
prior  years.  The  Company  recognized  an income  tax  benefit in 1996 of $5.3
million as a result of revisions to prior year tax estimates and  adjustments to
the estimated utilization of NOLs.
         Extraordinary  Loss  on  Early  Extinguishment  of  Debt.  The  Company
recorded an extraordinary loss on the early  extinguishment of debt in both 1997
and 1996 of $1.5  million  ($1.2  million  and $1.4  million  net of income  tax
benefit, respectively).
         Net Income. Net income for 1998 decreased 98% to $0.1 million,  after a
41% decrease in 1997 over 1996, in each case  reflecting  the factors  described
above for each year.

Liquidity and Capital Resources
         The Company's sources of liquidity are cash flows from operations,  the
Company's  accounts  receivable  securitization  facility  described  below  and
borrowings  under  its $100  million  revolving  credit  facility.  The  Company
believes  these  sources  will  be  sufficient  to  fund  its  working   capital
requirements,  capital  expenditures,  debt service and dividend payments for at
least through 1999.
         On September 29, 1997, the Company completed a common stock offering of
5.75  million  shares  at a  public  offering  price of $18 per  share.  The net
proceeds from the offering of approximately $97.7 million were used to repay the
entire amount  outstanding  under the Company's  term loan  agreement,  totaling
$95.0 million, as well as $2.7 million outstanding under the Company's revolving
credit facility.
         On  September  26,  1997,  the Company  sold all of its trade  accounts
receivables to a 100% owned subsidiary,  Commonwealth  Financing Corp.  ("CFC").
Simultaneously, CFC entered into a three-year accounts receivable securitization
facility with a financial institution and its affiliate, whereby CFC sells, on a
revolving  basis,  an  undivided  interest  in  certain of its  receivables  and
receives up to $150.0 million from an unrelated  third party purchaser at a cost
of funds linked to commercial paper rates plus a charge for  administrative  and
credit  support  services.  At December  31, 1998,  the Company had  outstanding
$120.2  million  under the  agreement  and had  $15.9  million  of net  residual
interest  in the  securitized  receivables.  The net  residual  interest  in the
securitized  receivables  is included in other  current  assets in the Company's
consolidated financial statements.
         The Company's  cash flows from  operations in 1998,  1997 and 1996 were
$46.6 million, $134.7 million and $42.0 million,  respectively.  The increase in
cash flow from  operations in 1997 was due primarily to the accounts  receivable
securitization. Working capital increased to $115.2 million at December 31, 1998
from $112.9 million at December 31, 1997.  Working  capital  decreased to $112.9
million at December 31, 1997 from $207.1  million at December  31, 1996,  due to
the accounts receivable securitization.
         The Company's  revolving credit facility permits borrowings and letters
of credit up to $100.0 million outstanding at any time.  Availability is subject
to satisfaction  of certain  covenants and other  requirements.  At December 31,
1998, $99.3 million was available. The facility expires on September 1, 2002.
         Capital  expenditures  were  $33.7  million,  $21.7  million  and $14.8
million  plus the  cost of the  CasTech  acquisition  in  1998,  1997 and  1996,
respectively, and are estimated to be $38 million in 1999, all generally related
to upgrading and expanding the  Company's  manufacturing  and other  facilities,
including the completion of Alflex's new production and distribution facility in
North Carolina, and meeting environmental requirements.
         The  indicated  annual rate of  dividends  being paid on the  Company's
Common Stock is $0.20 per share, or an annual total of about $3.2 million.

Risk Management
         Commodity  Price Risk. The price of aluminum is subject to fluctuations
due to  unpredictable  factors on the  worldwide  market.  To reduce this market
risk,  the Company  follows the policy of hedging its  anticipated  raw material
requirements  based on  firm-priced  sales  and  purchase  orders.  The  Company
purchases and sells futures  contracts and options on the London Metal  Exchange
("LME") based on its net metal position.  The Company's metal position  consists
of inventories, purchase commitments,  committed and anticipated sales, with the
net hedged using LME futures  contracts and options.  At December 31, 1998,  the
Company held  purchase and sales  commitments  through 1999 totaling $47 million
and $292 million, respectively.
         The change in market value of such LME contracts has a high correlation
to the price  changes of the hedged  commodity  (aluminum  scrap and ingot).  To
obtain a matching of revenues and expenses realized gains or losses arising from
LME  contracts  are  included  in  inventories  as a cost of raw  materials  and
reflected in the consolidated  statement of income when the product is sold. The
Company had  deferred  realized  losses of $2.2  million and $1.5  million as of
December  31,  1998 and 1997,  respectively  on  closed  futures  contracts  and
options.  Deferred  realized  losses are recorded as an increase in the carrying
value of inventory  and deferred  realized  gains are recorded as a reduction in
the carrying value of inventory.
         At December 31, 1998 and 1997,  the Company's  position with respect to
open aluminum futures contracts and options was as follows (in millions):

                                             Fair             Net Unrealized
                                            Value                (Loss) Gain 
                                            -----             --------------
         December 31, 1998                  $100.4              $ (5.6)
         December 31, 1997                   123.9                 0.3

         Net  unrealized  gains and losses on open futures and option  contracts
are  recorded  in the  consolidated  balance  sheet as accrued  liabilities  and
prepayments and other current assets,  respectively.  The net unrealized loss of
$5.6  million and net  unrealized  gain of $0.3 million at December 31, 1998 and
1997,  respectively,  consists  of  unrealized  gains due from  brokers  of $4.1
million and $0.6 million,  respectively, and unrealized losses due to brokers of
$9.7 million and $0.3 million,  respectively.  Futures contracts and options are
valued at the closing price on the last business day of the year.
         A  sensitivity  analysis has been  prepared to estimate  the  Company's
exposure to market risk related to its LME position. Market risk is estimated as
the  potential  loss in fair value  resulting  from a  hypothetical  10% adverse
change in the price of the futures  contract.  On December  31, 1998 the Company
had approximately 62,175 metric tonnes of LME futures contracts.  A hypothetical
10 % change from the 1998  year-end  three-month  high grade  aluminum  price of
$1,223 per metric  tonne would  result in a change in fair value of $7.6 million
in these contracts. However it should be noted that any change in the fair value
of these contracts would be  significantly  offset with an inverse change in the
cost of purchased metal.
         Credit Risk.  As discussed  previously,  the Company  utilizes  futures
contracts and options to protect  against  exposures to commodity  price risk in
the  aluminum  market.  The  Company  is  exposed  to  losses  in the  event  of
non-performance by the counterparties to these agreements;  however, the Company
does not anticipate  non-performance by the counterparties.  Prior to conducting
business with a potential customer,  credit checks are performed on the customer
to determine  creditworthiness and assess credit risk. In addition,  an indirect
credit exposure review is performed on all customers. Trading partners (brokers)
are  evaluated  for  creditworthiness  and risk  assessment  prior to initiating
trading  activities  with the  brokers.  However,  the Company  does not require
collateral to support broker transactions.  In addition,  all brokers trading on
the LME with U.S.  clients are regulated by the Commodities  Trading and Futures
Commission,  which requires the brokers to be fully insured  against  unrealized
losses owed to clients.  At December 31, 1998, credit lines totaling $49 million
were available at various brokerages used by the Company.
         Interest Rate Risk. The Company  manages its ratio of fixed to floating
rate debt with the  objective  of  achieving a mix that  management  believes is
appropriate.  To manage this mix in a cost-effective  manner, the Company,  from
time to time,  enters into interest rate swap  agreements.  At December 31, 1998
the  Company  had  interest  rate  swap  contracts  with a  notional  amount  of
approximately $53 million. With respect to these agreements,  the Company pays a
fixed  rate  of  interest  and  receives  a  LIBOR-based   floating   rate.  The
counterparties  to  interest  rate  contracts  are  major  commercial  banks and
management  believes  that losses  related to credit  risk are remote.  The fair
value  of these  interest  rate  swap  agreements  at  December  31,  1998 was a
liability of $1.1 million.
         A  sensitivity  analysis has been  prepared to estimate  the  Company's
exposure to market risk related to its interest  rate  position.  Market risk is
estimated as the potential loss in fair value resulting from a hypothetical  100
basis  point  change  in  interest  rates  relating  to the  interest  rate swap
agreements. A hypothetical 100 basis point change in interest rates would result
in a  change  in  fair  value  of $0.4  million  in  these  interest  rate  swap
agreements.

