<PAGE>   1
 
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
                            ------------------------
 
<TABLE>
<S>               <S>
   (MARK ONE)
      [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
                                               OR
      [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
 
                         COMMISSION FILE NUMBER 1-12374
 
                                  ALUMAX INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                            <C>
                   DELAWARE                                      13-2762395
           (STATE OF INCORPORATION)                           (I.R.S. EMPLOYER
                                                           IDENTIFICATION NUMBER)
</TABLE>
 
                     3424 PEACHTREE ROAD, N.E., SUITE 2100
                             ATLANTA, GEORGIA 30326
                         (PRINCIPAL EXECUTIVE OFFICES)
 
                        TELEPHONE NUMBER: (404) 846-4600
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
<TABLE>
<C>                                                       <C>
                                                                            NAME OF EACH EXCHANGE
                  TITLE OF EACH CLASS:                                      ON WHICH REGISTERED:
         Common Stock, $0.01 par value per share                           New York Stock Exchange
                (including Stock Purchase
                Rights relating thereto)
</TABLE>
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      NONE
 
     Indicate by check mark whether the registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.   Yes   X      No ____
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [ X ]
     As of January 31, 1998, 53,424,939 shares of the common stock of the
registrant were issued and outstanding. The aggregate market value of the common
stock held by non-affiliates of the registrant was $1,822,145,616 as determined
by the January 31, 1998 closing price of $34.875 for one share of common stock
on the New York Stock Exchange.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Proxy Statement for the Annual Meeting of Stockholders of the registrant to
be held on May 28, 1998. Certain information therein is incorporated by
reference into Part III hereof.
 
================================================================================
<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
     Alumax Inc. ("Alumax" or the "Company") is the third largest aluminum
company in the United States and the fourth largest in North America, based on
sales, and operates over 70 plants and other manufacturing and distribution
facilities in 22 states, Canada, Western Europe, Mexico, Australia, the People's
Republic of China and Poland. The Company is an integrated producer of aluminum
products, operating in a single segment: aluminum processing. Using alumina
purchased from one principal supplier, the Company produces primary aluminum
employing an electrolytic process at five reduction plants in the United States
and Canada. Primary products are sold externally or further processed by Alumax
into a broad range of semi-fabricated and fabricated products. The Company's
products are sold to a wide variety of markets, including transportation,
distributors, building and construction, consumer durables, and packaging.
 
     Since becoming an independent public corporation in November 1993, Alumax
has taken several significant steps to increase stockholder value, position the
Company for future growth and strengthen its balance sheet. Alumax has devised
and implemented a four-point business strategy designed to (i) enhance the
Company's position as a low-cost producer of primary aluminum; (ii) grow in
transportation, aluminum's largest and fastest growing market; (iii) emphasize
the manufacture of more specialized, value-added products; and (iv) expand in
emerging global markets where the Company believes it will be able to capitalize
on its product strengths.
 
     The four-point strategy has been complemented by the Company's continuing
efforts to increase its operational strengths and efficiencies, principally by
improving its business and product mix, enhancing the market share and unit
volume growth prospects of its downstream businesses, reducing controllable
costs and improving productivity. The Company has reconfigured its asset base by
(i) disposing of various businesses and assets which did not generate, and
offered limited prospects of yielding, acceptable returns or which were not
integral to the Company's long-range business activities and (ii) reinvesting
the proceeds derived from such dispositions into businesses having greater
potential for future growth. In the four years ended December 31, 1997, sales of
non-essential businesses and assets generated approximately $775 million in
cash, while over $1 billion was utilized for strategic acquisitions and business
expansion purposes. The Company will continue to manage its asset base actively
with a view toward strengthening the growth prospects of its downstream
businesses.
 
     In addition to the measures described above, the Company announced in
November 1997 implementation of a performance improvement plan with an initial
target of increasing its annual pretax operating earnings by approximately $100
million by 1999. Working in tandem with this plan will be a new value
measurement system to be used for management incentive compensation purposes
beginning in 1998. For additional information concerning the performance
improvement plan and the value measurement system, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Introduction"
included elsewhere herein.
 
     As part of its effort to enhance stockholder value, the Company began
acquiring shares of its Common Stock pursuant to a stock repurchase program
announced in July 1996. That program authorizes the Company to purchase up to
2.5 million shares of Common Stock from time to time on the open market or
pursuant to negotiated transactions at price levels the Company deems
attractive. Open market transactions were effected at various times during the
fourth quarter of 1997 and resulted in the Company repurchasing 1.8 million
common shares at an aggregate cost of $59.1 million, or an average of $32.60 per
share. In February 1998, the Board of Directors amended the program to provide
that purchases reported to, and ratified by, the Board of Directors or by the
Executive Committee of the Board shall not be counted in determining compliance
with the 2.5 million share limitation.
 
                                        1
<PAGE>   3
 
     The table below sets forth certain information concerning the Company's
production, metal shipments and net sales by class of product during the last
three years. As used herein, a "tonne" means a metric ton equal to 2,204.6
pounds.
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1997       1996       1995
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Production and metal shipments (in thousands of tonnes):
  Sources of metal (unaudited):
     Primary aluminum production............................     708.6      686.3      650.9
     Metal purchases (including scrap aluminum).............     353.7      419.6      355.3
                                                              --------   --------   --------
          Total.............................................   1,062.3    1,105.9    1,006.2
                                                              ========   ========   ========
Metal shipments (unaudited):
  Aluminum processing (including tolling)(1):
     Primary products.......................................     779.8      787.7      732.0
     Semi-fabricated products...............................     632.9      575.5      424.0
     Fabricated products(2)(3)..............................      99.9      134.3      143.1
     Intercompany...........................................    (474.5)    (415.4)    (325.6)
                                                              --------   --------   --------
          Total.............................................   1,038.1    1,082.1      973.5
                                                              ========   ========   ========
Net sales by class of product (in millions):
  Aluminum processing(1):
     Primary products.......................................  $1,390.3   $1,335.5   $1,300.0
     Semi-fabricated products...............................   1,833.7    1,643.1    1,320.1
     Fabricated products(3).................................     540.7      863.2      967.9
     Intercompany...........................................    (833.8)    (682.5)    (661.9)
                                                              --------   --------   --------
          Total.............................................  $2,930.9   $3,159.3   $2,926.1
                                                              ========   ========   ========
</TABLE>
 
---------------
 
(1) Certain reclassifications have been made to prior years' information to
    conform with the 1997 presentation.
(2) Included in Fabricated products metal shipments are billet shipments of
    30.3, 28.6 and 26.8 thousand tonnes for the years ended December 31, 1997,
    1996 and 1995, respectively.
(3) On September 25, 1996, the Company sold certain fabricated products
    businesses in Western Europe and in the United States. Sales related to
    these businesses totaled $363.3 million and $485.0 million in 1996 and 1995,
    respectively. Shipments related to these businesses totaled 46.3 and 60.7
    thousand tonnes in 1996 and 1995, respectively.
 
                                        2
<PAGE>   4
 
     Information concerning the estimated distribution of the Company's sales
for the last three years is presented below. Sales to distributors have
increased significantly over the last two years as a result of the January 1996
acquisition of Cressona Aluminum Company and the Company's efforts to diversify
its product lines.
 
<TABLE>
<CAPTION>
                                                                 APPROXIMATE
                                                                  PERCENTAGE
                                                               OF SALES DOLLARS
                                                              ------------------
                                                              1997   1996   1995
                                                              ----   ----   ----
<S>                                                           <C>    <C>    <C>
Primary aluminum and other raw material sales...............   19%    22%    26%
Processed product sales by market:*
  Building and construction.................................   25     30     34
  Distributors..............................................   22     16     10
  Transportation............................................   15     17     15
  Consumer durables.........................................    4      3      5
  Packaging.................................................    4      4      4
  Electrical................................................    3      2      2
  Other.....................................................    8      6      4
                                                              ---    ---    ---
          Total.............................................  100%   100%   100%
                                                              ===    ===    ===
</TABLE>
 
---------------
 
* Includes both semi-fabricated products and fabricated products. Transportation
  consists primarily of sales to the automotive, truck, trailer and railcar
  markets. Alumax does not have significant sales to the aircraft manufacturing
  market.
 
     Additional operating and geographic area financial information is presented
in Note 16 to the Financial Statements included elsewhere herein.
 
PRIMARY ALUMINUM PRICES
 
     The aluminum industry is highly cyclical in nature. The Company's results
of operations and financial condition depend to a large degree on primary
aluminum prices, as well as conditions in the building and construction and
transportation industries. This price sensitivity affects the realized selling
prices of substantially all of the Company's products to varying degrees, with
less impact on the more specialized and value-added products.
 
     Primary aluminum prices, which are determined by worldwide supply and
demand conditions, declined significantly from 1989 through 1993 but have shown
general improvement over the last four years. The most commonly used index of
pricing in the aluminum industry is the average price per tonne as reflected by
the London Metal Exchange (the "LME"). The LME index is not necessarily
representative of prices actually realized by the Company but generally
approximates the trend with respect to Alumax's realized prices (exclusive of
the effects of the Company's price risk management strategy described below).
Using the LME index, the cyclical nature of aluminum pricing is illustrated in
the table below.
 
                         LME AVERAGE ANNUAL CASH PRICE*
                             (HIGH GRADE CONTRACT)
 
<TABLE>
<CAPTION>
                          US$ PER   US$ PER
          YEAR             TONNE     POUND
          ----            -------   -------
<S>                       <C>       <C>
1980....................   1,810      .82
1981....................   1,300      .59
1982....................   1,010      .46
1983....................   1,480      .67
1984....................   1,280      .58
1985....................   1,080      .49
1986....................   1,190      .54
1987....................   1,590      .72
1988....................   2,580     1.17
1989....................   1,950      .88
</TABLE>
 
<TABLE>
<CAPTION>
                          US$ PER   US$ PER
          YEAR             TONNE     POUND
          ----            -------   -------
<S>                       <C>       <C>
1990....................   1,640      .74
1991....................   1,300      .59
1992....................   1,250      .57
1993....................   1,140      .52
1994....................   1,480      .67
1995....................   1,810      .82
1996....................   1,510      .68
1997....................   1,600      .73
1998-First Quarter
  (through January
  31)...................   1,486      .67
</TABLE>
 
---------------
 
* Adjusted for years prior to, and including, 1987 to reflect the introduction
  of High Grade Contract.
 
                                        3
<PAGE>   5
 
     Market fundamentals relative to the supply and consumption of aluminum have
improved significantly since 1993, when aluminum prices reached historic lows on
an inflation-adjusted basis. The LME cash price increased substantially during
1994 and in early 1995, reaching a high of $.97 per pound during January 1995.
Inventory de-stocking and generally weaker economic conditions worldwide during
the second half of 1995, along with significant restarts of previously idled
production capacity, led to reported inventory (consisting of producer plus LME
terminal stocks) increases that lasted through January 1996. The level of
reported inventory remained relatively unchanged through August 1996, with ingot
stocks on the LME alone increasing through early November. During this period of
relatively flat overall consumption, producer and consumer activity on the LME
was subdued, which resulted in the LME cash price declining from $.75 per pound
at the beginning of January 1996 to an average of $.61 per pound during October
1996. Since that time, industry fundamentals improved, reported inventories
declined, and the LME cash price increased to an August 1997 average of $.78 per
pound. The LME cash price has since declined. Financial and currency problems in
Asia, which have clouded the near-term outlook for aluminum consumption, have
contributed significantly to this decline. At January 31, 1997, the LME cash
price was $.69 per pound.
 
     Historically, the Company priced its primary aluminum production at market,
with realized prices closely tracking cyclical shifts in market prices. To
maintain market based pricing while entering into forward fixed price
arrangements required by certain customers and suppliers, the Company utilizes
futures contracts which effectively convert forward fixed price arrangements to
market prices as of specified settlement dates. The Company also may, from time
to time, establish a floor selling price for varying quantities of future
production. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Risk Management" and Note 15 to the Financial
Statements included elsewhere herein.
 
ALUMINUM PROCESSING
 
  Primary products
 
     The Company, through Alumax Primary Aluminum Corporation and several other
wholly-owned subsidiaries, produces and markets t-ingot and a variety of premium
primary products, including extrusion billet, slab and foundry ingot. These
products are consumed by both the Company's downstream operations and third
party customers, in rolling mills, extrusion plants, foundries and remelt
operations. In 1997, approximately 60 percent of the Company's primary aluminum
production was sold to its downstream operations. The Company believes, based on
its ownership interest in the facilities described below and upon reports of
industry analysts, that the average primary aluminum reduction costs at its
facilities are well within the lower half of all aluminum reduction facilities
in the western world. The Company is committed both to maximizing its earnings
from the sale of premium primary products and to improving its cost position
relative to other primary aluminum producers.
 
                                        4
<PAGE>   6
 
     The table below summarizes the capacity of the five primary aluminum
reduction facilities in which the Company has an ownership interest and reflects
the Company's share of capacity.
 
<TABLE>
<CAPTION>
                                                  PERCENTAGE
                                                   OWNERSHIP                            ALUMAX'S SHARE OF
                                                INTEREST AS OF      TOTAL AMOUNT OF        TOTAL ANNUAL
FACILITY                                       DECEMBER 31, 1997   NAMEPLATE CAPACITY   NAMEPLATE CAPACITY
--------                                       -----------------   ------------------   ------------------
                                                                              (TONNES PER YEAR)
<S>                                            <C>                 <C>                  <C>
Lauralco
  Deschambault, Quebec.......................       100.00%              235,000             235,000
Intalco
  Ferndale, Washington.......................        61.00%              278,500             169,900
Eastalco
  Frederick, Maryland........................        61.00%              174,000             106,100
Mt. Holly
  Goose Creek, South Carolina................        50.33%              205,000             103,200
ABI
  Becancour, Quebec..........................        24.95%              372,000              92,800
                                                                       ---------             -------
          Total..............................                          1,264,500             707,000
                                                                       =========             =======
</TABLE>
 
     During 1997, the above facilities produced an aggregate of 1,264,235 tonnes
of aluminum, of which the Company's share was 707,405 tonnes. The Company's
smelter network is currently operating at or above full nameplate capacity.
Production enhancements put into place in 1997 and prior periods at Lauralco and
Intalco have increased the total nameplate capacity of these facilities by
20,000 and 8,000 tonnes, respectively.
 
     A Japanese consortium, led by a subsidiary of Mitsui & Co. Ltd., owns an
aggregate 39 percent undivided interest in each of the Intalco and Eastalco
facilities. Subsidiaries of Century Aluminum Company, a publicly traded domestic
corporation, and Sudelektra Holding AG, a Swiss corporation, together own 49.67
percent of Mt. Holly. For information with respect to the sale by the Company of
a 23 percent undivided interest in the Mt. Holly facility in January 1996 and a
14 percent undivided interest in each of the Intalco and Eastalco facilities in
March 1995, see Note 2 to the Financial Statements included elsewhere herein.
 
     Primary aluminum is produced by the reduction of alumina, which is refined
from bauxite, in a series of pots (potline) through an electrolytic process. The
Company does not mine bauxite or refine alumina. Alcoa of Australia Limited
("Alcoa of Australia") has been the Company's principal supplier of alumina for
over 20 years and currently provides substantially all of the alumina for the
Company's reduction operations under a long-term contract which, with renewal
options, expires in increments between 2007 and 2018. Pricing under the contract
is determined in part on a cost basis and in part on a market basis, providing
the Company with protection against spot market price extremes during periods of
tight supply. The contract also provides the Company with a secure source of
supply from a reliable, high-quality producer, which reportedly has the lowest
costs of production in the world. The Company believes that any additional
supplies of alumina it may require, from time to time in the foreseeable future,
in excess of that supplied by Alcoa of Australia can be obtained at competitive
prices. While there has been no interruption in supply during the period that
Alcoa of Australia has supplied the Company's alumina requirements, an extended
interruption of supply of alumina from Alcoa of Australia could have a material
adverse effect on the Company's operations. Other raw materials needed for the
production of aluminum, such as petroleum coke, coal tar pitch and aluminum
fluoride, are purchased from third parties. The Company believes that it can
continue to obtain adequate supplies of these materials at competitive market
prices.
 
     The primary aluminum reduction process, which strips the oxygen atoms from
the alumina molecule, requires substantial amounts of electric power. Lauralco,
Intalco, Eastalco, Mt. Holly and ABI purchase electricity under long-term
contracts which expire in the years 2014, 2001, 2003, 2005 and 2014,
respectively, subject to certain extension provisions. Except for Intalco, each
facility's contract is with a single supplier. Power rates for all of the
electricity supplied to ABI and Lauralco are linked to the prevailing price of
aluminum. In late 1995, Intalco entered into a series of new long-term power
contracts with the Bonneville Power Administration (the "BPA") and British
Columbia Power Exchange Corporation to provide for all of
                                        5
<PAGE>   7
 
its electricity needs from September 1996 through 2001. Under these contracts,
Intalco's power costs are no longer linked to the price of aluminum but are set
at a fixed rate. A group of industrial consumers of electricity and a group
representing environmental interests had challenged the power supply agreement
with BPA (along with other similar BPA agreements with other parties). In 1997,
the United States Court of Appeals for the Ninth Circuit denied the claims of
these groups and upheld the validity and legality of the power supply agreement
with BPA. Mt. Holly entered into a new electric power supply agreement in 1997,
while Eastalco amended its existing power supply agreement during the year. With
respect to Eastalco, the electric rates payable were significantly reduced. As
to Mt. Holly, the electric rates payable were significantly reduced for the
first three years of the agreement. Thereafter, Mt. Holly has the opportunity to
achieve even greater reductions in the cost of electric power through limited
access to the open market. However, this limited access also exposes Mt. Holly
to limited market risk. In addition, each agreement provides Mt. Holly and
Eastalco, respectively, with certain other benefits and, despite Mt. Holly's
limited exposure to market risk, secures for both facilities a stable and
reliable supply of electric power during the "transition period" of the electric
industry from a regulated monopoly to open competition. The Company expects to
meet its power requirements over the foreseeable future pursuant to the
aforementioned contracts. Interruptions of power supply could have a material
adverse impact on the Company by increasing the cost of production of primary
aluminum or necessitating a reduction in production.
 
     Alumax Primary Aluminum Corporation and the Government of British Columbia
are proceeding with a planning and feasibility study for the construction of a
primary aluminum reduction plant of not less than 250,000 tonnes in British
Columbia, Canada. The planning and feasibility study will be conducted based
upon a memorandum of understanding executed by the parties on January 8, 1998.
Completion of the planning and feasibility study is expected to occur no later
than December 31, 1998.
 
     For information with respect to the credit agreement entered into in 1990
with a group of banks to finance the construction of the Lauralco primary
aluminum reduction facility, see Note 6 to the Financial Statements included
elsewhere herein.
 
  Semi-fabricated products
 
     Alumax Extrusions.  Alumax Extrusions, Inc., a wholly owned subsidiary
("Alumax Extrusions"), manufactures a broad line of soft-alloy extruded
products, as well as secondary billet to be sold to third parties, at eleven
plants located in Pennsylvania, Tennessee, Florida, Arkansas, Georgia,
Mississippi, Illinois, South Dakota, Utah, North Carolina and its international
operation in Monterrey, Mexico. Alumax Extrusions has recently added a twelfth
manufacturing facility in Morris, Illinois, utilizing an idle plant previously
operated by Alumax Mill Products. The Morris facility provides adequate space to
accommodate a further expansion of Alumax Extrusions' manufacturing capacity in
a location well situated to serve the growing needs of its transportation and
service center customers. The Company believes that Alumax Extrusions has the
world's largest soft alloy extrusion manufacturing capacity. Its shower and bath
enclosures are distributed through eight service centers in California, Florida,
Georgia, North Carolina, Pennsylvania, Texas and Washington, with a ninth
service center to be added in Iowa during the second quarter of 1998. The
Mexican operation consists of a three-press extrusion plant in Monterrey, with
distribution facilities in Mexico City, Guadalajara and Hermosillo. Except for
the plants located in North Carolina and Monterrey, the eight service centers,
and the distribution facilities in Guadalajara and Hermosillo, which are leased,
Alumax Extrusions owns all of the aforementioned plants and facilities.
 
     Alumax Extrusions operates as a unified manufacturing support group with a
total of 43 presses that range in size from 700 to 6,000 tons. Its integrated
resources include complete melting, alloying and casting facilities for 25
alloys, one of the industry's largest in-house shops for the design and
production of tooling and dies, and facilities for fabrication, assembly,
painting and anodizing. Press operations utilize both direct and indirect
technology. The wide range of press sizes and capacities offers scheduling
flexibility and increased manufacturing efficiency.
 
     Alumax Extrusions' product line includes extruded aluminum alloys,
semi-fabricated and fabricated parts and components from extruded aluminum
alloys, and secondary extrusion billet. Available in circle sizes up to
 
                                        6
<PAGE>   8
 
20 inches, product classifications extend to standard and custom extruded shapes
(solids, semi-hollows and hollows), standard and specialty rod and bar, seamless
and structural pipe and tube, seamless mechanical pipe and tube, and seamless
tubular bus conductors. Alumax Extrusions also produces DIAMONDBACK(R) Slip-
Resistant Systems, an integrated line of components and accessories that are
designed for improved safety on access, walking and working surfaces.
 
     Alumax Extrusions has made many advancements with improved process control
systems, including Computer Integrated Manufacturing (CIM). With the exception
of the recently added Morris, Illinois facility, all domestic locations are
certified under the ISO 9000 international quality standard. Alumax Extrusions
believes that its diversified customer base helps to minimize the impact of
seasonal and cyclical fluctuations in markets such as building and construction.
 
     To provide greater focus on its key markets, Alumax Extrusions markets and
sells its products through three distinct business units: Alumax Building and
Construction Products, located in Plant City, Florida; Alumax Distribution and
Industrial Products (formerly the Cressona Aluminum Company business unit),
located in Cressona, Pennsylvania; and Alumax Transportation Products, located
in West Chicago, Illinois. Although headquartered at different locations, all
three business units are supported by the unified manufacturing group. The goal
of this structure is to provide specialized sales and service designed to
satisfy customer requirements in the areas represented by the three business
units.
 
     Alumax Building and Construction Products ("AB&CP") markets and sells
extrusions to the residential and commercial window and door market. Utilizing
seven paint lines, approximately 75 percent of the products are sold with
thermal set polyester paint, Kynar resin coatings, anodized finishes, or high
performance coatings for corrosive environments. Representative products include
window and door frames; bath and shower enclosures; patio and pool enclosures;
stadium seating; light poles and flagpoles; bridges, rail and decking; and
colored architectural shapes.
 
     Alumax Distribution and Industrial Products ("AD&IP") markets and sells
extrusions to the service center industry. It also services key original
equipment manufacturers' accounts in the machinery and equipment, electrical
switchgear and transmission, recreation, medical, and consumer durables markets.
AD&IP offers a broad product line of standard and custom extruded shapes,
extensive capabilities in pipe and tube, large circle size profiles, and tight
tolerance products that utilize indirect extrusion technology.
 
     Alumax Transportation Products ("ATP") markets and sells extrusions to the
automotive, truck, truck trailer, marine, and railcar markets. Representative
products include extruded profiles for automotive space frames, anti-lock brake
parts, automotive air bag components, bumper beam components, seating and window
components, truck and trailer bodies, recreational vehicle parts, and railcar
structural members.
 
     Alumax Extrusions has developed or holds intellectual property rights
relating to the following products and processes: DIAMONDBACK(R); ECON-O-ROD;
ACC-U-ROD(R); ECON-O-PLATE(R); ACC-U-PLATE(R); AluShield(TM); Fluorocarbon
Coated Conduit System (ALX-1); and Retrogression Heat Treatment (RHT) and
Compression-fit (CF) technologies.
 
     Alumax Mill Products.  Alumax Mill Products produces flat rolled products
with both painted and mill finishes at mills in Lancaster, Pennsylvania and
Texarkana, Texas. In addition, it operates a facility in Lancaster, Pennsylvania
which produces semi-fabricated cast aluminum plate, engineered to meet highly
specialized industrial applications. In November 1997, Alumax Mill Products
entered into a new five-year operating lease, renewable for up to two additional
years, covering the Texarkana mill. The new leasing arrangement enabled the
Company to forego a previously planned capital investment of $97 million to
purchase the Texarkana facility.
 
     Alumax Mill Products produces semi-fabricated products, including sheet,
plate, circles and blanks, which are used for building products, transportation
products, consumer durables, machinery and equipment and in other industrial
applications. Representative products include gutters, downspouts, siding,
soffits, high grade painted or anodized quality building panels, truck trailer
side panels, automotive heat shields, cable wrap, flexible conduit, computer
base plates, seating brackets, air bags, heater cores, evaporators, wheel rims,
license plates, and appliance panels for washers, dryers and ranges.
                                        7
<PAGE>   9
 
     To provide greater focus on its key markets, Alumax Mill Products markets
and sells its products through AB&CP, AD&IP, and ATP. The goal of this structure
is to provide specialized sales and service designed to satisfy customer
requirements in the areas represented by these three business units.
 
     Some of Alumax Mill Products' markets are seasonal, notably the building
and construction market in which demand is generally lower in the fall and
winter seasons than in the spring and summer when the weather is more suitable
for construction.
 
     Alumax Mill Products implemented a restructuring plan in 1994 with a view
toward consolidating, streamlining and modernizing its business. This
restructuring plan has been substantially completed. As part of the plan, Alumax
Mill Products closed its Morris, Illinois mill (which was acquired by Alumax
Extrusions in the fourth quarter of 1997) and its Riverside, California mill and
has expanded and modernized the overall capabilities of the Lancaster and
Texarkana mills. Costs of the expansion and modernization totaled approximately
$91 million. The restructuring plan also provided for the construction of a
separate cast aluminum plate facility adjacent to the Lancaster mill at a cost
of approximately $26 million. This facility began commercial production in the
third quarter of 1996.
 
     Alumax Foils.  Alumax Foils' facility in St. Louis, Missouri uses the
continuous casting process to produce aluminum sheet which is then processed
through rolling mills and heat treating ovens to manufacture foil in various
thicknesses, widths, tempers and alloys. Foil products are sold primarily to
commercial users in the flexible packaging, converter, food service and
pharmaceutical industries. The nature of these products and diversity of
customers reduces the impact on Alumax Foils of seasonal fluctuations. Alumax
Foils also owns and operates a facility in Russellville, Arkansas which, when
fully operational, will expand its overall production capacity by approximately
30 percent. Construction was completed in 1996, with the first customer
shipments commencing in the first half of 1997. The Russellville plant includes
two wide rolling mills, annealing ovens and ancillary equipment, all dedicated
primarily to the production of light-gauge converter foil. See "Other
Activities."
 
  Fabricated products
 
     Kawneer.  Kawneer designs, manufactures and markets architectural aluminum
products and is a leading producer of such products in the United States and
Canada. Kawneer also sells its products for use in major construction projects
in foreign countries where it does not have production facilities, particularly
in the Far East.
 
     Kawneer products are manufactured mainly from extruded aluminum shapes
which are fabricated into curtain wall, storefront and entrance systems,
windows, framing and decorative aluminum products which are anodized or painted.
Kawneer operates five integrated architectural plants, 15 service centers and
two additional manufacturing locations in the United States, which include
plants owned by Kawneer in Arkansas, California, Georgia, Indiana, Michigan,
Pennsylvania and Tennessee. Distribution is principally through dealers, most of
whom are glazing contractors. These products also may be sold to building
contractors and owners, and Kawneer has acted as a subcontractor for entire wall
or window systems on selected major projects.
 
     Demand for Kawneer's products generally follows the seasonal and cyclical
trends of the nonresidential construction industry. Kawneer believes that it is
well positioned to participate in the modest rate of growth expected to occur in
this market over the near term and remains committed to continue its efforts
aimed at reducing costs, improving productivity, and enhancing product quality
and customer service.
 
     Kawneer also operates two integrated architectural plants in Canada which
provide most of the product that is sold for large overseas projects, as well as
two service centers.
 