Year 2000 Readiness Disclosure
         The Company is entering the final stages of a  company-wide  program to
make its computer systems year 2000 compliant. The year 2000 issue is the result
of computer  programs  being written using two digits rather than four to define
the  applicable  year.  Any of the Company's  programs that have  time-sensitive
software  may  recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations.
         As of December 31, 1998, approximately 87 percent of the Company's core
business  computer systems were Year 2000 compliant,  with all computer systems,
which  includes  mainframe,  server,  desktop and portable  computers,  embedded
systems, in addition to the core business applications, expected to be compliant
by the end of the  third  quarter  of 1999 as  planned.  The  total  cost of the
program is  estimated  to be $8.0  million,  of which the Company  has  incurred
approximately  $6.4  million  through  December  31,  1998,  and is being funded
through operating cash flows.  Maintenance or modification costs are expensed as
incurred,  while the cost of systems being replaced is capitalized and amortized
over the new system's  useful life. The Company  presently  believes that,  with
these  modifications  and  replacements,  the  year  2000  issues  will not pose
significant operational problems for the Company. However, if such modifications
and replacements in critical  operations are not completed timely, the year 2000
issues may have a material  impact on the  results of  operations  or  financial
condition of the Company.
         The Company  recognizes the importance of readiness for potential worst
case  scenarios  relating  to the Year 2000  issues.  The  Company is working to
identify scenarios requiring  contingency plans and has begun to assess the year
2000 compliance  efforts of external parties.  The Company relies on a number of
customers  and  suppliers,   including   banks,   telecommunication   providers,
utilities,  and other  providers of goods and  services.  The inability of these
third parties to conduct their business for a significant  period of time due to
the Year 2000  issue  could  have a  material  adverse  impact on the  Company's
operations.  The Company is currently  assessing the Year 2000  readiness of its
most critical  customers  and  suppliers  and planning a due diligence  study of
those  customers and  suppliers.  There can be no assurance  that the systems of
other  companies that interact with the Company will be  sufficiently  Year 2000
compliant.  If a major supplier or customer is unable to supply raw materials or
receive the Company's products, the Company's results of operations or financial
condition could be materially impacted.
         The  Company  has  notified  recipients  of  previously  made Year 2000
statements that these statements, and any other Year 2000 statements released by
the Company, are retroactively  identified and labeled in their entirety as Year
2000 Readiness Disclosures pursuant to Section 7(b) of the Year 2000 Information
and Readiness  Disclosure  Act of 1998. By doing so, these prior  statements are
relieved from tort liability.

Recently Issued Accounting Pronouncements
         In March 1998, the American  Institute of Certified Public  Accountants
("AICPA")  issued  Statement  of  Position  98-1,  "Accounting  for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
provides guidance on accounting for the costs of computer software  developed or
obtained for internal use. SOP 98-1 is effective for  financial  statements  for
fiscal years  beginning after December 15, 1998. The Company will adopt SOP 98-1
effective  January 1, 1999 and does not expect the  adoption  to have a material
impact on the Company's  consolidated results of operations,  financial position
or cash flows.
         In June 1998, the Financial Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). The Statement  establishes
accounting and reporting  standards  requiring that every derivative  instrument
(including  certain  derivative  instruments  embedded  in other  contracts)  be
recorded on the balance  sheet as either an asset or  liability  measured at its
fair value. The Statement  requires that changes in the derivative's  fair value
be recognized  currently in net income unless specific hedge accounting criteria
are met. Special  accounting for qualifying  hedges allows a derivative's  gains
and losses to offset related results on the hedged item in the income statement,
and requires  that a company must  formally  document,  designate and assess the
effectiveness of transactions  that receive hedge  accounting.  The Company will
adopt SFAS No. 133 in the Company's  first  quarter 2000  reporting as required.
Management is currently  evaluating  the impact of SFAS No. 133 on the Company's
future financial reporting.

<PAGE>
                                                        Exhibit 13 item (C)
                                                        -------------------

                          COMMONWEALTH INDUSTRIES, INC.
                           Consolidated Balance Sheet
                        (in thousands except share data)
<TABLE>
<CAPTION>

                                                                                      December 31,
                                                                        --------------------------------------
                                                                            1998                     1997
                                                                        -------------            -------------
<S>                                                                     <C>                      <C>  
Assets
Current assets:
          Cash and cash equivalents                                       $        6               $        -
          Accounts receivable, net                                               228                      355
          Inventories                                                        174,968                  171,633
          Prepayments and other current assets                                25,367                   45,107
                                                                        -------------            -------------
               Total current assets                                          200,569                  217,095
Property, plant and equipment, net                                           269,837                  266,292
Goodwill, net                                                                169,086                  173,562
Other noncurrent assets                                                        8,907                   10,472
                                                                        -------------            -------------
               Total assets                                                $ 648,399                $ 667,421
                                                                        =============            =============

Liabilities
Current liabilities:
          Outstanding checks in excess of deposits                         $       -                $   9,122
          Accounts payable                                                    54,244                   67,881
          Accrued liabilities                                                 31,133                   27,168
                                                                        -------------            -------------
               Total current liabilities                                      85,377                  104,171
Long-term debt                                                               125,000                  125,650
Other long-term liabilities                                                    8,859                    9,675
Accrued pension benefits                                                      15,930                   13,368
Accrued postretirement benefits                                               86,704                   84,084
                                                                        -------------            -------------
               Total liabilities                                             321,870                  336,948
                                                                        -------------            -------------

Commitments and contingencies                                                      -                        -

Stockholders' Equity
     Common stock, $.01 par value, 50,000,000 shares authorized,
          15,944,000 and 15,941,500 shares outstanding at
          December 31, 1998 and 1997, respectively                               159                      159
     Additional paid-in capital                                              398,794                  398,757
     Accumulated deficit                                                     (69,621)                 (66,575)
     Unearned compensation                                                      (672)                  (1,172)
     Accumulated other comprehensive income:
         Minimum pension liability adjustment                                 (2,131)                    (696)
                                                                        -------------            -------------
               Total stockholders' equity                                    326,529                  330,473
                                                                        -------------            -------------
               Total liabilities and stockholders' equity                  $ 648,399                $ 667,421
                                                                        =============            =============
</TABLE>

                 See notes to consolidated financial statements.
<PAGE>
                          COMMONWEALTH INDUSTRIES, INC.
                        Consolidated Statement of Income
                      (in thousands except per share data)
<TABLE>
<CAPTION>

                                                                                  Year ended December 31,
                                                                    -----------------------------------------------------
                                                                        1998                1997                1996
                                                                    -------------      ---------------       ------------
<S>                                                                    <C>                 <C>                 <C>      
Net sales                                                              $ 967,949           $1,090,777          $ 739,218
Cost of goods sold                                                       898,494            1,002,734            689,906
                                                                    -------------      ---------------       ------------
     Gross profit                                                         69,455               88,043             49,312
Selling, general and administrative expenses                              43,558               41,972             28,841
Amortization of goodwill                                                   4,476                4,478              1,209
                                                                    -------------      ---------------       ------------
     Operating income                                                     21,421               41,593             19,262
Other income (expense), net                                                  365                  487                 76
Interest expense, net                                                    (22,221)             (30,536)            (9,875)
                                                                    -------------      ---------------       ------------
     Income (loss) before income taxes and extraordinary loss               (435)              11,544              9,463
Income tax expense (benefit)                                                (578)               2,422             (5,293)
                                                                    -------------      ---------------       ------------
     Income before extraordinary loss                                        143                9,122             14,756
Extraordinary loss on early extinguishment of debt,
     net of income tax benefit                                                 -               (1,181)            (1,355)
                                                                    -------------      ---------------       ------------
     Net income                                                            $ 143              $ 7,941           $ 13,401
                                                                    =============      ===============       ============

Basic and diluted per share data:
     Income before extraordinary loss                                     $ 0.01               $ 0.78             $ 1.45
     Extraordinary loss                                                        -                (0.10)             (0.13)
                                                                    -------------      ---------------       ------------
     Net income                                                           $ 0.01               $ 0.68             $ 1.32
                                                                    =============      ===============       ============

Weighted average shares outstanding
     Basic                                                                15,944               11,687             10,197
     Diluted                                                              15,947               11,723             10,203
</TABLE>

                 See notes to consolidated financial statements.
<PAGE>
                          COMMONWEALTH INDUSTRIES, INC.
                 Consolidated Statement of Comprehensive Income
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                                Year ended December 31,
                                                              ------------------------------------------------------
                                                                  1998                 1997                1996
                                                              --------------      ---------------       ------------
<S>                                                               <C>                   <C>               <C>     
Net income                                                         $    143              $ 7,941           $ 13,401
Other comprehensive income, net of tax:
     Minimum pension liability adjustment                            (1,435)                (696)             2,269
                                                              --------------      ---------------       ------------
Comprehensive income (loss)                                        $ (1,292)             $ 7,245           $ 15,670
                                                              ==============      ===============       ============
</TABLE>