     Alumax Europe N.V.  Alumax Europe N.V., a wholly-owned subsidiary ("Alumax
Europe"), was organized in 1997 to manage the Company's international operations
in the United Kingdom, France, Germany and The Netherlands. It also participates
in a joint venture in Morocco. Two manufacturing plants located in France, and
one each in England and Germany, three of which are owned and one of which is
leased, provide architectural aluminum products very similar to those produced
by Kawneer operations in the
                                        8
<PAGE>   10
 
United States. These products are marketed under the Kawneer name in the United
Kingdom and Western Europe. Alumax Europe also operates service centers in
France, Poland and Morocco. Other international operations of Alumax Europe
include plants it operates in Wales and The Netherlands that produce custom
extrusions for sale throughout Western Europe. These plants also provide
extruded products to Alumax Europe's architectural operations for further
processing into architectural building products and systems. Billet needed for
the extrusion operations is supplied by a casting plant in The Netherlands. This
plant converts scrap and aluminum ingot into billet on a tolling basis and for
intra-company use and outside sales. In addition, Alumax Europe pursues other
business opportunities throughout Europe, including former Eastern Bloc
countries.
 
     AEMP.  Alumax Engineered Metal Processes ("AEMP") is engaged in the
commercial production of semi-solid aluminum forged automotive components that
offer high mechanical properties and near-net-shape configurations using AEMP's
proprietary, semi-solid forging technology. Although AEMP's marketing activities
have focused almost exclusively on the automotive aluminum forged market,
efforts are under way to expand into other industrial markets. Representative
products include cylinder housings, fuel rails, transmission and engine
brackets, suspension and rocker arm assembly components.
 
     AEMP's forging operations are conducted at plants located in Jackson,
Tennessee and Bentonville, Arkansas, both of which are currently producing
automotive components on a commercial scale. A scrap reclamation facility is
also located at the Jackson site to produce aluminum alloy for the forging
operations. These operations have incurred losses since commercial production
commenced, and both the Jackson and Bentonville plants are currently operating
at rates below their design capacity.
 
     To provide greater focus on its key markets, AEMP markets and sells its
products through ATP. The goal of this structure is to provide specialized sales
and service designed to satisfy automotive customer requirements.
 
     In 1997, AEMP implemented a reorganization and action plan designed to
maintain its position as a world leader in semi-solid forging technology and to
meet the competitive requirements of commercial production. The reorganization
and action plan is intended to improve operating performance as AEMP continues
to move from development toward full commercial production. The plan includes
combining AEMP's three engineering facilities in St. Louis, Missouri into one;
ramping up the Jackson scrap reclamation facility for full production; reducing
the salaried and hourly workforce; making the Bentonville plant a satellite
plant to the Jackson facility; and intensifying efforts to increase the overall
productivity and efficiency of plant operations. AEMP has also ceased production
of several components that did not fit its market strategy and profitability
goals. All current and potential business has been reviewed to determine the
niche products that fit the technology offered and that meet AEMP's strategic
objectives. Production is expected to increase during 1998 with the introduction
of several new products that take advantage of the various capabilities provided
by semi-solid aluminum forging. Management intends to monitor the implementation
of the reorganization and action plan which is targeted at making this business
profitable by the end of 1999. Total assets of AEMP were approximately $115
million at December 31, 1997.
 
OTHER ACTIVITIES
 
  Asia-Pacific Operations
 
     To further its objective to participate in growth opportunities in emerging
global markets, the Company, through a wholly owned subsidiary, has entered into
a joint venture with Yunnan Aluminum Processing Factory in Kunming, China,
providing for the annual production of 8,000 to 10,000 tonnes of light gauge
aluminum foil for China's packaging market. Alumax has a 56 percent interest in
the joint venture and will invest a total of $38 million in cash to develop a
continuous cast foil operation. As of December 31, 1997, the Company had
invested approximately $24 million in the joint venture. Alumax Foils is
expected to provide training, as well as management and technical assistance, to
the joint venture. Production is expected to begin in the latter half of 1998.
 
                                        9
<PAGE>   11
 
     In addition to the Kunming joint venture, Alumax leases an extrusions plant
near Melbourne, Australia that produces thin-walled aluminum tubing. The Company
is actively exploring other business opportunities throughout the Asia-Pacific
region through Alumax Asia Pacific Pty Limited, a wholly owned subsidiary.
 
  Alumax Materials Management
 
     In 1996, the Company organized Alumax Materials Management, Inc. ("AMM"), a
wholly owned subsidiary, to provide certain services to other subsidiaries of
the Company. These services include primary products sales and customer service,
centralized procurement of all non-primary metal and selected non-metal inputs,
and use of the futures markets to hedge certain risks related to primary
aluminum prices, fixed forward sales, metal inventory positions, and energy
costs. AMM is also responsible for the centralized procurement of certain
shipping and freight services.
 
  Product Distribution
 
     Alumax produces and distributes products at all stages of the aluminum
product chain, from primary ingot to fabricated finished products, for a variety
of industrial, commercial and consumer markets. To reach these markets the
Company uses most common forms of product distribution channels -- wholesale
distributors, original equipment manufacturers, traders, retail consumer goods
outlets, agents, manufacturers' representatives, general line and specialized
dealers, and direct sales. Many intermediate products, such as ingot, sheet and
plate, are distributed to other aluminum producers and fabricators for further
processing and distribution through many of these same channels.
 
  Competition
 
     The markets for most aluminum products are highly competitive. Primary
aluminum ingot is a commodity product, traded extensively on world metal
markets, and is thus very price sensitive. The market for premium ingot products
is also highly sensitive to pricing, but the Company believes that quality and
service are also important factors in competing with other premium product
manufacturers. Semi-fabricated and fabricated aluminum products compete
extensively on price, quality and service, not only within the aluminum products
industry but also with other materials, such as plastics, steel, copper, glass,
wood, fiberglass, zinc, lead, magnesium and paper. In markets where aluminum
products compete with other materials, the diverse characteristics of aluminum
are also significant factors in its competitiveness, particularly its light
weight and recyclability.
 
     Price competition, product range and quality, and the ability to provide
technical assistance to customers are important aspects of the Company's overall
strategy. A number of producers with which the Company competes are
substantially larger in terms of total assets, operations and sales. Among the
Company's principal competitors are Alcan Aluminium Limited, Aluminum Company of
America, Reynolds Metals Company, Kaiser Aluminum Company, Commonwealth
Industries, Inc. and Easco, Inc.
 
  Research and Development
 
     The Company continues to explore new technology, processes and products in
the aluminum industry. Research and development activities are conducted at the
Company's technical center in Golden, Colorado, and at various operating
facilities. Expenditures for research and development totaled $10.9 million,
$19.2 million and $18.0 million in 1997, 1996 and 1995, respectively.
 
  Patents and Trademarks
 
     The Company owns or licenses a significant number of patents relating to
various products and processes. The Company does not consider its business to be
materially dependent on any one particular patent or patent license. The Company
also owns a large number of trademarks, including the "Alumax" and "Kawneer"
trademarks, which the Company believes may be material to its business.
 
                                       10
<PAGE>   12
 
  Employee and Labor Relations
 
     At year-end 1997, the Company employed approximately 14,400 people
worldwide, including approximately 12,000 employees in the United States.
Approximately 4,800 employees are represented by labor unions under separate
labor agreements with various unions. Management considers its employee
relations to be good.
 
ENVIRONMENTAL MATTERS
 
     The Company is subject to various federal, state, local and foreign laws
and regulations including, among others, the Clean Air Act (including the 1990
amendments thereto), the Resource Conservation and Recovery Act and the Clean
Water Act and the regulations promulgated in connection therewith, concerning
the discharge of contaminants which may be emitted into the air and discharged
into the waterways and governing the use, discharge and disposal of hazardous
materials and wastes. The Company believes its manufacturing facilities are in
substantial compliance with current laws and regulations. Compliance with
current laws and regulations has not had, and is not expected to have, a
material adverse effect on the Company's financial condition or results of
operations. Based on historical trends toward tighter environmental standards,
it appears likely that the Company will incur additional expenditures to remain
in compliance with federal and state environmental laws.
 
     The Company also is involved in certain claims and legal proceedings that
relate to the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") or similar state laws that impose environmental liability. These
matters include pending claims and proceedings in which the Company has been
named as a defendant or "potentially responsible party" with respect to the
disposal of hazardous substances at 38 waste disposal sites which, in most
instances, were owned or operated by third parties. CERCLA and state laws can
impose joint and several liability on generators of hazardous substances placed
in waste disposal sites for investigative, remedial and other costs associated
with cleanup of those sites if hazardous substances have been released into the
environment. The Company's ultimate liability in connection with present and
future environmental claims will depend on many factors, including its
volumetric share of the waste at a given site, the remedial action required, the
total cost of remediation and the financial viability and participation of the
other entities which also sent waste to the site. Based upon current law and
information known to the Company concerning the size of the sites known to it,
their years of operation, the number of other financially viable and
participating past users and the amount of available insurance coverage,
Management believes that it has adequate reserves so that anticipated and
estimable liabilities that may result from these matters, and anticipated
expenditures for remediation programs it may be required to undertake, either
individually or in the aggregate, are not expected to have a material adverse
effect on the financial condition or ongoing results of operations of the
Company. The Company is unaware of any additional environmental matters which,
based on information currently known to the Company, would have a material
effect upon the Company's financial condition or ongoing results of operations.
See "Legal Proceedings" below.
 
     Legislation that would reauthorize and amend CERCLA is expected to be
reintroduced before Congress. The prospects for such legislative effort are
uncertain, as are any potential substantive changes that might result or affect
the Company's liability for cleanup costs in both pending and future claims.
 
     The Company's expenditures for environmental remediation and compliance
amounted to $6.1 million in 1997, $12.9 million in 1996 and $12.7 million in
1995. Of those amounts, $4.4 million, $8.8 million and $9.0 million,
respectively, was capitalized and the balance, net of insurance recoveries, was
charged to reserves. Based on available information, the Company anticipates
making capital and operating expenditures of approximately $9.6 million and $6.1
million in 1998 and 1999, respectively, for environmental remediation and
compliance.
 
ITEM 2. PROPERTIES
 
     Information in response to this Item is set forth in "Business" under Item
1 above.
 
                                       11
<PAGE>   13
 
ITEM 3.  LEGAL PROCEEDINGS
 
  Tax Dispute Regarding Consolidation with Amax
 
     The Internal Revenue Service (the "IRS") asserted that Alumax and certain
of its subsidiaries were improperly included in the 1984, 1985, and 1986
consolidated income tax returns of the Company's former parent corporation, AMAX
Inc. ("Amax"), and on that basis has assessed a federal income tax deficiency
against Alumax of $129 million. In response to the IRS' notice of deficiency,
the Company filed a petition in the United States Tax Court (the "Court")
seeking a re-determination in respect of the purported deficiency. The parties
waived their rights to a trial and the matter was submitted to the Court for
decision based upon the pleadings, stipulations, memoranda and other documents
submitted to the Court by the parties. On September 30, 1997, the Court entered
a decision in favor of the IRS, opining that Amax did not have the 80 percent
control necessary to consolidate. As a result of the ruling, the Company
recorded a charge of $108.6 million in the third quarter of 1997. On October 27,
1997, the Company paid an aggregate of $411 million to the IRS, representing the
expected deficiency and estimated accrued interest. The payment was funded from
cash on hand and borrowings of $355 million under the Company's revolving credit
facility. On December 24, 1997, the Company filed a notice of appeal of the
Court's decision to the United States Court of Appeals for the Eleventh Circuit.
 
     In connection with the merger of Amax into Cyprus Minerals Company and the
public distribution of all of the Company's outstanding common shares in
November 1993, the Company and Amax entered into a tax disaffiliation agreement,
dated as of May 24, 1993 (the "Tax Disaffiliation Agreement"), defining the
rights and obligations of the Company and Amax following the consummation of
those transactions. Under the terms of the Tax Disaffiliation Agreement, the
Company has assumed responsibility for all proceedings relating to the
above-described deficiency and payment of any additional taxes, along with
penalties and interest, which may ultimately be due.
 
     Payment of the above-described deficiency and interest provided certain tax
benefits to the Company that offset in 1997, and will offset, within a
prescribed carry-forward period, a portion of the cost of paying the deficiency
and interest. In addition, under the terms of the Tax Disaffiliation Agreement,
Cyprus Amax Minerals Company will share certain tax benefits which will become
available to it in the event the adverse determination is ultimately upheld.
 
  Stringfellow
 
     In 1983, the United States and the State of California commenced an action
under CERCLA in the United States District Court for the Central District of
California against the Company and 30 other potentially responsible parties in
connection with the Stringfellow disposal site located at Glen Avon, California.
In a proceeding in the United States District Court for the Central District of
California, it was determined that both the defendants and the State of
California are responsible for certain costs associated with the cleanup of the
Stringfellow site. The issue of the allocation of liability among the defendants
and the State was tried before a Special Master who filed his Findings of Fact,
Conclusions of Law and Report and Recommendation of the Special Master Regarding
the State Share Fact Finding Hearing on November 30, 1993. On January 23, 1995,
the United States District Court entered an order adopting the findings,
conclusions and recommendations of the Special Master with certain
modifications, which did not adversely impact the Company. The order allocates
liability on the basis of two different types of legal claims, each of which has
a different legal standard of apportionment. As to CERCLA claims, the order
allocates liability as follows: 65 percent to the State, ten percent to
Stringfellow Quarry Company and 25 percent to all other parties (including the
Company). As to the claims asserted against the State under state law theories
such as negligence and breach of a mandatory duty, the order allocates 100
percent of the liability to the State.
 
     On July 16, 1996, the State of California filed a motion for
reconsideration of the District Court's liability rulings against the State,
based upon the United States Supreme Court's decision in Seminole Tribe of
Florida v. Florida. That decision, issued in March 1996, reversed an earlier
Supreme Court decision which held that Congress had the authority to abrogate
protections of the Eleventh Amendment of the Constitution barring certain suits
against states in federal courts, including under CERCLA. In the motion, the
State contends that
 
                                       12
<PAGE>   14
 
the Eleventh Amendment is a jurisdictional bar which cannot be waived through
conduct in litigation and that the State has not expressly waived its Eleventh
Amendment immunity. Consequently, the State argues that the liability rulings
against the State must be reversed or the defendants' counterclaims limited to
defensive recoupment. The defendants filed an opposition to that motion on
August 2, 1996, which maintains that Seminole Tribe does not alter prior law by
recognizing the Eleventh Amendment as a jurisdictional bar nor does the case
address the doctrine of defensive recoupment. The opposition also asserts that
Seminole Tribe does not affect the question of waiver of Eleventh Amendment
immunity by conduct in litigation or the District Court's prior finding that the
State waived its Eleventh Amendment immunity through its conduct of the lawsuit.
Oral argument on the State's motion, as well as on a motion filed by the
defendants for a ruling that CERCLA liability cannot be imposed upon them
retroactively and a joint motion of the United States and the defendants for
entry of a judgment which will permit the parties to appeal, was made before the
Special Master on November 13 and 14, 1996. The Special Master has not ruled on
the motions or submitted written recommendations to the District Court, after
which the parties will be afforded an opportunity to present objections prior to
entry of an order by the court.
 
     Based on information presently available, the Company does not believe that
any liability imposed in connection with the Stringfellow site will have a
material adverse effect on the Company's financial condition or ongoing results
of operations given the nature and extent of its involvement at the site and
available reserves.
 
  Proceedings Relating to the Howmet Acquisition
 
     In December 1990, the Company and two of its subsidiaries, among others,
were named as third-party defendants in a CERCLA action arising out of the
operation of the Blackbird Mine, a cobalt mine in Lemhi County, Idaho. The
third-party action was initiated by M.A. Hanna Company, Noranda Mining Company
and certain of their affiliates, all of which were defendants in a lawsuit
brought by the State of Idaho in the United States District Court for the
District of Idaho in 1983 seeking recovery of response costs incurred as a
result of alleged contamination resulting from cobalt mining in and around the
Blackbird Mine. The Company has been involved as a result of its 1983
acquisition of Howmet Corporation from Pechiney, a French corporation. It is
alleged that Howmet, along with certain of its predecessors and subsidiaries,
owned and operated the Blackbird Mine and engaged in extensive mining
activities.
 
     On June 21, 1993, the Department of Justice filed an action in the United
States District Court for the District of Idaho against the Company, one of its
subsidiaries and several other defendants seeking response costs and natural
resource damages occurring at or near the Blackbird Mine. On October 29, 1993,
the Department of Justice agreed to dismiss the Company as a defendant in such
action; however, a subsidiary of the Company remains a defendant.
 
     Under the terms of an agreement with Pechiney, the Company, subject to
limited contributions, will be indemnified against liabilities associated with
the Blackbird Mine as well as other claims and suits arising from activities
predating and unrelated to the aluminum businesses acquired by the Company in
1983. The Company assigned certain rights in respect of insurance coverage to
Pechiney, but is entitled to receive a portion of any recoveries obtained by
Pechiney.
 
     On August 22, 1991, the Company and certain of its subsidiaries filed an
action for declaratory relief seeking coverage for environmental claims and
damages for breach of contract against the primary and excess insurance carriers
which issued insurance policies to the Howmet corporate entities acquired by the
Company in 1983. The action was brought in the Superior Court of New Jersey,
Morris County and was consolidated with a similar suit between former affiliates
of the acquired entities and the carriers. A motion for summary judgment filed
by the insurance carriers with respect to the Blackbird Mine site on the basis
that Idaho law should be applied to that claim and coverage is not available
under Idaho law has been granted, in part, by the Court. A hearing on a motion
for reconsideration of that ruling filed by Pechiney and the Company was held on
October 23, 1997. While the Court indicated it did not intend to alter the prior
ruling, no order has been issued. If the order is entered as indicated, Pechiney
and the Company intend to appeal the ruling, although neither the ruling nor an
adverse decision on the appeal will result in additional liability to the
Company for
 
                                       13
<PAGE>   15
 
the Blackbird Mine site, based upon the terms of the Company's agreement with
Pechiney, but could reduce or eliminate any insurance recovery for amounts
already expended by the Company in connection with that site.
 
     The Company believes that it has adequate reserves so that payments to be
made and reasonably anticipated contributions required under the settlement
agreement with Pechiney will not have a material adverse effect on the financial
condition or ongoing results of operations of the Company.
 
  Cressona Consent Decree
 
     The Company acquired Cressona Aluminum Company ("Cressona") on January 31,
1996. Cressona is subject to a consent decree (the "Consent Decree") entered
into with the United States of America to settle an action brought on behalf of
the United States Environmental Protection Agency (the "EPA"). That action was
initiated in the United States District Court for the Eastern District of
Pennsylvania on September 10, 1992, in respect of the remediation and disposal
of polychlorinated biphenyls ("PCBs") discovered at Cressona's facility at
Cressona, Pennsylvania. The PCBs were ingredients in lubricants and hydraulic
fluids used at that facility by the prior owner.
 
     The Consent Decree, which was filed in the action on August 3, 1993,
specified actions that Cressona would undertake to fully characterize and
determine the extent of PCB contamination at the facility as well as criteria
and conditions to be met with respect to the remediation of such contamination.
In addition, the Consent Decree imposed certain reporting requirements,
established dates for the performance of specified actions to be taken, and
provided for stipulated penalties for failure to comply with requirements of the
Consent Decree or for discharges of PCBs in excess of specified concentrations.
Cressona has either substantially complied with the provisions of the Consent
Decree or sought modification of those requirements from the EPA. Cressona has
provided the EPA with extensive information to characterize the nature and
extent of the PCB contamination, has performed substantial remedial work and
proposed measures for remediation of the remaining contamination. The precise
nature and extent of further remedial activities which will be required and the
costs of those activities cannot be determined with certainty at this time and
may be subject to change depending upon results of further monitoring at the
facility as well as EPA concurrence with the additional remedial actions
proposed by Cressona. However, the Company believes that Cressona has adequate
reserves so that reasonably anticipated and estimable costs for remediation of
PCB contamination at the Cressona, Pennsylvania facility will not have a
material adverse effect on the financial condition or ongoing results of
operations of the Company.
 
  Other Environmental Matters
 
     In addition to the Stringfellow and Blackbird Mine litigation, the Company
has been named as a defendant or identified as a potentially responsible party
at 36 other pending sites which, in most instances, were owned or operated by
third parties, including some sites relating to operations of the Pechiney
subsidiaries acquired in 1983. Unlike the Blackbird Mine and three other
mining-related sites, claims against the Company at sites relating to the
aluminum businesses acquired in 1983 do not fall within the indemnification
obligations of the Company's settlement agreement with Pechiney. In addition,
the Company and its subsidiaries have been named as defendants or potentially
responsible parties at sites associated with operations of its subsidiaries
which are unrelated to the Howmet acquisition. At virtually all sites, the
Company is one of many potentially responsible parties who are alleged to be
jointly and severally responsible for the response costs associated with the
sites.
 
     Management periodically evaluates the Company's potential liability for
remediation and related costs at both its own and other parties' sites. Such
evaluations are based upon then current information, including alternative
methods of remediation, estimated costs for implementation of such alternatives,
the nature and the extent of the Company's involvement at the site in question,
and anticipated contributions of other potentially responsible parties. Once it
becomes probable that the Company will incur costs in connection with
remediation of a site and such costs can be reasonably estimated, the Company
establishes or adjusts its reserve for those projected costs.
 
                                       14
<PAGE>   16
 
     Due to uncertainties associated with developing case law relating to
insurance coverage for environmental claims and remediation costs, insurance
recoveries are not considered in estimating the Company's share of remediation
costs at a site unless an insurance carrier has agreed to pay a portion of those
costs. Projections of remediation costs by their nature are imprecise and
reserves accrued by the Company are based on Management's best estimate of such
costs based upon available information about known sites. It is not possible to
predict the amount or timing of future remediation costs which may be ultimately
determined or project costs for sites which may be identified in the future. It
should be recognized that a number of the Company's present and past facilities
have been in operation for many years and additional remediation activities may
be required as environmental laws and circumstances continue to evolve. The
Company believes that it has adequate reserves so that anticipated and estimable
liabilities that may result from sites known to it, and anticipated expenditures
for remediation programs it may be required to undertake, either individually or
in the aggregate, are not expected to have a material adverse effect on the
financial condition or ongoing results of operations of the Company.
 
  Other Legal Proceedings
 
     Justice Department Inquiry.  In August 1994, Alumax received a civil
investigative demand from the Antitrust Division of the Department of Justice
requesting documents and information principally relating to reductions in the
production of primary aluminum during the period from 1991 to the date of
demand. Alumax cooperated with the Department in connection with the inquiry. By
letter dated May 9, 1997, the Department of Justice advised the Company that the
investigation relating to the demand had been closed.
 
     Antitrust Action.  Alumax and four other producers of primary aluminum,
together with The Aluminum Association, an industry trade association, were
served with a summons and complaint in March 1996, alleging violations of
California's State antitrust act (the Cartwright Act). The suit was originally
filed in the Superior Court for Los Angeles County, but was removed by the
defendants to the United States District Court for the Central District of
California. Plaintiff alleges that the defendants conspired, together with the
United States Government and the governments of several other sovereign nations,
to fix the prices of primary aluminum by agreeing to reduce production. The
allegations arise from the Memorandum of Understanding Concerning the Aluminum
Market ("MOU") negotiated by the United States and other governments in 1993 and
1994, and executed by them in Brussels in 1994, and the actions of the
defendants alleged to have been undertaken in connection with the MOU.
 
     The complaint was brought by a California bicycle manufacturer as a
purported class action on behalf of all direct and indirect purchasers of
primary aluminum and aluminum products produced during the period from January
1, 1994 to March 5, 1996. The complaint seeks injunctive relief and recovery of
damages that, when trebled, are alleged to be in excess of $26 billion.
Following removal of the action to the District Court, the defendants filed a
motion to dismiss. Upon considering that motion, plaintiff's opposition and the
defendants' reply, the Court by order dated May 28, 1996, converted the motion
to dismiss to a motion for summary judgment by the defendant-aluminum producers.
In the same order, the Court granted The Aluminum Association's motion to
dismiss for lack of personal jurisdiction. Following the filing of briefs in
support and in opposition to summary judgment, the Court granted summary
judgment in favor of the defendant-aluminum producers and dismissed the
complaint with prejudice by order dated July 1, 1996. The Court denied
plaintiff's subsequent motion for reconsideration by order entered on July 16,
1996.
 
     On July 18, 1996, the plaintiff filed a notice of appeal to the United
States Court of Appeals for the Ninth Circuit from the United States District
Court's orders granting The Aluminum Association's motion to dismiss and the
aluminum producers' motion for summary judgment and the order denying the
plaintiff's motion for reconsideration. Following the submission of briefs by
the parties, oral argument on the appeal was heard on December 3, 1997, after
which the Court of Appeals entered an order on December 11, 1997, affirming the
decision of the District Court. The plaintiff has requested rehearing by the
Court of Appeals.
 
     Patent Infringement Action.  On August 17, 1995, the Company filed suit in
the United States District Court for the Eastern District of Arkansas against
Hot Metal Molding, Inc. alleging infringement of a process patent, United States
Patent 4687042 (the "042 patent"), held by the Company which is used in
semi-solid
 
                                       15
<PAGE>   17
 
forming applications. The litigation is in the discovery phase and was recently
expanded by order of the Court to include Ormet Primary Aluminum Corporation
("Ormet"), the exclusive North American licensee of Pechiney Corporation's
technology for casting thixotropic billet, and certain subsidiaries and
affiliates of Buhler International AG, a Swiss manufacturer of die casting
machines. Ormet has filed counterclaims alleging that the patent is invalid,
void and unenforceable and is seeking a declaratory judgment that the 042 patent
would not be infringed by the use of Ormet's billet in any diecasting
application. On October 3, 1997, certain defendants sought leave of the District
Court to file counterclaims against the Company, alleging violations of Sections
1 and 2 of the Sherman Act and Section 4 of the Clayton Act for which they seek
injunctive relief and treble damages in an unspecified amount. In addition, the
Company has sought leave to amend its complaint to add claims that the
subsidiaries and affiliates of Buhler International have infringed the 042
patent and that certain of the defendants have infringed other patents held by
the Company relating to the casting of billet used in semi-solid forming
applications. On January 19, 1998, the Court entered its order granting all
parties leave to amend their pleadings. The Company believes that the
counterclaims are without merit and intends to vigorously oppose them.
 
     Other.  In addition to the matters described above, the Company and its
subsidiaries are also involved in the defense and handling of various judicial
proceedings and claims arising out of alleged defects in its products as well as
other matters occurring in the ordinary course of business. Management believes,
taking into account its reserves and insurance coverage, that these matters,
either individually or in the aggregate, will not have a material adverse effect
on the financial condition or ongoing results of operations of the Company.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1997.
 
EXECUTIVE OFFICERS OF THE REGISTRANT
 
     As of February 1, 1998, the names, offices with the Company, ages and years
of service as an officer of all Executive Officers of the Company were as
follows:
 
<TABLE>
<CAPTION>
                                                                                             YEARS AS
             NAME                                     OFFICE                        AGE      OFFICER
             ----                                     ------                        ---      --------
<S>                              <C>                                                <C>      <C>
Allen Born                       Chairman and Chief Executive Officer               64           4
Thomas G. Johnston               President and Chief Operating Officer              55          --
Jay M. Linard                    Senior Vice President and Group Executive          52           1
Robert P. Wolf                   Senior Vice President and General Counsel          54           8
Michael T. Vollkommer            Vice President and Chief Financial Officer         39           4
Christian A. Carrington          Vice President, Strategic Planning and Corporate
                                   Development                                      47          --
Helen M. Feeney                  Vice President and Corporate Secretary             57           4
Philip Gaetano                   Vice President, Human Resources and
                                   Administration                                   38          --
Eugene R. Greenberg              Vice President                                     59           1
Kevin J. Krakora                 Vice President and Controller                      42          --
Philippe G. Thaure               Vice President                                     60           7
Thomas L. Gleason                Treasurer                                          46           1
</TABLE>
 
                                       16
<PAGE>   18
 
     There are no family relationships, by blood, marriage or adoption, between
the above officers. All officers are elected until the next annual meeting of
the Board of Directors or until their respective successors are chosen and
qualified. There is no arrangement or understanding between any of the above
officers and any other person pursuant to which he or she was selected as an
officer.
 
     The principal occupations and positions for the past five years of each of
the Executive Officers of the Company are as follows:
 
          MR. BORN has been a Director of the Company since 1985, Chairman since
     April 1993 and Chairman and Chief Executive Officer since November 1993.
     For more than five years prior to November 1993, he had been Chief
     Executive Officer of Amax and also served as Chairman of that company from
     June 1988 to November 1993. Mr. Born was also Co-Chairman of Cyprus Amax
     Minerals Company from November 1993 to November 1995 and Vice Chairman of
     that company from November 1995 to May 1996.
 
          MR. JOHNSTON was elected President and Chief Operating Officer of
     Alumax in December 1997, after having been an Executive Vice President
     since March 1997. He joined Alumax in December 1996 as head of the
     Company's interests in the Pacific Rim. Prior thereto, he had been Chairman
     and Chief Executive Officer of Aztec Mining Company Limited for more than
     five years.
 