                 See notes to consolidated financial statements.
<PAGE>
                          COMMONWEALTH INDUSTRIES, INC.
            Consolidated Statement of Changes in Stockholders' Equity
                 (in thousands except share and per share data)
<TABLE>
<CAPTION>
                                                                                                       
                                                                                                       Accumulated
                                                                                                         Other
                                                                                                      Comprehensive
                                                                                                         Income:
                                            Common Stock                                                 Minimum       
                                      -----------------------  Additional                                Pension         Total  
                                       Number of                Paid-in      Accumulated   Unearned      Liability    Stockholders'
                                         Shares      Amount     Capital        Deficit    Compensation   Adjustment      Equity
                                      -----------  ----------  -----------   -----------  ------------  -----------   ------------
<S>                                   <C>             <C>     <C>           <C>           <C>           <C>           <C>        
Balance December 31, 1995              10,190,000      $ 102   $ 301,114     $ (83,549)    $(2,335)      $(2,269)      $ 213,063
Net income                                      -          -           -        13,401           -             -          13,401
Cash dividends, $0.20 per share                 -          -           -        (2,040)          -             -          (2,040)
Minimum pension liability adjustment            -          -           -             -           -         2,269           2,269
Issuance of restricted stock               25,000          -         420             -        (420)            -               -
Forfeiture of restricted stock            (17,500)         -        (245)            -         245             -               -
Amortization of unearned compensation           -          -           -             -         530             -             530
                                      -----------  ----------  -----------    ----------  -----------   ----------      ---------
Balance December 31, 1996              10,197,500        102     301,289       (72,188)     (1,980)            -         227,223
Net income                                      -          -           -         7,941           -             -           7,941
Cash dividends, $0.20 per share                 -          -           -        (2,328)          -             -          (2,328)
Minimum pension liability adjustment            -          -           -             -           -          (696)           (696)
Stock offering                          5,750,000         57      97,585             -           -             -          97,642
Issuance of restricted stock                2,500          -          47             -         (47)            -               -
Forfeiture of restricted stock            (22,500)         -        (399)            -         399             -               -
Amortization of unearned compensation           -          -           -             -         456             -             456
Exercise of stock options                   9,000          -         151             -           -             -             151
Stock awards                                5,000          -          84             -           -             -              84
                                      -----------  ----------  -----------     ---------  -----------   ----------      ---------
Balance December 31, 1997              15,941,500        159     398,757       (66,575)     (1,172)         (696)        330,473
Net income                                      -          -           -           143           -             -             143
Cash dividends, $0.20 per share                 -          -           -        (3,189)          -             -          (3,189)
Minimum pension liability adjustment            -          -           -             -           -        (1,435)         (1,435)
Forfeiture of restricted stock             (2,500)         -         (35)            -          35             -               -
Amortization of unearned compensation           -          -           -             -         465             -             465
Stock awards                                5,000          -          72             -           -             -              72
                                      -----------  ----------  -----------     ---------   -----------  ----------      ---------
Balance December 31, 1998              15,944,000      $ 159    $ 398,794     $(69,621)     $ (672)      $(2,131)      $ 326,529
                                      ===========  ==========  ===========     =========   ===========  ==========      =========
</TABLE>

                 See notes to consolidated financial statements.
<PAGE>

                          COMMONWEALTH INDUSTRIES, INC.
                      Consolidated Statement of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                                                Year ended December 31,
                                                                                  --------------------------------------------------
                                                                                     1998               1997               1996
                                                                                  ------------      -------------       ------------
<S>                                                                                  <C>                <C>                <C>  
Cash flows from operating activities:
   Net income                                                                         $   143            $ 7,941            $13,401
   Adjustments to reconcile net income to net cash provided by operations:
        Depreciation and amortization                                                  34,728             34,710             22,452
        Extraordinary loss on early extinguishment of debt                                  -              1,495              1,505
        Loss on disposal of property, plant and equipment                               1,453              1,271                  -
        Issuance of common stock in connection with stock awards                           72                 84                  -
        Proceeds from the initial sale of accounts receivable                               -            150,000                  -
        Changes in assets and liabilities:
             Decrease (increase) in accounts receivable, net                              127            (46,650)            12,636
             (Increase) decrease in inventories                                        (3,335)             2,278             (1,563)
             Decrease in prepayments and other current assets                          19,740              6,970              7,819
             Decrease (increase) in other noncurrent assets                               398                201             (1,425)
             (Decrease) in accounts payable                                           (13,637)           (14,459)            (3,248)
             Increase (decrease) in accrued liabilities                                 3,965             (9,183)            (1,972)
             Increase (decrease) in other liabilities                                   2,931                 13             (7,570)
                                                                                  ------------      -------------       ------------
                 Net cash provided by operating activities                             46,585            134,671             42,035
                                                                                  ------------      -------------       ------------
Cash flows from investing activities:
   Net cash and cash equivalents (outflow) from acquisition                                 -             (2,894)          (280,921)
   Debt issuance costs                                                                      -                  -             (9,921)
   Purchases of property, plant and equipment                                         (33,650)           (21,736)           (14,841)
   Proceeds from sale of property, plant and equipment                                     32                 28                314
                                                                                  ------------      -------------       ------------
        Net cash (used in) investing activities                                       (33,618)           (24,602)          (305,369)
                                                                                  ------------      -------------       ------------
Cash flows from financing activities:
   (Decrease) increase in outstanding checks in excess of deposits                     (9,122)             9,122                  -
   Proceeds from short-term borrowings                                                      -                  -             21,000
   Repayments of short-term borrowings                                                      -                  -            (25,000)
   Proceeds from long-term debt                                                        45,150            294,950            343,500
   Repayments of long-term debt                                                       (45,800)          (511,550)           (74,847)
   Proceeds from issuance of common stock                                                   -             97,793                   -
   Cash dividends paid                                                                 (3,189)            (2,328)            (2,040)
                                                                                  ------------       -------------       -----------
        Net cash (used in) provided by financing activities                           (12,961)          (112,013)           262,613
                                                                                  ------------       -------------       -----------
Net increase (decrease) in cash and cash equivalents                                        6             (1,944)              (721)
Cash and cash equivalents at beginning of period                                            -              1,944              2,665
                                                                                  ------------       -------------       -----------
Cash and cash equivalents at end of period                                                $ 6                $ -           $  1,944
                                                                                  ============       =============       ===========
Supplemental disclosures:
    Interest paid                                                                    $ 22,385           $ 27,046            $ 3,571
    Income taxes paid (refund received)                                                   (10)            (1,407)             1,558
</TABLE>

                 See notes to consolidated financial statements.
<PAGE>

                         COMMONWEALTH INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Basis of Presentation and Summary of Significant Accounting Policies
Commonwealth Industries, Inc. (the "Company") operates principally in the United
States in two business  segments.  The aluminum  segment  manufactures  aluminum
sheet  for  distributors  and the  transportation,  construction,  and  consumer
durables end-use markets. The electrical conduit segment  manufactures  flexible
electrical wiring products for the commercial and do-it-yourself markets.

Principles of Consolidation
The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned  subsidiaries.  All significant intercompany  transactions have
been  eliminated.  Certain prior year amounts have been  reclassified to conform
with current classifications.

Use of Estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash and Cash Equivalents
Cash and cash  equivalents  include demand deposits with banks and highly liquid
investments  with  original  maturities  of three  months or less.  The carrying
amount of cash and cash equivalents approximates their fair value.

Concentrations of Credit Risk
Futures contracts, options, cash investments and accounts receivable potentially
subject the Company to  concentrations  of credit risk.  The Company  places its
cash  investments  with high credit quality  institutions.  At times,  such cash
investments  may be in  excess  of the  Federal  Deposit  Insurance  Corporation
insurance limit.  Credit risk with respect to accounts receivable exists related
to  concentrations  of sales to  aluminum  distributors,  who in turn resell the
Company's aluminum products to end-use markets, including the consumer durables,
building and construction and transportation  markets.  Concentrations of credit
risk with respect to accounts  receivable  from the sale of electrical  products
are limited due to the large  customer base,  and their  dispersion  across many
different  geographical areas. During 1996, sales to one major customer amounted
to 11.0% of the  Company's  net  sales.  The  Company  performs  ongoing  credit
evaluations  of  its  customers'   financial  condition  but  does  not  require
collateral to support customer receivables.

Inventories
Inventories are stated at the lower of cost or market. The methods of accounting
for inventories are described in Note 4.

Long-Lived Assets
Property, plant and equipment are carried at cost and are being depreciated on a
straight-line  basis  over  the  estimated  useful  lives  of the  assets  which
generally range from 15 to 33 years for buildings and improvements and from 5 to
20 years for machinery and equipment.  Repair and maintenance  costs are charged
against  income while renewals and  betterments  are  capitalized.  Retirements,
sales and disposals of assets are recorded by removing the cost and  accumulated
depreciation  from the accounts  with any  resulting  gain or loss  reflected in
income.

Goodwill  represents  the  excess  of cost  over  the fair  value of net  assets
acquired and is amortized on a straight-line basis over forty years. Accumulated
amortization  was $10.2  million and $5.7 million at December 31, 1998 and 1997,
respectively.

In the event that facts and  circumstances  indicate that the carrying amount of
an asset or group of assets may be impaired,  an  evaluation  of  recoverability
would  be  performed.  If  an  evaluation  is  required,  the  estimated  future
undiscounted  cash flows  associated  with the asset  would be  compared  to the
assets' carrying amount to determine if a write-down to fair value or discounted
cash flow value is required.

Financial Instruments
The Company  enters into futures  contracts and options to manage price exposure
from  committed and certain  anticipated  sales.  Gains,  losses and premiums on
these instruments which effectively hedge exposures are deferred and included in
income as a component of the underlying sales transaction.

The Company also uses futures  contracts  to manage  risks  associated  with its
natural gas requirements and interest rate swaps to manage interest rate risk.

Income Taxes
The Company  accounts  for income  taxes  using the  liability  method,  whereby
deferred  income taxes reflect the tax effect of temporary  differences  between
the carrying amount of assets and liabilities for financial  reporting  purposes
and the amounts used for income tax  purposes.  In valuing  deferred tax assets,
the Company uses judgment in determining if it is more likely than not that some
portion or all of a deferred  tax asset will not be  realized  and the amount of
the required valuation allowance.

Revenue Recognition
The Company recognizes  revenue upon passage of title to the customer,  which in
most cases coincides with shipment.

Computation of Net Income Per Common Share
Basic net income per common  share has been  computed by dividing  net income by
the weighted average number of common shares outstanding during the period.

Diluted net income per share has been  computed  by  dividing  net income by the
weighted average number of common and common  equivalent  shares (stock options)
outstanding during the period.

Stock-Based Compensation
Compensation cost is measured under the intrinsic value based method.  Pro forma
disclosures of net income and net income per share are presented, as if the fair
value based method had been applied.

Self Insurance
The  Company  is  substantially  self-insured  for losses  related  to  workers'
compensation  and health  claims.  Losses are accrued  based upon the  Company's
estimates  of the  aggregate  liability  for  claims  incurred  based on Company
experience and certain actuarial assumptions.

Environmental Compliance and Remediation
Environmental  expenditures  relating  to current  operations  are  expensed  or
capitalized as appropriate.  Expenditures relating to existing conditions caused
by past operations,  which do not contribute to current or future revenues,  are
expensed.  Costs to  prepare  environmental  site  evaluations  and  feasibility
studies are accrued when the Company  commits to perform them.  Liabilities  for
remediation  costs and  post-remediation  monitoring  are recorded when they are
probable  and  reasonably  estimable,  generally  the earlier of  completion  of
feasibility  studies  or the  Company's  commitment  to a plan  of  action.  The
assessment  of this  liability  is  calculated  based  on  existing  technology,
considers funds available in the settlement trust discussed in Note 12, does not
reflect any offset for possible  recoveries from insurance  companies and is not
discounted.

2.  Acquisitions
On  September  20,  1996,  the  Company  acquired  CasTech  Aluminum  Group Inc.
("CasTech")  for a purchase  price of $285  million.  The excess of the purchase
price over the  acquired net assets of $179 million was recorded as goodwill and
is being  amortized  over 40  years.  The  acquisition  was  recorded  under the
purchase  method of  accounting  and  accordingly,  the results of operations of
CasTech  prior  to the  date  of  acquisition  have  not  been  included  in the
accompanying consolidated financial statements.

3.  Accounts Receivable Securitization
On September 26, 1997, the Company sold all of its trade accounts receivables to
a 100% owned subsidiary,  Commonwealth Financing Corp. ("CFC").  Simultaneously,
CFC entered into a three-year accounts receivable securitization facility with a
financial  institution  and its  affiliate  whereby CFC can sell, on a revolving
basis,  an undivided  interest in certain of its  receivables  and receive up to
$150.0 million from an unrelated third party purchaser at a cost of funds linked
to commercial  paper rates plus a charge for  administrative  and credit support
services.  At December 31, 1998 and 1997, the Company had outstanding  under the
agreement $120.2 million and $150.0 million, respectively, and had $15.9 million
and $39.7 million,  respectively,  of net residual  interest in the  securitized
receivables  which  is  included  in  other  current  assets  in  the  Company's
consolidated financial statements.

The Company  maintains an allowance for  uncollectible  accounts  based upon the
expected collectibility of all consolidated trade accounts receivable, including
receivables  sold by CFC.  The  allowance  was $2.5  million and $2.3 million at
December 31, 1998 and 1997, respectively, and is netted against the net residual
interest in the  securitized  receivables  which is  included  in other  current
assets in the Company's consolidated financial statements.

4.  Inventories
The Company  uses the  first-in,  first-out  (FIFO) and the  last-in,  first-out
(LIFO) methods for valuing its  inventories.  Inventories at December 31 consist
of the following (in thousands):

                                                   1998            1997
                                                --------        --------
Raw materials                                    $34,908         $30,395
Work in process                                   74,960          76,286
Finished goods                                    49,079          53,395
Expendable parts an                               14,910          14,884
                                                --------        --------
                                                 173,857         174,960
LIFO reserve                                       3,659          (3,327)
                                                --------        --------
                                                 177,516         171,633
Lower of cost or market reserve                   (2,548)              -
                                                --------        --------
                                                $174,968        $171,633
                                                ========        ========

Inventories of  approximately  $33.6 million and $35.4 million,  included in the
above totals  (before the LIFO and lower of cost or market  reserve) at December
31,  1998 and 1997,  respectively,  are  accounted  for under the LIFO method of
accounting.

During 1997,  LIFO  inventory  quantities  were reduced,  resulting in a partial
liquidation  of the LIFO  bases,  the  effect of which  increased  net income by
approximately $0.7 million.

5.  Property, Plant and Equipment
Property,  plant and  equipment  and the  related  accumulated  depreciation  at
December 31 consist of the following (in thousands):

                                                     1998            1997
                                                  --------        --------
Land and improvements                             $ 20,704        $ 20,686
Buildings and improvement                           67,100          62,764
Machinery and equipment                            419,313         408,517
Construction in progress                            33,273          19,770
                                                  --------        --------
                                                   540,390         511,737
Less accumulated depreciation                      270,553         245,445
                                                  --------        --------
Net property, plant and equipment                 $269,837        $266,292
                                                  ========        ========

Depreciation expense was $28.6 million,  $28.2 million and $20.0 million for the
years ended 1998, 1997 and 1996, respectively.

6.  Financial Instruments
Market  and  credit  risk is  managed  by the  Company  through  an active  risk
management program. This program focuses on inventory,  purchase commitments and
committed and anticipated  sales.  The Company  utilizes  futures  contracts and
options to protect against  exposures to price risk in the aluminum market.  The
Company  is  exposed  to  losses  in  the  event  of   non-performance   by  the
counterparties  to these  agreements;  however,  the Company does not anticipate
non-performance  by the  counterparties.  Prior to  conducting  business  with a
potential  customer,  credit  checks are  performed on the customer to determine
creditworthiness  and assess  credit  risk.  In  addition,  an  indirect  credit
exposure review is performed on all customers.  Trading  partners  (brokers) are
evaluated for  creditworthiness  and risk assessment prior to initiating trading
activities with the brokers, however, the Company does not require collateral to
support broker  transactions.  All brokers  trading on the London Metal Exchange
with  U.S.  clients  are  regulated  by  the  Commodities  Trading  and  Futures
Commission,  which requires the brokers to be fully insured  against  unrealized
losses owed to clients.  At December 31, 1998, credit lines totaling $49 million
were available at various brokerages used by the Company.

Gains,  losses and premiums on futures  contracts and options which  effectively
hedge  exposures  are  deferred  and  included in income as a  component  of the
underlying sales  transaction.  The Company had deferred realized losses of $2.2
million and $1.5  million as of  December  31,  1998 and 1997,  respectively  on
closed futures  contracts and options.  Deferred realized losses are recorded as
an increase in the carrying  value of inventory and deferred  realized gains are
recorded as a reduction in the carrying value of inventory.