          MR. LINARD was elected a Senior Vice President of Alumax in September
     1997, after having been a Vice President since December 1996. He was
     designated Group Executive for the Company's semi-fabricated businesses in
     December 1997. Mr Linard has also been President of Alumax Extrusions,
     Inc., a wholly owned subsidiary of the Company and formerly named Cressona
     Aluminum Company, for more than five years.
 
          MR. WOLF was elected Senior Vice President and General Counsel of
     Alumax in March 1997, after having been Vice President and General Counsel
     for more than five years. He also served as Secretary of Alumax from
     November 1989 to November 1993.
 
          MR. VOLLKOMMER was elected Vice President and Chief Financial Officer
     of Alumax in December 1997, after having been Vice President, Strategic
     Planning and Corporate Development since June 1997. Prior thereto, he had
     been a Vice President of Alumax since December 1995 and Controller since
     February 1994. Prior to joining the Company in January 1994, Mr. Vollkommer
     served as Director of Accounting at Amax.
 
          MR. CARRINGTON was elected Vice President, Strategic Planning and
     Corporate Development in January 1998. Prior thereto, he developed and
     managed the Latin American corporate finance advisory practices at both
     Ernst & Young and Coopers & Lybrand for more than five years
 
          MRS. FEENEY has been Vice President and Corporate Secretary of Alumax
     since November 1993. For more than five years prior thereto, she had been
     Corporate Secretary of Amax.
 
          MR. GAETANO was elected Vice President, Human Resources and
     Administration in January 1998. For more than five years prior thereto, he
     held various executive and senior managerial positions in the human
     resources field at Marcam Corporation, Fisher Scientific International, GE
     Capital Corporation and Dun & Bradstreet Corporation.
 
          MR. GREENBERG has been a Vice President of Alumax since December 1996
     and President of Alumax Materials Management, Inc., a wholly owned
     subsidiary of the Company, since September 1996. Before joining Alumax in
     February 1996, Mr. Greenberg was Vice President -- Materials of
     Commonwealth Aluminum Company from 1991.
 
          MR. KRAKORA was elected Vice President and Controller of Alumax in
     June 1997, after having been Vice President, Finance of Kawneer Company,
     Inc., a wholly owned subsidiary of the Company, from 1994. Prior thereto,
     he served four years as the Director of Finance and later Vice President
     and Controller for Liebert Customer Service and Support, a division of
     Emerson Electric Co.
 
                                       17
<PAGE>   19
 
          MR. THAURE has been a Vice President of Alumax for more than five
     years and President of Alumax International Company and Alumax Technology
     Corporation, each a wholly owned subsidiary of the Company, since February
     1994. For more than five years prior thereto, he had been a Vice President
     of Alumax Primary Aluminum Corporation, a wholly owned subsidiary of
     Alumax.
 
          MR. GLEASON has been Treasurer of the Company since November 1996. For
     more than five years prior thereto, he held various executive and
     managerial positions with Royal Bank of Canada, most recently serving as
     Vice President of Corporate Banking for the Eastern region of the United
     States.
 
                                       18
<PAGE>   20
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Common Stock, par value $.01 per share, of the Company (the "Common
Stock") is listed on the New York, London, Toronto and Brussels Stock Exchanges.
The following table sets forth on a quarterly basis the high and low sales
prices of the Common Stock on the New York Stock Exchange for the two most
recent fiscal years:
 
<TABLE>
<CAPTION>
                                                              HIGH      LOW
                                                              ----      ---
<S>                                                           <C>       <C>
1996
  First Quarter.............................................  $40       $26 5/8
  Second Quarter............................................  $36 1/2   $29 1/8
  Third Quarter.............................................  $34       $29
  Fourth Quarter............................................  $34 1/8   $30 5/8
1997
  First Quarter.............................................  $40 3/8   $33 7/8
  Second Quarter............................................  $39 1/8   $34 1/4
  Third Quarter.............................................  $45 1/4   $37 3/8
  Fourth Quarter............................................  $42 1/4   $30 1/2
</TABLE>
 
     The Company paid no dividends on the Common Stock in 1997 or 1996 and does
not expect to do so over the foreseeable future. Future Common Stock dividend
decisions will take into account several factors, including the then current
business results and cash requirements of the Company. In addition, the Company
has a loan agreement that contains, among other things, restrictions on the
payment of dividends by the Company. See Note 6 to the Financial Statements
included elsewhere herein.
 
     At December 31, 1997, there were 9,343 holders of record of the Company's
Common Stock.
 
                                       19
<PAGE>   21
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The following table sets forth selected financial information of the
Company for each of the five years ended December 31, 1997 which has been
derived from the audited Financial Statements of the Company. The information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which follows this
section, and the Financial Statements and related notes included elsewhere
herein.
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                 ----------------------------------------------------
                                                   1997       1996       1995       1994       1993
                                                 --------   --------   --------   --------   --------
                                                   (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S>                                              <C>        <C>        <C>        <C>        <C>
OPERATING RESULTS
Net sales......................................  $2,930.9   $3,159.3   $2,926.1   $2,754.5   $2,347.3
                                                 ========   ========   ========   ========   ========
  Earnings (loss) from operations..............  $  293.0   $  231.9      305.8   $  134.0   $ (116.1)
  Gain on sales of assets(a)...................                242.9      128.8        6.6
  Interest expense, net(b).....................     (57.8)     (62.8)     (65.4)     (72.6)     (76.5)
  Other income, net............................       2.0       10.6        7.3        4.4        6.0
  Income tax (provision) benefit(c)............    (203.5)    (172.6)    (139.1)     (25.7)      52.1
  Cumulative effect of accounting changes(d)...                                                  (3.8)
                                                 --------   --------   --------   --------   --------
  Net earnings (loss)..........................  $   33.7   $  250.0   $  237.4   $   46.7   $ (138.3)
                                                 ========   ========   ========   ========   ========
  Earnings (loss) applicable to common
     shares....................................  $   33.7   $  240.7   $  228.1   $   37.4   $ (147.6)
                                                 ========   ========   ========   ========   ========
EARNINGS (LOSS) PER COMMON SHARE(E)(F)
  Basic........................................  $   0.62   $   5.26   $   5.11   $   0.84   $  (3.33)
  Diluted......................................  $   0.60   $   4.53   $   4.34   $   0.84   $  (3.33)
FINANCIAL POSITION
  Working Capital..............................  $  754.3   $  660.6   $  767.9   $  706.9   $  571.9
  Property, plant and equipment, net...........   2,026.9    2,027.4    1,611.9    1,523.3    1,571.1
  Total assets.................................   3,453.0    3,298.7    3,135.0    2,958.8    2,973.6
  Long-term debt...............................     955.6      672.0      708.9      851.9      925.2
  Total debt...................................   1,002.0      710.4      845.9      915.5      988.2
  Stockholders' equity.........................   1,621.7    1,640.8    1,399.3    1,162.1    1,099.6
OTHER DATA
  Total debt to invested capital...............      38.2%      30.2%      37.7%      44.1%      47.3%
  Return on sales..............................       1.1%       7.9%       8.1%       1.7%      (5.9)%
  Return on average stockholders' equity.......       2.1%      16.4%      18.5%       4.1%     (12.0)%
  Return on average invested capital...........       3.0%      13.5%      14.1%       4.8%      (4.2)%
  Book value per share(g)......................  $  30.37   $  30.00   $  25.73   $  21.45   $  20.38
</TABLE>
 
---------------
 
(a)  Included in 1996 was a pretax gain of $71.7 ($36.7 after tax) related to
     the sale of certain fabricated products businesses, a pretax gain of $92.8
     ($55.1 after tax) related to the sale of mining interests and a pretax gain
     of $78.4 ($48.6 after tax) related to the sale of a 23 percent interest in
     the Mt. Holly primary aluminum reduction plant. Included in 1995 was a
     pretax gain of $128.8 ($81.3 after tax) related to the sale of a 14 percent
     interest in each of the Intalco and Eastalco primary aluminum reduction
     plants. Included in 1994 was a pretax gain of $6.6 ($4.0 after tax) related
     to the sale of an Australian mining investment.
(b)  Includes capitalized interest of $1.6 in 1997, $7.5 in 1996, and $5.4 in
     1995.
(c)  Included in 1997 was a $108.6 provision associated with a United States Tax
     Court decision concerning an alleged income tax deficiency.
(d)  The 1993 results included a charge of $3.8 (net of $2.0 tax benefit) for
     postemployment benefits related to the adoption of SFAS No. 112.
(e)  The computation of diluted earnings per common share for the years ended
     1994 and 1993 excluded preferred stock of 9,600,000 shares because their
     effects were antidilutive. Per share data for 1993 was calculated on a pro
     forma basis using 44,354,000 average shares outstanding from November 15,
     1993 through December 31, 1993, as if such shares were outstanding
     throughout the year.
(f)  In the fourth quarter of 1997, the Company adopted Statement of Financial
     Accounting Standards No. 128, "Earnings per Share." Prior year amounts have
     been restated in accordance with this Statement.
(g)  Book value per share amounts were determined as if the Series A Preferred
     Stock, which was converted to Common Stock in December 1996, had been
     converted to Common Stock in each year presented.
 
                                       20
<PAGE>   22
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
       (Millions of dollars, except per tonne amounts)
 
INTRODUCTION
 
     The Company is an integrated producer of aluminum products, operating in a
single segment: aluminum processing. Using purchased alumina, the raw material
used to produce aluminum, the Company produces primary aluminum through an
eloctrolytic process. Primary aluminum products are sold externally or further
processed into a broad range of semi-fabricated and fabricated products. The
Company's products are sold to a wide variety of markets, including
transportation, distributors, building and construction, consumer durables, and
packaging. The following should be read in conjunction with the Company's
consolidated Financial Statements and notes thereto, which are contained
elsewhere herein.
 
     Net earnings for the year ended December 31, 1997 totaled $33.7 as compared
with net earnings of $250.0 for the year ended December 31, 1996 and $237.4 for
the year ended December 31, 1995.
 
     Since becoming an independent public corporation in late 1993, Management
has made significant progress in implementing a strategic plan designed to
enhance stockholder value, strengthen the Company's balance sheet, and position
the Company for future growth. A key element of that plan was repositioning the
Company in order to take advantage of faster growth markets for aluminum, such
as the domestic transportation and distributor markets, and to exit mature,
slower growth markets. From 1993 through 1996, a series of actions related to
this strategy was completed. The Company's aluminum sheet business was
restructured. The Company exited the low margin can sheet market and sold its
sheet distribution business. Several non-core assets and businesses were also
sold raising proceeds that totaled $770. In that same period, over $1 billion
was invested into business expansion including the acquisition of Cressona
Aluminum Company.
 
     In 1997, the Company continued its growth and expansion efforts by
investing an additional $165 in its operations. In addition, the Company
commenced implementation of three major programs focused on the continued
enhancement of stockholder value. One, implementation of a performance
improvement plan designed to increase the Company's annual pretax operating
earnings by approximately $100 by 1999. Two, design and implementation of a new
value measurement system for use in management incentive compensation to
effectively link the level of incentive compensation to the creation of
stockholder value. And three, the repurchase of 1.8 million shares of the
Company's outstanding common stock in connection with a stock repurchase program
originally announced in July 1996.
 
     The performance improvement plan, announced in the fourth quarter of 1997,
has an initial target of increasing the Company's annual pretax operating
earnings by about $100 by 1999, without regard to any changes in aluminum
pricing. The Company is targeting approximately $69 of the performance
improvements to come from operating cost efficiencies and from actions to bring
all of Alumax's operations up to a level of the Company's best practices. In
addition, approximately $18 of the performance improvements are targeted to come
from gains in productivity and through workforce attrition. An additional $13 in
charges and write-offs incurred in 1997 as part of the consolidation and action
plan at the Company's semi-solid forging operations are also included in the
improvement level. There are also on-going efforts to increase the level of
targeted performance improvements under the plan.
 
     The Company also announced a new value measurement system to be used for
management incentive compensation, commencing in 1998. This new value
measurement system was designed to include a focus on stockholder return. This
new measurement system will reward employees based upon improvements to
stockholder return, as well as improvements in the Company's financial returns
compared to its cost of capital.
 
     In the fourth quarter of 1997, the Company repurchased approximately 1.8
million shares of its outstanding common stock in connection with its ongoing
stock repurchase program announced in July 1996. These repurchases were financed
by internal cash flow generated from the reduction of working capital in the
fourth quarter of 1997. The stock repurchase program authorizes the Company to
purchase up to 2.5 million shares from time to time, on the open market or
pursuant to negotiated transactions, at price levels deemed attractive by the
Company.
 
                                       21
<PAGE>   23
 
     On September 30, 1997, the United States Tax Court ruled in favor of the
Internal Revenue Service (the "IRS") in an action filed by the Company to
contest an IRS notice of deficiency related to consolidation of the Company in
the income tax returns of the Company's former parent, AMAX Inc., for 1984, 1985
and 1986. Although the Company is appealing that ruling, the Company paid $411
to the IRS, representing the expected deficiency and estimated accrued interest
in order to stop any further accrual of interest. See "Legal Proceedings -- Tax
Dispute Regarding Consolidation with Amax."
 
     Management believes the Company has the financial capability to continue to
execute its strategic plan for growth and development. The Company's balance
sheet remains strong. Total stockholders' equity exceeded $1.6 billion at
December 31, 1997, up almost 50 percent since the Company became an independent
public corporation. The ratio of total debt to capital was 38 percent at
December 31, 1997, compared with 30 percent and 38 percent at December 31, 1996
and 1995, respectively.
 
                                       22
<PAGE>   24
 
EARNINGS FROM OPERATIONS
 
     Earnings from operations for the year ended December 31, 1997 totaled
$293.0 compared with earnings of $231.9 for the year ended December 31, 1996 and
$305.8 for the year ended December 31, 1995. The increase in 1997 earnings from
operations was primarily the result of higher average aluminum prices. The
benefit from higher average aluminum prices was partially offset by a decrease
in external shipments and by the costs associated with the reorganization
efforts at the Company's semi-solid forging operations. Included in 1997
earnings was $1.4 related to the liquidation of LIFO inventories. Earnings for
both 1997 and 1996 were negatively impacted by operating losses from the
Company's semi-solid forging operations.
 