At December 31, 1998,  the Company held purchase and sales  commitments  through
1999 totaling $47 million and $292 million,  respectively.  At December 31, 1998
and 1997, the Company's position with respect to open aluminum futures contracts
and options was as follows (in millions):


                                               Fair         Net Unrealized
                                              Value          (Loss) Gain
                                             ------         --------------
       December 31, 1998                     $100.4            $ (5.6)
       December 31, 1997                      123.9               0.3


Net  unrealized  gains and  losses on open  futures  and  option  contracts  are
recorded  in  the  consolidated   balance  sheet  as  accrued   liabilities  and
prepayments and other current assets,  respectively.  The net unrealized loss of
$5.6  million and net  unrealized  gain of $0.3 million at December 31, 1998 and
1997,  respectively,  consists  of  unrealized  gains due from  brokers  of $4.1
million and $0.6 million,  respectively, and unrealized losses due to brokers of
$9.7 million and $0.3 million,  respectively.  Futures contracts and options are
valued at the closing price on the last business day of the year.

7.  Long-term Debt
Long-term  debt of the Company at December 31  consisted  of the  following  (in
thousands):

                                                  1998             1997
                                               --------         --------
Senior subordinated notes                      $125,000         $125,000
Revolving credit facility                            --              650
                                               --------         --------
                                                125,000          125,650
Less current maturities                              --               --
                                               --------         --------
                                               $125,000         $125,650
                                               ========         ======== 

During  1996,  in  connection  with the  acquisition  of  CasTech,  the  Company
refinanced its outstanding borrowings and entered into a credit agreement with a
syndicate  of banks led by  National  Westminster  Bank.  The  credit  agreement
included a $100 million term loan and a $225 million  revolving credit facility.
In addition, the Company issued $125 million of 10.75% senior subordinated notes
due  2006.  In  connection  with  the  refinancing,   the  Company  incurred  an
extraordinary  loss on early  extinguishment  of debt of $1.5  million  (or $1.4
million after tax).

During  September 1997, the Company repaid the remaining amount of the term loan
under the credit agreement with the net proceeds of approximately  $97.7 million
received from the September 1997 equity  offering of the Company.  In connection
with the repayment of the term loan, the Company incurred an extraordinary  loss
on early  extinguishment of debt of $1.5 million (or $1.2 million after tax). In
addition,  in December 1997, the Company amended the credit  agreement to reduce
the revolving credit facility from $225 million to $100 million.

The credit  agreement is  collateralized  by a pledge of all of the  outstanding
stock of the  Company's  subsidiaries  and  substantially  all of the  Company's
assets.

Up to $30 million of the revolving  credit facility is available for standby and
commercial  letters  of  credit.   The  revolving  credit  facility   commitment
terminates on September 1, 2002.

Borrowings  under the credit agreement bear interest at a variable base rate per
annum plus up to an  additional  1.75%  depending  on the results of a quarterly
financial test as defined in the agreement. In addition, the Company must pay to
the lenders under the credit agreement,  a quarterly commitment fee ranging from
0.425% to 0.500%. The blended interest rate on outstanding  borrowings under the
revolving credit facility was 8.50% at December 31, 1997.

The  Company  must pay a fee  ranging  from  0.325% to  0.750%  per annum on the
carrying amount of each outstanding  letter of credit.  At December 31, 1998 and
1997,  letters  of credit  totaling  $0.7  million  were  outstanding  under the
revolving credit facility.

The credit agreement includes covenants which, among others, relate to leverage,
interest  coverage,  fixed  charges,  capital  expenditures  and the  payment of
dividends.

The Company uses  interest  rate swaps to  effectively  convert a portion of its
variable interest rates relating to the Company's  revolving credit facility and
accounts receivable securitization facility to fixed interest rates. At December
31,  1998,  the Company had  interest  rate swap  agreements  in place  covering
approximately $53 million of the Company's  exposure to variable interest rates.
The fair value of these interest rate swap agreements at December 31, 1998 was a
liability of $x.x million. The fixed interest rates range from 5.9% to 7.0%. The
counterparties  to  interest  rate  contracts  are  major  commercial  banks and
management believes that losses related to credit risk is remote.

At December 31, 1997,  the interest rates on all amounts  outstanding  under the
credit agreement were scheduled to adjust in three months or less.  Accordingly,
the  carrying  value of all  amounts  outstanding  under  the  credit  agreement
approximates  fair value at December 31, 1997.  Based on estimated market values
at December 31, 1998 and 1997, the fair value of the senior  subordinated  notes
was approximately $123 million and $131 million, respectively.

Future  aggregate  maturities  of  long-term  debt at  December  31, 1998 are as
follows (in thousands):

1999                                                        $   --
2000                                                            --
2001                                                            --
2002                                                            --
2003                                                            --
Thereafter                                                 125,000
                                                          --------
     Total                                                $125,000
                                                          ========

8.  Stockholders' Equity
On September  29, 1997,  the Company  completed a common stock  offering of 5.75
million  shares at a public  offering  price of $18 per share.  The net proceeds
from the offering of  approximately  $97.7 million were used to repay the entire
amount  outstanding  under the Company's  term loan  agreement,  totaling  $95.0
million,  as well as $2.7  million  outstanding  under the  Company's  revolving
credit facility.

9.  Pension Plans
The Company has two defined benefit pension plans covering  certain salaried and
non-salaried  employees.  The plan  benefits  are  based  primarily  on years of
service and  employees'  compensation  during  employment  for all employees not
covered under a collective  bargaining agreement and; on stated amounts based on
job grade and years of service prior to retirement  for  non-salaried  employees
covered  under a collective  bargaining  agreement.  The plans'  assets  consist
primarily of equity securities, guaranteed investment contracts and fixed income
pooled accounts.

The financial status of the plans at December 31 is as follows (in thousands):

                                                    1998          1997
                                                  -------       --------
Change in benefit obligation:
Benefit obligation at beginning of year           $77,814        $76,727
    Service cost                                    2,508          2,221
    Interest cost                                   5,629          5,719
    Actuarial loss (gain)                           4,892         (3,358)
    Benefits paid                                  (5,722)        (3,495)
                                                  -------        -------
Benefit obligation at end of year                  85,121         77,814
                                                  -------        -------

Change in plan assets:
Fair value of plan assets at beginning of year     70,530         64,083
    Actual return on plan assets                    7,571          9,691
    Employer contribution                              --            251
    Benefits paid                                  (5,722)        (3,495)
                                                  -------        -------
Fair value of plan assets at end of year           72,379         70,530
                                                  -------        -------

Funded status                                     (12,742)        (7,284)
Unrecognized net actuarial loss                     6,018          2,290
Unrecognized prior service cost                    (4,445)        (4,703)
                                                  -------        -------
    Net amount recognized                        $(11,169)       $(9,697)
                                                  =======        =======

Amounts recognized in the consolidated balance sheet consist of:
    Prepaid (accrued) pension cost               $(15,930)      $(13,368)
    Intangible asset                                2,630          2,975
    Accumulated other comprehensive income          2,131            696
                                                  -------        ------- 
Net amount recognized                            $(11,169)       $(9,697)
                                                  =======        =======

The  liabilities  as of December 31, 1998 and 1997  disclosed  above reflect the
change in the defined  benefit plan  covering  the salaried  employees to a cash
balance  formula  effective  January  1, 1998.  In  addition,  reflected  in the
Company's consolidated balance sheet is an additional minimum liability relative
to its  underfunded  plan in the  amount of $4.8  million  and $3.7  million  at
December 31, 1998 and 1997, respectively.  A corresponding amount is recorded as
an intangible asset to the extent it does not exceed  unrecognized prior service
cost, while the excess in 1998 and 1997 was charged to stockholders' equity.

The weighted  average  assumptions and components of net pension expense for the
years ended December 31 are as follows (in thousands):

                                               1998         1997         1996
                                               ----         ----         ----
Weighted average assumptions:
    Discount rate                              7.00%        7.25%        7.75%
    Expected return on plan assets             9.25         9.25         9.25
    Rate of compensation increase              4.50         4.50         4.50

Components of net pension expense:
    Service cost                             $2,508       $2,221       $2,378
    Interest cost                             5,629        5,719        5,514
    Actual return on plan assets             (7,571)      (9,691)      (5,699)
    Net amortization and deferral               944        4,016        1,102
                                             ------       ------       ------
          Net pension expense                $1,510       $2,265       $3,295
                                             ======       ======       ====== 

The  Company's  policy  for  these  plans is to make  contributions  equal to or
greater  than the  requirements  prescribed  by the Employee  Retirement  Income
Security Act of 1974.

The Company also contributes to a union sponsored defined benefit multi-employer
pension plan for certain of its non-salaried employees.  The Employee Retirement
Income  Security  Act of 1974,  as amended by the  Multi-Employers  Pension Plan
Amendment  Act of 1980,  imposes  certain  liabilities  upon  employers  who are
contributors to multi-employer  plans in the event of the employers'  withdrawal
from  such a plan or upon a  termination  of such a plan.  Management  does  not
intend  to  take  any  action  that  would  subject  the  Company  to  any  such
liabilities. The Company's contributions to the multi-employer pension plan were
approximately $0.2 million for both 1998 and 1997.

In addition to the defined benefit pension plans  described  above,  the Company
also sponsors defined  contribution plans covering certain employees.  In one of
the  plans,  the  Company  matches  25%  to  50%  of a  participant's  voluntary
contributions  (depending on the respective plant's annual earnings performance)
up to a maximum of 6% of a  participant's  compensation.  In the other plan, the
Company matches 100% of the first 3% of a participant's  voluntary contributions
to the plan. The Company's  contributions to the plans were  approximately  $1.4
million, $1.9 million and $1.3 million for 1998, 1997 and 1996, respectively.

10.  Postretirement Benefits Other Than Pensions
The Company provides  postretirement  health care and life insurance benefits to
certain  employees.  The  Company  accrues the cost of  postretirement  benefits
within the employees'  active service  periods.  Effective  January 1, 1994, the
Company  limited the extent of its  liability  for future  increases  in medical
costs. When the average annual per retiree claim cost exceeds two times the 1993
per retiree claim cost,  the employer  contribution  will be increased each year
only for general  inflation,  regardless  of the actual  increase in the cost of
providing  medical  benefits.  Based on current medical trend  assumptions,  per
retiree  medical  claims  will  reach two times the 1993 level in the year 2000.
Certain  changes  were  made to the plan as a result  of a new  labor  agreement
completed  in  September  1998  relating to the  Company's  Lewisport,  Kentucky
rolling  mill.  The  changes  require  employees  who retire to pay a portion of
medical  premiums  under  the  plan  based  upon  length  of  service  and  also
discontinues  medical  coverage upon the employees  being  eligible for Medicare
benefits.  The plan  changes  reduced  the  accumulated  postretirement  benefit
obligation by $14.1 million,  which will be amortized over the average remaining
service lives of the Company's  active  employees and has the effect of reducing
net periodic postretirement benefits cost.

The financial status of the plan at December 31, 1998 and 1997 is as follows (in
thousands):

                                                        1998          1997
                                                      -------        -------
Change in benefit obligation:
Benefit obligation at beginning of year               $69,030        $61,244
    Service cost                                        1,827          1,934
    Interest cost                                       4,439          4,529
    Amendments                                        (14,073)            --
    Actuarial (gain) loss                              (2,854)         3,341
    Benefits paid                                      (1,915)        (2,018)
                                                      -------        -------
Benefit obligation at end of year                      56,454         69,030
                                                      -------        -------

Change in plan assets:
Fair value of plan assets at beginning of year             --             --
    Actual return on plan assets                           --             --
    Employer contribution                               1,915          2,018
    Benefits paid                                      (1,915)        (2,018)
                                                      -------        -------
Fair value of plan assets at end of year                   --             --
                                                      -------        -------

Funded status                                         (56,454)       (69,030)
Unrecognized net actuarial gain                       (11,931)        (9,490)
Unrecognized prior service cost                       (18,319)        (5,564)
                                                      -------        -------  
    Prepaid (accrued) postretirement benefit cost    $(86,704)      $(84,084)
                                                      =======        =======

The weighted average  assumptions and components of net  postretirement  benefit
expense for the years ended December 31 are as follows (in thousands):

                                               1998         1997         1996
                                               ----         ----         ----
Weighted average assumptions:
    Discount rate                              7.00%        7.25%        7.75%

Components of net postretirement benefit expense:
    Service cost                             $1,827       $1,934       $1,890
    Interest cost                             4,439        4,529        4,390
    Amortization of prior service cost       (1,318)        (927)        (927)
    Recognized net actuarial loss              (413)        (658)        (524)
                                             ------       ------       ------
          Net postretirement benefit expense $4,535       $4,878       $4,829
                                             ======       ======       ======

For measurement  purposes, a 7.5% annual health care cost trend rate was assumed
for 1998.  The rate was assumed to decrease by 1.0% per year to an ultimate rate
of 4.5% in 2001 and remain at that level  thereafter.  Assumed  health care cost
trend rates have a  significant  effect on the amounts  reported  for the health
care plan. If the health care cost trend rate  assumptions were increased by 1%,
the  postretirement  benefit obligation as of December 31, 1998 and the combined
service and interest cost components of  postretirement  benefit expense for the
year then ended  would be  increased  by  approximately  $7.1  million  and $1.0
million,  respectively,  and if the health care cost trend rate assumptions were
decreased by 1%, the  postretirement  benefit obligation as of December 31, 1998
and the combined service and interest cost components of postretirement  benefit
expense for the year then ended would be decreased by approximately $5.9 million
and $0.8 million, respectively.

11.  Income Taxes
The  components of income tax expense  (benefit) for the years ended December 31
are as follows (in thousands):

                                               1998        1997        1996
                                               ----        ----        ----
Current:
                         Federal           $ (1,093)       $ 606    $(6,079)
                         State and Local        515        1,816        786
                                             ------       ------     ------
                                               (578)       2,422     (5,293)
Deferred:
                         Federal                 --          --          --
                         State and Local         --          --          --
                                             ------       ------     ------
                                              $(578)      $2,422    $(5,293)
                                             ======       ======     ======


Deferred  tax  assets  and  liabilities  at  December  31  are  as  follows  (in
thousands):

<TABLE>
<CAPTION>

                                                            1998                           1997
                                                            ----                           ----
                                                     Assets       Liabilities       Assets       Liabilities
                                                    ---------     -----------      ---------     -----------
<S>                                                   <C>               <C>          <C>               <C>  
Inventory                                             $ 2,460           $  --        $ 1,429           $  --
Property, plant and equipment                              --          55,171             --          55,835
Accrued and other liabilities                           8,217              --          9,268              --
Accrued pension costs                                   6,029              --          5,447              --
Accrued postretirement costs                           34,682              --         33,634              --
Net operating loss carryforwards                       32,576              --         37,341              --
AMT credit carryforwards                                5,847              --          7,494              --
Other                                                     425              --            803              --
                                                     --------         -------       --------         -------
           Totals                                    $ 90,236         $55,171       $ 95,416         $55,835
                                                     --------         -------       --------         -------
Net deferred tax asset                                 35,065              --         39,581              --
Valuation allowance                                   (35,065)             --        (39,581)             --
                                                     --------         -------       --------         -------
           Net deferred taxes                          $   --           $  --         $   --           $  --
                                                     ========         =======       ========         =======
</TABLE>

The Company has  determined  that at December 31, 1998 and 1997,  its ability to
realize  future  benefits  of net  deferred  tax assets  does not meet the "more
likely than not" criteria in SFAS No.109, "Accounting for Income Taxes".

At December 31, 1998, the Company had net operating  loss ("NOL")  carryforwards
for federal tax purposes of approximately  $81 million,  which expire in various
amounts through 2008 and approximately  $5.8 million in alternative  minimum tax
("AMT") credit  carryforwards  which do not expire. As a result of the Company's
initial  public  offering  during 1995,  the Company  experienced  an "ownership
change"  within  the  meaning  of  Section  382 of the  Internal  Revenue  Code.
Consequently,  the Company is subject to an annual  limitation  on the amount of
net operating loss  carryforwards that can be used to offset taxable income. The
annual  limitation is $9.6 million plus certain gains included in taxable income
which are attributable to the Company prior to the ownership change.