     The lower 1996 earnings from operations compared with 1995 were
attributable to lower average aluminum prices and higher raw material, research,
business and product development costs. Included in 1996 earnings was $3.7
related to the liquidation of LIFO inventories and $2.1 from the sale of
pollution credits. Included in 1995 earnings was a $7.3 reduction in the sheet
mill operations' restructuring liability to account for lower than expected
costs, $5.1 in gains on sales of assets, and $1.4 related to the liquidation of
LIFO inventories.
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1997       1996       1995
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net sales:
  Aluminum processing:(1)
     Primary products.......................................  $1,390.3   $1,335.5   $1,300.0
     Semi-fabricated products...............................   1,833.7    1,643.1    1,320.1
     Fabricated products(2).................................     540.7      863.2      967.9
     Intercompany...........................................    (833.8)    (682.5)    (661.9)
                                                              --------   --------   --------
                                                              $2,930.9   $3,159.3   $2,926.1
                                                              ========   ========   ========
Earnings from operations:
  Aluminum processing.......................................  $  342.3   $  275.6   $  339.7
  Corporate.................................................     (49.3)     (43.7)     (33.9)
                                                              --------   --------   --------
                                                              $  293.0   $  231.9   $  305.8
                                                              ========   ========   ========
Sources and shipments (thousands of tonnes):
  Sources of metal (unaudited)
     Primary aluminum production............................     708.6      686.3      650.9
     Aluminum purchases.....................................     353.7      419.6      355.3
                                                              --------   --------   --------
                                                               1,062.3    1,105.9    1,006.2
                                                              ========   ========   ========
Metal shipments (unaudited):
  Aluminum processing:(1)
     Primary products.......................................     779.8      787.7      732.0
     Semi-fabricated products...............................     632.9      575.5      424.0
     Fabricated products(2)(3)..............................      99.9      134.3      143.1
     Intercompany...........................................    (474.5)    (415.4)    (325.6)
                                                              --------   --------   --------
                                                               1,038.1    1,082.1      973.5
                                                              ========   ========   ========
</TABLE>
 
---------------
 
(1) Certain reclassifications have been made to prior years' information to
    conform with the 1997 presentation.
(2) On September 25, 1996, the Company sold certain fabricated products
    businesses in Western Europe and in the United States. Sales related to
    these businesses totaled $363.3 and $485.0 in 1996 and 1995, respectively.
    Shipments related to these businesses totaled 46.3 and 60.7 thousand tonnes
    in 1996 and 1995, respectively.
(3) Included in Fabricated products metal shipments were billet shipments of
    30.3, 28.6 and 26.8 thousand tonnes for the years ended December 31, 1997,
    1996 and 1995, respectively.
 
                                       23
<PAGE>   25
 
NET SALES AND SHIPMENTS
 
     The Company generated sales of $2,930.9 on aluminum shipments of
approximately 1.0 million tonnes in 1997. Sales of $3,159.3 in 1996 and $2,926.1
in 1995 were generated on aluminum shipments of approximately 1.1 and 1.0
million tonnes, respectively. The decrease in 1997 net sales and shipments was
largely the result of lower volumes due to the sale of certain fabricated
products operations ("Fab Products") in Western Europe and in the United States
in September 1996.
 
     The Company's net sales are also sensitive to changes in the world pricing
of primary aluminum. The price sensitivity affects the realized selling prices
of substantially all of the Company's products to varying degrees, with less
impact on the more specialized and value-added products. In 1997, the LME cash
price averaged $1,600 per tonne compared with $1,510 and $1,810 per tonne in
1996 and 1995, respectively. The LME price increased from a January 1997 average
of $1,580 to a monthly average peak of $1,710 in August 1997 and averaged $1,530
in December 1997. Net sales for 1997 reflect the impact of the annual average
price increase. Sales growth of eight percent in 1996 was attributable to
increased shipments offset somewhat by a decline in pricing.
 
     Primary products' net sales in 1997 increased four percent. Substantially
all of the increase was a result of higher average realized selling prices.
Internal consumption of primary products grew by 15 percent in 1997 compared to
1996. The increase in internal consumption was driven by the integration of the
Company's expanded extrusion operations. The January 31, 1996 acquisition of
Cressona Aluminum Company ("Cressona") more than doubled the capacity of the
Company's extrusion operations. The Company's total primary aluminum production
in 1997 increased approximately three percent over 1996.
 
     Primary products' net sales increased three percent in 1996 on shipment
increases of eight percent. Primary production rose in 1996 as idled capacity
restarts of approximately 90,000 tonnes, which were announced in November 1995,
were completed in January 1996. The Company's smelter network has been operating
at or above full nameplate capacity since January 1996. The increase in
shipments was partially offset by lower average realized selling prices during
1996 as compared with 1995.
 
     Semi-fabricated products' net sales for 1997 increased 12 percent as a
result of increased shipments. The increase in shipments was primarily
attributable to the Company's extrusion operations. The 1996 acquisition of
Cressona, which more than doubled the capacity of the Company's extrusion
business, created an organization which the Company believes has the world's
largest soft-alloy extrusion manufacturing capacity. Additionally, continued
growth in the Company's extrusion operations in the transportation and service
center businesses contributed to the increase. Semi-fabricated products' net
sales also benefited from an increase in shipments by the Company's sheet mill
operations.
 
     Semi-fabricated products' net sales in 1996 increased 24 percent over 1995,
principally due to shipment increases of 36 percent. Substantially all of the
1996 increase in shipments was generated as a result of the acquisition of
Cressona. Slightly offsetting the impact of higher shipments were lower prices
in the Company's sheet mill operations.
 
     Fabricated products' net sales for 1997 decreased 37 percent principally
due to the September 1996 sale of Fab Products. Increased sales in the Company's
domestic building and construction operations and European secondary aluminum
and extrusion operations were more than offset by the effects of the sale of Fab
Products, which had sales of $363.3 in 1996.
 
     Fabricated products' net sales in 1996 declined 11 percent on a six percent
decline in shipments. The Company sold Fab Products, which had sales of $485.0
in 1995 and $363.3 in 1996 through the date of disposition, on September 25,
1996. The decline in sales was partially offset by an increase in sales to the
domestic building and construction market.
 
COST AND EXPENSES
 
     The Company's cost and expenses were $2,637.9 for 1997 compared with
$2,927.4 for 1996 and $2,620.3 for 1995. The decrease in 1997 was largely
attributable to lower volumes resulting from the sale of Fab
 
                                       24
<PAGE>   26
 
Products and decreases in external purchases of aluminum. Additionally, as a
result of actions under the performance improvement plan, savings of $12.3 were
realized in the fourth quarter of 1997. These savings included $9.8 from
improvements in production efficiencies and best practices throughout the
Company's businesses and $2.5 from productivity gains and workforce attrition.
 
     The increase in total cost and expense levels in 1996 as compared with 1995
reflects the expanded volume from the Company's extrusion operations combined
with increases in raw material, research, business and product development
costs, partially offset by a volume reduction associated with the Fab Products
disposition.
 
     Depreciation expense increased 11 percent in 1997, which was commensurate
with the Company's level of capital spending since 1995. In 1996, depreciation
expense increased 27 percent compared with 1995 with most of this increase the
result of expansion of the Company's extrusions business and the effects of
capital spending programs.
 
OTHER ITEMS AFFECTING NET EARNINGS
 
  Other income, net
 
     Other income, net, for the years ended December 31, 1997, 1996 and 1995 was
$2.0, $10.6 and $7.3, respectively. Included in 1996 and 1995, respectively,
were $18.6 and $11.6 for dividends received from Mexican mining operations. The
Company sold its investment in the Mexican mining operations during 1996.
 
  Interest expense, net
 
     Gross interest expense was $62.5, $74.1 and $81.6 for the years ended
December 31, 1997, 1996 and 1995. Gross interest expense in 1997 decreased
because of lower interest rates and a lower average level of borrowings compared
with 1996. Gross interest expense in 1996 decreased because of lower interest
rates compared with 1995. Interest income for the years ended December 31, 1997,
1996 and 1995 was $3.1, $3.8 and $10.8, respectively. Interest income was higher
in 1995 because of higher interest rates and higher overall cash balances.
Capitalized interest was $1.6, $7.5 and $5.4 in 1997, 1996 and 1995,
respectively.
 
  Income taxes
 
     The income tax provision for the year ended December 31, 1997 was $203.5
compared with an income tax provision of $172.6 and $139.1 in 1996 and 1995,
respectively. Included in 1997 was a $108.6 charge related to an alleged income
tax deficiency. The Internal Revenue Service (the "IRS") asserted that Alumax
and certain of its subsidiaries were improperly included in the 1984, 1985 and
1986 consolidated income tax returns of AMAX Inc. ("Amax"), the Company's former
parent company, and on that basis assessed a federal income tax deficiency
against Alumax of $129. In response to the IRS' notice of deficiency, the
Company filed a petition in the United States Tax Court (the "Court"), seeking a
redetermination in respect of the purported deficiency. The parties waived their
rights to a trial and the matter was submitted to the Court for decision based
upon the pleadings, stipulations, memoranda and other documents submitted to the
Court by the parties. On September 30, 1997, the Court entered a decision in
favor of the IRS, opining that Amax did not have the 80 percent control
necessary to consolidate. On October 27, 1997, the Company paid an aggregate of
$411 to the IRS, representing the expected deficiency and estimated accrued
interest. The payment was funded from cash on hand and borrowings of $355 under
the Company's revolving credit facility. On December 24, 1997, the Company filed
a notice of appeal of the Court's decision to the United States Court of Appeals
for the Eleventh Circuit.
 
     Effective tax rates differ from the statutory rate due to provisions for
prior years, provisions for state and foreign taxes and the charge related to
the alleged income tax deficiency. In addition, the 1996 repatriation of foreign
earnings associated with the sale of Fab Products' businesses in Western Europe
also contributed to a higher effective tax rate than the statutory rate. In the
first quarter of 1995, the Company reversed a $13.4 federal income tax valuation
allowance in anticipation of utilization of the asset. This deferred tax asset
was subsequently realized.
 
                                       25
<PAGE>   27
 
STRATEGIC TRANSACTIONS
 
     The Company periodically implements strategic actions which it believes
afford it the opportunity to redeploy resources to enhance profitability and
growth. During 1996 and 1995 the following notable strategic transactions
occurred:
 
<TABLE>
<CAPTION>
                                                  DISPOSITION   ACQUISITION   PRE-TAX   AFTER-TAX
                                                   PROCEEDS        COST        GAIN       GAIN
                                                  -----------   -----------   -------   ---------
<S>                                               <C>           <C>           <C>       <C>
1996:
  Fab Products..................................    $246.6                    $ 71.7     $ 36.7
  Mexican Mining Investment.....................     160.0                      92.8       55.1
  Excess Primary Aluminum Capacity..............      89.3                      78.4       48.6
  Cressona Aluminum Company.....................                  $436.5
                                                    ------        ------      ------     ------
                                                    $495.9        $436.5      $242.9     $140.4
                                                    ======        ======      ======     ======
1995:
  Excess Primary Aluminum Capacity..............    $147.6                    $128.8     $ 81.3
                                                    ======                    ======     ======
</TABLE>
 
  Dispositions
 
     In September 1996, the Company sold certain fabricated products businesses
in Western Europe and in the United States for $246.6 in cash, net of cash sold
of $5.4. The Company recorded an after-tax gain of $36.7, net of a $35.0 tax
provision, in the third quarter of 1996.
 
     In June 1996, the Company sold its investment in Mexican mining interests
for total consideration of $160 in cash. The Company recorded an after-tax gain
of $55.1, net of a $37.7 tax provision, in the second quarter of 1996.
 
     In January 1996, the Company sold a 23 percent undivided interest in its
Mt. Holly primary aluminum reduction facility for $89.3, which the Company
applied to the early retirement of a $90.7 promissory note due in May 1996. The
Company recorded an after-tax gain of $48.6, net of a $29.8 tax provision, in
the first quarter of 1996. This transaction reduced the Company's ownership in
the Mt. Holly facility to 50.33 percent.
 
     In March 1995, the Company sold a 14 percent undivided interest in each of
the Company's Intalco and Eastalco primary aluminum reduction facilities for
cash proceeds of $147.6, resulting in an after-tax gain of $81.3, net of a $47.5
tax provision, recorded in the first quarter of 1995. This transaction reduced
the Company's ownership in each facility to 61 percent.
 
  Acquisition
 
     On January 31, 1996, the Company purchased all of the common shares of
privately held Cressona for a cash cost, including expenses, of $436.5, net of
$3.1 of cash acquired. In conjunction with the acquisition, accounts payable,
debt and other liabilities of $87.4 were acquired. Cressona was a leading
manufacturer of extruded aluminum products and is now an integral part of Alumax
Extrusions, Inc.
 
     The transaction was accounted for as a purchase and the results of
operations of Cressona have been included in the consolidated financial
statements since January 31, 1996. The acquisition was financed with cash on
hand and $375 of borrowings obtained under a $400 bridge loan facility. All of
these borrowings have been repaid and the facility has been terminated.
 
                                       26
<PAGE>   28
 
  Pro Forma Information
 
     The following summary presents Alumax's unaudited pro forma consolidated
net sales, net earnings, and basic earnings per common share for 1996 and 1995,
respectively, as if the acquisition of Cressona and the sale of Fab Products
each occurred on January 1, 1996 and 1995. The pro forma adjustments for 1996
include the addition of Cressona's operating results for the month of January
1996. Since the acquisition occurred on January 31, 1996, the Company's actual
results include Cressona from February 1, 1996 through December 1996.
 
<TABLE>
<CAPTION>
                                                                FOR THE YEAR ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1996         1995
                                                              ----------   ----------
<S>                                                           <C>          <C>
Net sales...................................................  $  2,830.3   $  2,910.1
Net earnings................................................  $    243.6   $    238.6
Basic earnings per common share.............................  $     5.12   $     5.14
</TABLE>
 
     The pro forma results are based upon certain assumptions and estimates,
which the Company believes are reasonable. The pro forma results do not purport
to be indicative of results that actually would have been obtained had these
transactions occurred on January 1, 1996 or 1995, nor are they intended to be a
projection of future results.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  Operating activities
 
     Operations used cash of $80.3 in 1997, compared with cash provided of
$193.0 in 1996 and $254.7 in 1995. The lower cash flow in 1997 was primarily the
result of the payment of $411 to the IRS related to an alleged income tax
deficiency. Lower cash flow in 1996 compared with 1995 cash flow was directly
related to the decrease in earnings from operations partially offset by working
capital reductions, net of the effects of the Cressona acquisition and the sale
of Fab Products. Cash flow in 1995 was negatively affected by $3.0 due to
advance payments from a customer received in 1993 for future shipments of
primary aluminum. In addition, the Company incurred $14.9 of cash costs during
1995 related to the 1993 restructuring of its sheet mill operations, which has
been substantially completed.
 