Reconciliation  of the federal  statutory rate and the effective income tax rate
is as follows:

<TABLE>
<CAPTION>

                                                               1998        1997        1996
                                                               ----        ----        ----
<S>                                                              <C>         <C>        <C>  
Federal statutory rate                                           35.0%       35.0%      35.0%
Utilization of NOL and AMT credit carryforwards                 225.8       (40.0)     (68.9)
Nondeductible goodwill and other permanent differences         (413.5)       15.2        1.0
Adjustment of prior year accrual                                   --          --      (34.8)
State income taxes, net of federal income tax benefit           (77.0)        9.9        5.1
Alternative minimum tax                                            --         5.2        6.8
Foreign sales corporation benefits                               21.8          --         --
Refund of income taxes attributed to previously              
   accrued securities valuation reserves                        340.7        (2.3)        --
Other items                                                        --        (2.0)      (0.1)
                                                                -----        -----    ------
          Effective income tax rate                             132.8%       21.0%     (55.9)%
                                                                ======       =====    =======
</TABLE>

12.  Contingencies
The Company's  operations are subject to  increasingly  stringent  environmental
laws  and  regulations  governing  air  emissions,  wastewater  discharges,  the
handling,  disposal  and  remediation  of  hazardous  substances  and wastes and
employee  health and safety.  These laws can impose joint and several  liability
for releases or threatened  releases of hazardous  substances  upon  statutorily
defined parties, including the Company, regardless of fault or the lawfulness of
the  original  activity or  disposal.  The Company  believes it is  currently in
material compliance with applicable environmental laws and regulations.

Future  regulations,  under the Clean Air Act and  otherwise,  are  expected  to
impose  stricter  emission  requirements  on the  aluminum  industry.  While the
Company believes that current pollution control measures at most of the emission
sources at its  facilities  will meet  these  anticipated  future  requirements,
additional measures at some of the Company's facilities may be required.

The Company  has been named as a  potentially  responsible  party at six federal
superfund  sites and is  conducting  closure  activities at two of the sites for
past waste disposal  activity  associated with closed  recycling  facilities.  A
trust fund exists to fund the  activity at one of the sites  undergoing  closure
and was established through contributions from two other parties in exchange for
indemnification from further liability. The Company is reimbursed from the trust
fund as approved  closure  expenditures  are  incurred at the site.  The balance
remaining  in the  trust  fund  at  December  31,  1998  was  $0.8  million.  In
determining the adequacy of the Company's  aggregate  environmental  contingency
accrual, the assets of the trust fund were taken into account. At the four other
federal  superfund  sites,  the  Company is a minor  contributor  and expects to
resolve its  liability  for a nominal  amount.  The  Company is under  orders by
agencies in three states for  environmental  remediation at sites,  two of which
are currently operating and two of which have been closed.  Based upon currently
available  information,  the Company  estimates the range of possible  remaining
expenditures  with  respect to the above  matters is between $9 million  and $13
million.

The Company acquired its Lewisport,  Kentucky  ("Lewisport") rolling mill and an
aluminum smelter at Goldendale, Washington ("Goldendale"),  from Lockheed Martin
in 1985. In connection with the  transaction,  Lockheed  Martin  indemnified the
Company against expenses  relating to  environmental  matters arising during the
period of Lockheed Martin's ownership of those facilities.

Environmental  sampling at Lewisport has disclosed the presence of contaminants,
including  polychlorinated  biphenyls (PCBs), in a closed Company landfill.  The
Company has not yet determined the extent of the contamination or the nature and
extent of  remedial  measures  that may be  required.  Accordingly,  the Company
cannot at present  estimate the cost of any  remediation  that may be necessary.
Management  believes  the  contamination  is  covered  by  the  Lockheed  Martin
indemnification, which Lockheed Martin disputes.

The aluminum  smelter at Goldendale  was operated by Lockheed  Martin until 1985
and by the  Company  from  1985 to 1987  when it was sold to  Columbia  Aluminum
Corporation  ("Columbia").  Past aluminum smelting activities at Goldendale have
resulted in  environmental  contamination  and  regulatory  involvement.  A 1993
Settlement  Agreement among the Company,  Lockheed Martin and Columbia allocates
responsibility for future remediation at 11 sites at the Goldendale  smelter. If
remediation  is  required,  estimates  by outside  consultants  of the  probable
aggregate  cost to the Company  for these sites range from $1.3  million to $7.2
million.  The apportionment of  responsibility  for other sites at Goldendale is
left to alternative  dispute  resolution  procedures if and when these locations
become the subject of remedial requirements.

The  Company  has  been  named  as a  potentially  responsible  party  at  three
third-party  disposal sites relating to Lockheed  Martin  operations,  for which
Lockheed Martin has assumed responsibility.

The Company's aggregate loss contingency  accrual for environmental  matters was
$9.9 million and $10.7 million at December 31, 1998 and 1997,  respectively.  Of
the total  reserve,  $2.0  million  and $2.5  million is  included  in  "accrued
liabilities" in the Company's  consolidated  balance sheets at December 31, 1998
and 1997, respectively,  and $7.9 million and $8.2 million is included in "other
long-term liabilities" at December 31, 1998 and 1997, respectively.

While  the  Company  believes  the  overall  accrual  is  adequate  to cover all
environmental  loss  contingencies the Company has determined to be probable and
reasonably estimable, it is not possible to predict the amount or timing of cost
for future environmental matters which may subsequently be determined.  Although
the  outcome of any such  matters,  to the  extent  they  exceed any  applicable
accrual,  could have a material  adverse  effect on the  Company's  consolidated
results of  operations  or cash flows for the  applicable  period,  the  Company
believes  that  such  outcome  will not have a  material  adverse  effect on the
Company's consolidated financial condition, results of operations or cash flows.

The Company  has  incurred  and will  continue  to incur  capital and  operating
expenditures  for matters  relating  to  environmental  control and  monitoring.
Capital expenditures of the Company for environmental control and monitoring for
1998 and 1997  were  $2.1  million  and $2.3  million,  respectively.  All other
environmental  expenditures of the Company,  including remediation expenditures,
for 1998,  1997 and 1996 were  $1.0  million,  $3.1  million  and $1.5  million,
respectively.

The Company is also a party to various  non-environmental  legal proceedings and
administrative  actions,  all  arising  from the  ordinary  course of  business.
Although it is  impossible to predict the outcome of any legal  proceeding,  the
Company  believes any liability  that may finally be determined  with respect to
such  legal  proceedings  should  not have a  material  effect on the  Company's
consolidated  financial position,  results of operations or cash flows, although
resolution in any year or quarter could be material to the consolidated  results
of operations for that period.

13.  Stock Incentives
The Company has stock incentive plans covering certain  officers,  key employees
and  directors.  The plans  provide for the grant of options to purchase  common
stock,  the  award of  shares  of  restricted  common  stock  and in the case of
non-employee directors, the award of shares of common stock. The total number of
shares available under the plans is 1,200,000.

The following  summarizes  activity under the plans for the years 1996, 1997 and
1998:

<TABLE>
<CAPTION>
                                                             Options                         Restricted Stock  
                                         --------------------------------------------------  -----------------
                                                          Range of         Weighted Average
                                          Shares        Exercise Prices     Exercise Price            Shares
                                         ----------    -----------------  -----------------      ------------- 
<S>                                        <C>         <C>                          <C>               <C>      
Outstanding December 31, 1995                69,500               $14.00             $14.00            190,000
   Granted                                  130,500     $15.50 to $16.88             $16.71             25,000
   Exercised                                     --                   --                 --                 --
   Forfeited                                 (4,000)              $14.00             $14.00            (17,500)
                                            -------                                                   --------
Outstanding December 31, 1996               196,000     $14.00 to $16.88             $15.80            197,500
   Granted                                  203,500     $15.38 to $20.00             $15.55              2,500
   Exercised                                 (9,000)    $14.00 to $16.75             $15.60                 --
   Forfeited                                (45,500)    $14.00 to $16.75             $15.60            (22,500)
   Stock no longer restricted                    --                   --                 --             (7,500)
                                            -------                                                    -------
Outstanding December 31, 1997               345,000     $14.00 to $20.00             $15.68            170,000
   Granted                                  231,500      $8.25 to $16.00             $14.40                 --
   Exercised                                     --                   --                 --                 --
   Forfeited                                 (8,500)    $14.00 to $16.75             $14.99             (2,500)
                                            -------                                                    -------
Outstanding December 31, 1998               568,000      $8.25 to $20.00             $15.17            167,500
                                            =======                                                    =======
   (Weighted average contractual
     life of 8.0 years)

Exercisable Options:
   December 31, 1996                          5,500               $14.00             $14.00
   December 31, 1997                         11,000     $14.00 to $15.50             $14.75
   December 31, 1998                         71,500     $14.00 to $15.50             $14.24
</TABLE>

The following table summarizes  information  about stock options  outstanding at
December 31, 1998:

<TABLE>
<CAPTION>

                                               Options                                    Options
                                             Outstanding                                Exercisable
                       --------------------------------------------------   --------------------------------- 
                                             Weighted
                                             Average          Weighted                          Weighted
      Range of              Number         Contractual        Average           Number          Average
  Exercise Prices        Outstanding           Life        Exercise Price    Exercisable     Exercise Price
--------------------   -----------------   -------------   --------------    -------------   ---------------  
<S>                             <C>           <C>                  <C>             <C>               <C>
     $8.25 to $14.00              64,500       6.5 years            $13.55          59,500            $14.00
    $14.01 to $20.00             503,500       8.2 years            $15.38          12,000            $15.43
                                 -------                                            ------
     $8.25 to $20.00             568,000       8.0 years            $15.17          71,500            $14.24
                                 =======                                            ======
</TABLE>

The options are issued at the fair value of the underlying  stock on the date of
grant and become  exercisable  three years from the grant date for employees and
one year from the grant date for non-employee directors.  The options expire ten
years  after the date of grant.  The  restricted  stock,  principally  issued in
connection with the Company's  initial public offering in 1995, vests five years
from the date of award.  The  weighted-average  fair value of options granted in
1998,  1997 and 1996 was $6.23,  $6.11 and $4.24 per share,  respectively.  Fair
value estimates were  determined  using the  Black-Scholes  option pricing model
with the following weighted average asumptions for 1998, 1997 and 1996:

                                          1998           1997          1996
                                          ----           ----          ----
Risk-free interest rate                   5.67%         6.22%         6.50%
Dividend yield                            1.40%         1.29%         1.19%
Volatility factor                           47%           39%           15%
Expected term of options (in years)          5             5             5

As permitted by Statement of Financial Accounting Standards No. 123, "Accounting
for  Stock-Based  Compensation"  ("SFAS  No.  123"),  the  Company  follows  the
provisions of Accounting  Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees,"  and related  Interpretations  in accounting for its stock
option plans, and accordingly,  no compensation  expense has been recognized for
options  and stock  issued  under  the  plans.  Had  compensation  expense  been
determined  based on the fair  value of the  stock  options  at the  grant  date
consistent  with the  provisions  of SFAS No. 123, the  Company's net income and
basic and diluted net income per share  would have been  reduced for 1998,  1997
and 1996 to the pro forma amounts which follow:

                                                 1998      1997      1996
                                                 ----      ----      ----
Net income (loss)
    As reported                                  $143     $7,941    $13,401
    Pro forma                                   $(442)    $7,592    $13,276
Basic and diluted net income (loss) per share
    As reported                                 $0.01      $0.68      $1.32
    Pro forma                                  $(0.03)     $0.65      $1.30


14.  Net Income Per Share Computations
The following is a reconciliation  of the numerator and denominator of the basic
and diluted per share computations:

<TABLE>
<CAPTION>

                                                                               1998        1997        1996
                                                                              ------     -------     -------
<S>                                                                           <C>        <C>        <C>
Income (numerator) amounts used for basic and diluted per share computations:
     Income (loss) before extraordinary loss                                   $ 143      $9,122     $14,756
     Extraordinary loss, net of income tax benefit                                --      (1,181)     (1,355)
                                                                              ------     -------     -------
     Net income (loss)                                                         $ 143      $7,941     $13,401
                                                                              ======      ======     =======

Shares (denominator) used for basic per share computations:
     Weighted average shares of common stock outstanding                      15,944      11,687      10,197
                                                                              ======      ======      ======

Shares (denominator) used for diluted per share computations:
     Weighted average shares of common stock outstanding                      15,944      11,687      10,197
     Plus: dilutive effect of stock options                                        3          36           6
                                                                              ------      ------      ------
           Adjusted weighted average shares                                   15,947      11,723      10,203
                                                                              ======      ======      ======

Basic and diluted per share data:
    Income (loss) before extraordinary loss                                    $0.01       $0.78       $1.45
    Extraordinary loss                                                            --       (0.10)      (0.13)
                                                                               -----       -----       -----
    Net income (loss)                                                          $0.01       $0.68       $1.32
                                                                               =====       =====       =====
</TABLE>

Options to purchase 563,000, 8,000 and 125,000 common shares for the years ended
December  31,  1998,  1997  and  1996,  respectively,  were  excluded  from  the
calculations  above because the exercise prices on the options were greater than
the average market price for the periods.

15.  Lease Commitments
Certain  property,  plant and  equipment are leased under  noncancelable  leases
which provide for minimum rental payments as follows (in thousands):

1999                                                               $2,515
2000                                                                2,389
2001                                                                1,883
2002                                                                1,551
2003                                                                1,511
2004-2006                                                             919

Rental expense under cancelable and noncancelable leases for 1998, 1997 and
1996 was $3.2 million, $3.0 million and $1.2 million, respectively.

16. Selected  Quarterly  Financial Data (unaudited) All amounts are in thousands
except net income per share.

<TABLE>
<CAPTION>
                                                                            Quarter
                                                             ---------------------------------------------
                                                                1st        2nd         3rd          4th
                                                             --------    --------    --------    ---------
1998
----
<S>                                                          <C>         <C>         <C>          <C>     
Net sales                                                    $248,927    $258,346    $231,348     $229,328
Gross profit                                                   18,441      13,786      15,958       21,270
Net income (loss)                                               2,794      (2,643)     (2,139)       2,131
Basic and diluted net income (loss) per share                    0.18       (0.17)      (0.13)        0.13

1997
----
Net sales                                                    $272,191    $287,240    $271,142     $260,204
Gross profit                                                   24,046      24,247      21,155       18,595
Income before extraordinary loss                                2,168       4,163       1,590        1,201
Net income                                                      2,168       4,163         409        1,201
Basic and diluted per share data:
    Income before extraordinary loss                             0.21        0.41        0.15         0.08
    Net income                                                   0.21        0.41        0.04         0.08

</TABLE>

 17.  Information Concerning Business Segments
The Company has adopted  Statement of  Financial  Accounting  Standards  No.131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131").  Under SFAS No. 131,  the Company has  determined  it has two  reportable
segments:  aluminum and electrical  conduit.  The aluminum segment  manufactures
aluminum  sheet  for  distributors  and the  transportation,  construction,  and
consumer durables end-use markets.  The electrical conduit segment  manufactures
flexible  electrical  wiring  products  for the  commercial  and  do-it-yourself
markets.

The  accounting  policies  of the  reportable  segments  are the  same as  those
described  in  Note  1,  "Basis  of  Presentation  and  Summary  of  Significant
Accounting  Policies".  All  intersegment  sales  prices are market  based.  The
Company evaluates the performance of its operating segments based upon operating
income.

The  Company's  reportable  segments  are  strategic  business  units that offer
different  products to different  customer groups.  They are managed  separately
because each business requires different technology and marketing strategies.

Summarized financial information concerning the Company's reportable segments is
shown in the  following  table for the years 1998 and 1997.  The "Other"  column
includes  corporate  related  items,   including   elimination  of  intersegment
transactions,  and as it relates to segment operating income, income and expense
not  allocated to reportable  segments.  The Company has  determined  that it is
impracticable to disclose this data for the year 1996.

<TABLE>
<CAPTION>

                                                                       Electrical
                                                          Aluminum      Conduit        Other        Total
                                                          ----------   -----------   ---------     ---------- 
1998
----
<S>                                                          <C>         <C>           <C>          <C>     
Net sales to external customers                              $846,696     $121,253          $--      $967,949
Intersegment net sales                                         26,267           --      (26,267)           --
Operating income                                               16,853       12,885       (8,317)       21,421
Depreciation and amortization                                  31,151        3,113          464        34,728
Total assets                                                  546,891      101,356          152       648,399
Capital expenditures                                           27,985        5,665           --        33,650

1997
----
Net sales to external customers                              $964,012     $126,765          $--    $1,090,777
Intersegment net sales                                         26,230           --      (26,230)           --
Operating income                                               29,293       19,081       (6,781)       41,593
Depreciation and amortization                                  31,228        3,026          456        34,710
Total assets                                                  576,677       94,214       (3,470)      667,421
Capital expenditures                                           19,936        1,800           --        21,736

</TABLE>
<PAGE>

                          Commonwealth Industries, Inc.
                         Report of Independent Auditors

Board of Directors and Stockholders
Commonwealth Industries, Inc.

         In our opinion,  the accompanying  consolidated  balance sheets and the
related  consolidated  statements of income,  comprehensive  income,  changes in
stockholders'  equity and cash flows present fairly,  in all material  respects,
the  consolidated  financial  position  of  Commonwealth  Industries,  Inc.  and
subsidiaries  at December  31, 1998 and 1997,  and the  consolidated  results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles.  These financial  statements are the responsibility of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.

/s/ PricewaterhouseCoopers LLP

Louisville, Kentucky
January 22, 1999