     If the LME cash prices in 1998 were to remain at levels comparable to those
that prevailed in 1997 ($1,600 per tonne), and based on certain other
assumptions, the Company would expect to generate cash flow from operating
activities in excess of $560.
 
  Investing activities
 
     Cash used in investing activities was $159.8 in 1997 compared with cash
used of $177.7 and $62.9 in 1996 and 1995, respectively. Capital expenditures
were $165.4 in 1997 compared with $243.2 in 1996 and $213.7 in 1995. As
described above under "Strategic Transactions," the Company received net cash of
$59.4 and $147.6 in connection with notable strategic transactions during 1996
and 1995, respectively. Additional proceeds of $5.6, $6.1 and $3.2 were received
in 1997, 1996 and 1995, respectively, from the sale of various other assets.
 
     During 1998, capital expenditures are expected to approximate $190 as the
Company continues its program of investing capital in new markets, technology
and facilities. Included in these expenditures are completion of the
state-of-the-art Morris, Illinois extrusion facility, completion of continuous
homogenizing furnaces at the Company's Intalco and Eastalco primary aluminum
reduction facilities, and the balance of spending on the Yunnan aluminum foil
joint venture in China. Capital expenditures in 1997 included initial spending
on the Morris, Illinois extrusions facility, completion of upgrades to the
Lancaster, Pennsylvania and Texarkana, Texas rolling mills, completion of the
Russellville, Arkansas foil facility, continued spending on Eastalco's
point-feed conversion, and progress payments on the Yunnan aluminum foil
venture.
 
     During 1996, the Company, through a subsidiary, entered into a joint
venture with Yunnan Aluminum Processing Factory in Kunming, China for the annual
production of 8,000 to 10,000 tonnes of light gauge aluminum foil for China's
packaging market. Alumax will invest a total of $38 of cash in the joint venture
to
                                       27
<PAGE>   29
 
develop a continuous cast foil operation. As of December 31, 1997, the Company
had invested approximately $24 of cash in the joint venture.
 
  Financing activities
 
     Financing activities during 1997 provided $232.5 of cash compared with cash
used of $186.6 in 1996 and $78.9 in 1995. On October 27, 1997, the Company
borrowed $355 under the revolving credit facility to pay the alleged deficiency
and accrued interest due to the IRS based on the United States Tax Court ruling.
At December 31, 1997, the balance owed under the revolving credit facility was
$330. The Company borrowed $375 under available credit facilities in January
1996 to finance the acquisition of Cressona. During 1996, these borrowings were
fully repaid. Total debt repayments of $552.3 in 1996 also include $136.6 of
early retirements, principally consisting of $39.3 of Cressona debt acquired and
a $90.7 promissory note due in May 1996. Debt repayments of $69.6 in 1995
included early retirements and prepayments of $7.6. There were no new borrowings
in 1995. Dividends totaling $9.3 per annum were paid in 1996 and 1995 to holders
of Alumax $4.00 Series A Convertible Preferred Stock ("Preferred Stock"). In
December 1996, all of the outstanding Preferred Stock was converted into shares
of Alumax Common Stock. At December 31, 1997, 1996 and 1995, the Company's total
debt to invested capital was 38.2 percent, 30.2 percent and 37.7 percent,
respectively. Total debt outstanding was $1,002.0, $710.4 and $845.9, at
December 31, 1997, 1996 and 1995, respectively.
 
     In May 1995, the Company entered into a $400 revolving credit facility (the
"Credit Facility") to replace its then existing revolving credit facility, which
was terminated. During 1997, the credit agreement was amended, increasing the
total amount available under the facility to $800. The Credit Facility has a
term of five years, expiring in October 2002, with no provision for reduction in
commitments. Interest on outstanding balances will be based on either a base
rate or LIBOR option. The Credit Facility restricts the incurrence of
indebtedness by subsidiaries, as well as financial and other covenants. Under
the Credit Facility, the Company and its consolidated subsidiaries collectively
are required to maintain tangible net worth of at least $900 at any time, and
the Company and certain of its subsidiaries, excluding the Lauralco Project
Group (see Note 6 to the Financial Statements included elsewhere herein), are
collectively required to maintain a ratio of tangible net assets to funded debt
of at least 2.0 to 1.0 at any time.
 
     For further information relating to the Company's loan and credit
facilities and for a description of certain provisions contained in a loan
agreement which restrict the Company's ability to pay dividends, see Note 6 to
the Financial Statements included elsewhere herein. Under this restriction, at
December 31, 1997, $442.2 of retained earnings were available for the payment of
dividends on common stock.
 
     Management believes current cash balances, anticipated cash flows from
operations and available funds from the revolving credit facility described
above are sufficient to meet the Company's planned level of capital spending and
to service its debt.
 
     In November 1997, Alumax Mill Products entered into a new five-year
operating lease, renewable for up to two additional years, covering the
Texarkana rolling mill facility. The new leasing arrangement enabled the Company
to forego a previously planned capital investment of $97 to purchase the
Texarkana facility. Annual rent expense is expected to be reduced by
approximately $4.6 under the new lease.
 
     In the fourth quarter of 1997, the Company began acquiring shares of its
common stock in connection with a stock repurchase program announced in July
1996. That program authorizes the Company to purchase up to 2.5 million common
shares from time to time on the open market or pursuant to negotiated
transactions at price levels the Company deems attractive. The Company purchased
1.8 million shares of common stock in 1997 at an aggregate cost of $59.1. The
purpose of the stock repurchase program is to help the Company achieve its
long-term goal of enhancing stockholder value. In February 1998, the Board of
Directors amended the program to provide that purchases reported to, and
ratified by, the Board of Directors or by the Executive Committee of the Board
shall not be counted in determining compliance with the 2.5 million share
limitation.
 
                                       28
<PAGE>   30
 
     On November 4, 1996, the Company announced that it was redeeming all of the
outstanding shares of its Preferred Stock, par value $1.00 per share, on
December 18, 1996. In December 1996, the outstanding shares of Preferred Stock
were converted into approximately 9.6 million shares of Alumax Common Stock.
 
  Risk Management
 
     The Company utilizes certain financial instruments in connection with its
risk management. The risk of loss related to counterparty nonperformance under
financial instrument agreements at December 31, 1997 was not significant.
 
     The Company enters into forward fixed price arrangements that are required
by certain customers and suppliers. The Company may utilize futures or option
contracts to hedge risks associated with forward fixed price arrangements. The
Company may also utilize futures or option contracts to manage price risk
associated with changes in inventory levels. The net amount of such contracts
was approximately 313,425 tonnes at December 31, 1997 and included varying
maturity dates through 2003. Gains or losses with respect to these positions are
reflected in earnings concurrent with consummation of the underlying fixed price
transactions. Periodic value fluctuations of the futures contracts approximately
offset the value fluctuations of the underlying fixed price transactions.
 
     The Company also may, from time to time, establish a floor selling price
for varying quantities of future production. This may be accomplished by
entering into forward sales of primary aluminum, purchasing put options, or by
entering into forward sales of primary aluminum and purchases of call options,
which together provide the same price protection as purchasing put options in a
manner which correlates with the Company's production and sales of primary
aluminum. This strategy may be modified from time to time. At December 31, 1997,
the Company's commitments with respect to these financial instruments covered
approximately 234,450 tonnes of future production. The book value and market
value of these financial instruments were $5.4 and $22.5, respectively, at
December 31, 1997.
 
     Certain of the Company's foreign operating expenditures are denominated in
currencies other than the operations' functional currencies, which expose the
Company to exchange rate risks. In order to mitigate its exposure to exchange
rate risk where these conditions exist, the Company may utilize forward or
option contracts on foreign currencies. At December 31, 1997, the Company had
outstanding $214.9 in such contracts which mature at various dates through June
1999. The gains or losses related to these contracts are deferred and included
in the measurement of the related foreign denominated transactions. If these
contracts had been terminated at December 31, 1997, the Company would have
incurred a loss of approximately $4.5.
 
     The Company's debt instruments and related interest rate hedges are
susceptible to market fluctuations based on changes in the cost of borrowing. At
December 31, 1997, the fair value of total debt approximated book value. The
Lauralco credit facility, which has a variable interest rate, required the
Company to establish facilities to effectively limit the interest rate exposure
of the commitment. To meet this requirement, the Company has obtained interest
rate swaps with notional amounts totaling $400 through October 26, 2000 and
interest rate caps with a notional amount of $150 expiring October 26, 1998.
This program is designed to effectively cap interest rate exposure at a maximum
of approximately nine percent through October 26, 2000. The effective rate on
this debt amounted to 8.4 percent, 8.5 percent and 9.2 percent for the years
ended December 31, 1997, 1996 and 1995, respectively. The Company would have
paid approximately $32.3 to terminate these interest rate agreements at December
31, 1997.
 
     The Company also purchases natural gas for its operations and enters into
forward contracts to manage the volatility in prices. At December 31, 1997, none
of these contracts was material.
 
  Environmental Matters
 
     The Company has been named as a defendant or identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") and similar state laws by governmental agencies and
private parties at 38 pending waste disposal sites which, in most instances,
were owned and operated by third parties. Management periodically evaluates such
matters and records or
 
                                       29
<PAGE>   31
 
adjusts liability reserves for remediation and other costs and potential damages
when expenditures for such costs are considered probable and can be reasonably
estimated.
 
     The Company's ultimate liability in connection with present and future
environmental claims will depend on many factors, including its volumetric share
of the waste at a given site, the remedial action required, the total cost of
remediation and the financial viability and participation of the other entities
which also sent waste to the site. Based upon current law and information known
to the Company concerning the size of the sites known to it, anticipated costs
of remediation, their years of operation, and the number of potentially
responsible parties, Management believes that it has adequate reserves for the
Company's probable share of the estimated aggregate liability for the costs of
remedial actions and related costs and expenses and that such liability and
related costs and expenses should not have a material adverse effect on the
financial condition or ongoing results of operations of the Company. In
addition, the Company establishes reserves for remedial measures required from
time to time at its own facilities. Any expenditures for remediation programs it
may be required to undertake, either individually or in the aggregate, are not
expected to have a material adverse effect on the financial condition or ongoing
results of operations of the Company. The Company's environmental reserves
totaled $29.6 at December 31, 1997 and 1996. Management believes that the
reasonably probable outcomes of these matters will not materially exceed
established reserves. Although the Company believes it has coverage for some
environmental claims under certain insurance policies, insurance recoveries are
not considered in estimating the Company's share of remediation costs at a site
unless an insurance carrier has agreed to pay a portion of such costs. Insurance
recoveries were not considered in establishing reserves for any of these sites
absent an agreement between the carriers and the Company.
 
     Management does not anticipate that commitments, operating expenses or
capital expenditures for environmental compliance through and including the next
fiscal year will have a material adverse effect on the Company's financial
condition or ongoing results of operations. Based on historical trends toward
tighter environmental standards, it appears likely that the Company will incur
additional expenditures to remain in compliance with federal and state
environmental laws. See also "Business -- Environmental Matters" under Item 1
and "Legal Proceedings" under Item 3 in Part I hereof.
 
  Impact of the Year 2000 Issue
 
     The "Year 2000 Issue" resulted from the use of two digits rather than four
digits to define the applicable year in certain computer programs. With the
coming millennium, any of the Company's computer programs that have two digit
date-sensitive software may interpret a date of "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
 
     Management is in the process of evaluating the effect of the Year 2000
Issue on the Company. Based on preliminary findings, the total cost of
addressing the Year 2000 Issue is not expected to have a material effect on the
Company's business, financial condition or results of operations. However,
Management is in the process of completing its assessment of the potential
impact of the Year 2000 Issue on the Company and the potential exposure of the
Company to related problems of its customers and suppliers. There can be no
assurance that such exposures or the costs of remediating any problems
associated therewith will not materially affect the Company's future business,
financial condition or results of operations.
 
  Cautionary Statement Regarding Forward-Looking Information
 
     Certain statements and information contained in this Annual Report on Form
10-K, including in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and under "Business" in Item 1 and under
"Legal Proceedings" in Item 3, are forward-looking statements that reflect
Management's current plans, objectives and expectations for the future, which
are based on prevailing circumstances and information available at this time.
Accordingly, such statements and information involve inherent risks and
uncertainties, and actual results may differ materially from those discussed
therein. Forward-looking statements contained herein include: (i) statements
made concerning Management's
 
                                       30
<PAGE>   32
 
expectations with respect to the Company's strategic plan for growth and its
performance improvement plan (including all statements of targeted performance
improvements); (ii) statements made regarding expected future cash flow from
operating activities; (iii) statements regarding Management's expectations with
respect to the future profitability of the Company's semi-solid forging
operations; and (iv) statements made regarding the Company's current
expectations or beliefs with respect to the outcome and impact on the Company's
business, financial condition or results of operations of the Year 2000 Issue
and pending litigation and other claims, disputes or legal proceedings. Factors
that could cause actual results to differ from those discussed in the
forward-looking statements include: fluctuations in commodity prices (including
prices of aluminum and alumina), changes in competitive conditions, government
regulation, aluminum market conditions, changes in labor relations, the outcome
of pending litigation and other claims, domestic and international market
conditions and general economic conditions. In addition, actual results may
differ as a result of other factors not enumerated herein, as well as changes in
current circumstances, that are impossible to predict at this time.
 
                                       31
<PAGE>   33
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Accountants...........................   33
Statements of Earnings for the Years Ended December 31,
  1997, 1996 and 1995.......................................   34
Statements of Financial Position at December 31, 1997 and
  1996......................................................   35
Statements of Cash Flows for the Years Ended December 31,
  1997, 1996 and 1995.......................................   36
Statements of Changes in Stockholders' Equity for the Years
  Ended December 31, 1997, 1996 and 1995....................   37
Notes to Financial Statements...............................   38
</TABLE>
 
                                       32
<PAGE>   34
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders and Board of Directors of
Alumax Inc.
 
     We have audited the accompanying statements of financial position of Alumax
Inc. and its subsidiaries as of December 31, 1997 and 1996, and the related
statements of earnings, cash flows and changes in stockholders' equity for each
of the three years in the period ended December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Alumax Inc. and its
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
 
                                          COOPERS & LYBRAND L.L.P.
 
Atlanta, Georgia
January 27, 1998
 
                                       33
<PAGE>   35
 
                                  ALUMAX INC.
 
                             STATEMENTS OF EARNINGS
 
<TABLE>
<CAPTION>
                                                                     FOR THE YEAR ENDED DECEMBER 31,
                                                                    ---------------------------------
                                                             NOTE     1997        1996        1995
                                                             ----   ---------   ---------   ---------
                                                                          (IN MILLIONS, EXCEPT
                                                                           PER SHARE AMOUNTS)
<S>                                                          <C>    <C>         <C>         <C>
NET SALES..................................................          $2,930.9    $3,159.3    $2,926.1
Cost and expenses:
  Cost of goods sold.......................................           2,234.1     2,522.0     2,285.7
  Selling and general......................................             250.9       267.3       225.5
  Depreciation and amortization............................             152.9       138.1       109.1
                                                                     --------    --------    --------
                                                                      2,637.9     2,927.4     2,620.3
                                                                     --------    --------    --------
EARNINGS FROM OPERATIONS...................................             293.0       231.9       305.8
Gain on sales of assets....................................    2           --       242.9       128.8
Interest expense, net......................................   13        (57.8)      (62.8)      (65.4)
Other income, net..........................................   14          2.0        10.6         7.3
                                                                     --------    --------    --------
EARNINGS BEFORE INCOME TAXES...............................             237.2       422.6       376.5
Income tax provision.......................................    4        203.5       172.6       139.1
                                                                     --------    --------    --------
NET EARNINGS...............................................              33.7       250.0       237.4
Preferred dividends........................................   10           --        (9.3)       (9.3)
                                                                     --------    --------    --------
EARNINGS APPLICABLE TO COMMON SHARES.......................          $   33.7    $  240.7    $  228.1
                                                                     ========    ========    ========
Earnings per common share:
  Basic....................................................   10     $   0.62    $   5.26    $   5.11
                                                                     ========    ========    ========
  Diluted..................................................   10     $   0.60    $   4.53    $   4.34
                                                                     ========    ========    ========
Weighted average shares outstanding:
  Basic....................................................   10         54.7        45.7        44.6
                                                                     ========    ========    ========
  Diluted..................................................   10         55.7        55.2        54.8
                                                                     ========    ========    ========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       34
<PAGE>   36
 
                                  ALUMAX INC.
 
                        STATEMENTS OF FINANCIAL POSITION
 
<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                     ----------------------------
                                                              NOTE      1997             1996
                                                              ----   -----------      -----------
                                                                     (MILLIONS OF DOLLARS, EXCEPT
                                                                          PER SHARE AMOUNTS)
<S>                                                           <C>    <C>              <C>
                                             ASSETS
Current Assets:
  Cash and equivalents......................................            $   27.0         $   34.6
  Accounts receivable, less allowance for doubtful accounts
     (1997 -- $13.2; 1996 -- $16.6).........................               487.1            439.1
  Inventories...............................................    3          533.8            519.9
  Deferred income taxes.....................................    4           94.7             54.5
  Other current assets......................................                23.7             37.7
                                                                        --------         --------
          Total current assets..............................             1,166.3          1,085.8
                                                                        --------         --------
Noncurrent Assets:
  Property, plant and equipment, net........................    5        2,026.9          2,027.4
  Deferred income taxes.....................................    4           38.4             40.4
  Other assets..............................................               221.4            145.1
                                                                        --------         --------
          Total noncurrent assets...........................             2,286.7          2,212.9
                                                                        --------         --------
TOTAL ASSETS................................................            $3,453.0         $3,298.7
                                                                        ========         ========
 
                              LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................            $  145.3         $  162.6
  Accrued liabilities.......................................               220.3            224.2
  Current maturities of long-term debt......................    6           46.4             38.4
                                                                        --------         --------
          Total current liabilities.........................               412.0            425.2
                                                                        --------         --------
Noncurrent Liabilities:
  Long-term debt............................................    6          955.6            672.0
  Deferred income taxes.....................................    4          193.1            154.0
  Postretirement health care................................    8          164.8            161.8
  Other liabilities.........................................               105.8            244.9
                                                                        --------         --------
          Total noncurrent liabilities......................             1,419.3          1,232.7
                                                                        --------         --------
Commitments and Contingencies...............................    9
Stockholders' Equity:
  Preferred stock of $1.00 par value -- authorized
     50,000,000 shares......................................   10             --               --
  Common stock of $.01 par value -- authorized 200,000,000
     shares; issued and outstanding 53,390,250 shares in
     1997 and 54,692,057 shares in 1996.....................   10             .6               .5
  Paid-in capital...........................................               935.8            920.2
  Retained earnings.........................................               758.0            724.3
  Cumulative foreign currency translation adjustment........               (13.6)            (4.2)
  Common stock in treasury, at cost -- 1,812,900 shares in
     1997...................................................   10          (59.1)              --
                                                                        --------         --------
          Total stockholders' equity........................             1,621.7          1,640.8
                                                                        --------         --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................            $3,453.0         $3,298.7
                                                                        ========         ========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       35
<PAGE>   37
 
                                  ALUMAX INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                    FOR THE YEAR ENDED DECEMBER 31,
                                                                   ---------------------------------
                                                            NOTE     1997        1996        1995
                                                            ----   ---------   ---------   ---------
                                                                         (MILLIONS OF DOLLARS)
<S>                                                         <C>    <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings............................................           $  33.7     $ 250.0     $ 237.4
  Reconciliation of net earnings to net cash provided by
     (used in) operating activities:
  Depreciation and amortization...........................             152.9       138.1       109.1
  Provision for doubtful accounts.........................                .9         5.2         2.7
  Gain on sales of assets.................................    2         (4.3)     (242.1)     (133.9)
  Deferred income taxes...................................    4           .9        47.7        50.8
  Other noncash items.....................................              15.7         8.5         5.7
  Changes in operating assets and liabilities, net of
     effects of acquisition/dispositions:
     Accounts receivable..................................             (48.9)      (25.4)         .3
     Inventories..........................................    3        (13.9)       17.7       (60.0)
     Other current assets.................................              16.3       (21.8)       57.4
     Accounts payable and accrued liabilities.............             (21.2)        9.8       (51.2)
     Net change in other noncurrent assets and
       liabilities........................................            (212.4)        5.3        36.4
                                                                     -------     -------     -------
     Net cash provided by (used in) operating
       activities.........................................             (80.3)      193.0       254.7
                                                                     -------     -------     -------
INVESTING ACTIVITIES:
  Dispositions, net of cash sold..........................               5.6       502.0       150.8
  Acquisitions, net of cash acquired......................                --      (436.5)         --
  Capital expenditures....................................            (165.4)     (243.2)     (213.7)
                                                                     -------     -------     -------
     Net cash used in investing activities................            (159.8)     (177.7)      (62.9)
                                                                     -------     -------     -------
FINANCING ACTIVITIES:
  Repayments of debt......................................    6        (63.4)     (552.3)      (69.6)
  Proceeds from debt......................................    6        355.0       375.0          --
  Dividends paid..........................................   10           --        (9.3)       (9.3)
  Repurchases of common stock.............................   10        (59.1)         --          --
                                                                     -------     -------     -------
     Net cash provided by (used in) financing
       activities.........................................             232.5      (186.6)      (78.9)
                                                                     -------     -------     -------
Net increase (decrease) in cash and equivalents...........              (7.6)     (171.3)      112.9
Cash and equivalents at beginning of year.................              34.6       205.9        93.0
                                                                     -------     -------     -------
Cash and equivalents at end of year.......................           $  27.0     $  34.6     $ 205.9
                                                                     =======     =======     =======
Supplemental Cash Flow Information:
  Income taxes paid, net..................................           $ 430.0     $  98.0     $  84.0
  Interest paid, net of amounts capitalized...............           $  58.9     $  66.5     $  72.8
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       36
<PAGE>   38
 
                                  ALUMAX INC.
 
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                 1997              1996              1995
                                                            ---------------   ---------------   ---------------
                                                     NOTE   SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT
                                                     ----   ------   ------   ------   ------   ------   ------
                                                                           (IN MILLIONS)
<S>                                                  <C>    <C>      <C>      <C>      <C>      <C>      <C>
Preferred Stock
  At January 1.....................................            --        --     2.3    $  2.3     2.3    $  2.3
  Conversion to common stock.......................   10       --        --    (2.3)     (2.3)     --        --
                                                             ----    ------    ----    ------    ----    ------
  At December 31...................................            --        --      --        --     2.3    $  2.3
                                                             ====    ======    ====    ======    ====    ======
Common Stock
  At January 1.....................................          54.7    $   .5    44.8    $   .4    44.6    $   .4
  Conversion of preferred stock....................   10       --        --     9.6        .1      --        --
  Employee stock issuances.........................    7       .5        .1      .3        --      .2        --
  Repurchase common stock..........................   10     (1.8)       --      --        --      --        --
                                                             ----    ------    ----    ------    ----    ------
  At December 31...................................          53.4    $   .6    54.7    $   .5    44.8    $   .4
                                                             ====    ======    ====    ======    ====    ======
Paid-in Capital
  At January 1.....................................                  $920.2            $909.5            $903.8
  Conversion of preferred stock....................   10                 --               2.2                --
  Employee stock issuances.........................    7               15.6               8.5               5.7
                                                                     ------            ------            ------
  At December 31...................................                  $935.8            $920.2            $909.5
                                                                     ======            ======            ======
Retained Earnings
  At January 1.....................................                  $724.3            $483.6            $255.5
  Net earnings.....................................                    33.7             250.0             237.4
  Dividends on preferred stock.....................   10                 --              (9.3)             (9.3)
                                                                     ------            ------            ------
  At December 31...................................                  $758.0            $724.3            $483.6
                                                                     ======            ======            ======
Cumulative Foreign Currency Translation Adjustment
  At January 1.....................................                  $ (4.2)           $  3.5            $   .1
  Adjustment for foreign currency translation......                    (9.4)             (7.7)              3.4
                                                                     ------            ------            ------
  At December 31...................................                  $(13.6)           $ (4.2)           $  3.5
                                                                     ======            ======            ======
Common Stock in Treasury
  At January 1.....................................   10       --        --
  Common stock repurchases.........................           1.8    $(59.1)
                                                             ----    ------
  At December 31...................................           1.8    $(59.1)
                                                             ====    ======
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       37
<PAGE>   39
 
                                  ALUMAX INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1997
                (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
 
NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Principles of Consolidation -- The financial statements include the
consolidated accounts of all majority-owned subsidiaries over which Alumax Inc.
("Alumax" or the "Company") maintains control. Investments in companies over
which the Company has significant influence, but not a controlling interest, are
carried on the equity method of accounting. Investments in companies over which
the Company lacks significant influence are carried on the cost method of
accounting. All significant intercompany accounts and transactions have been
eliminated.
 
     Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires Management to make
estimates and assumptions that may affect the reported amounts of certain assets
and liabilities and disclosure of contingencies 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 Equivalents -- Cash equivalents consist of highly liquid investments,
which are readily convertible into cash, with a maturity at the date of
acquisition of three months or less.
 
     Financial Instruments -- The Company may, from time to time, utilize
certain financial instruments in connection with risk management. The fair value
of financial instruments is determined by reference to market value quotes,
where available, and other valuation techniques, as appropriate. Amounts to be
paid or received on interest rate swaps and caps are included in interest
expense on an accrual basis, as they effectively limit the interest rate
exposure of the Company's debt commitments.
 
     Certain of the Company's foreign operating expenditures are denominated in
currencies other than the operations' functional currencies, which expose the
Company to exchange rate risks. In order to mitigate its exposure to exchange
rate risk where conditions exist, the Company may utilize forward or option
contracts on foreign currencies. Amounts paid or received on settlement of such
contracts are deferred and included in the measurement of the related foreign
denominated transactions.
 
     The Company's results of operations and financial condition depend to a
large degree on primary aluminum prices. In order to reduce this exposure, the
Company may enter into future, forward and option contracts. Amounts paid or
received on settlement of future, forward and option contracts, including any
cost to purchase the contracts, are deferred and recognized as a component of
the related transaction and included in costs and expenses, except for amounts
paid or received on settlement of aluminum contracts by the primary reduction
facilities, which are included in net sales.
 
     All of the Company's financial instruments have been designated as hedges
and are closely monitored to ensure that correlation between changes in the fair
value of financial instruments and changes in the fair value associated with the
underlying hedged items exists to such a degree that they substantially offset.
In the event a high degree of correlation is not maintained, or anticipated
transactions do not occur, deferred gains or losses on the affected financial
instruments are recognized in earnings immediately. At December 31, 1997, all of
the Company's financial instruments qualified for deferral accounting treatment.
 
     Inventories -- Inventories are stated at the lower of cost or market, with
cost for a substantial portion of U.S. inventories determined under the last-in,
first-out (LIFO) method. The cost of other inventories is principally determined
under the first-in, first-out (FIFO) method.
 
     Property, Plant and Equipment -- Property, plant and equipment is recorded
at cost. Depreciation and amortization of property, plant and equipment is
computed principally on the straight-line method over the estimated useful lives
of the assets. Certain pre-operating costs attributable to new operations of
major facilities are deferred and amortized over a period of approximately three
years. In determining impairment of
                                       38
<PAGE>   40
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
facilities to be disposed, the Company includes direct holding costs during the
disposal period in its measurement of net realizable value.
 
     Stock-Based Compensation -- Compensation cost is measured under the
intrinsic value based method. Pro forma disclosures of net income and earnings
per share are presented, as if the fair value based method had been applied.
 
     Revenue Recognition -- The Company recognizes revenue when title passes to
the customer.
 
     Reclassifications -- Certain reclassifications have been made to prior
years' financial statements to conform with the 1997 presentation.
 
NOTE 2.  STRATEGIC TRANSACTIONS
 
     The Company periodically implements strategic actions, which it believes
afford it the opportunity to redeploy resources to enhance profitability and
growth. During 1996 and 1995 the following notable strategic transactions
occurred:
 
<TABLE>
<CAPTION>
                                                  DISPOSITION   ACQUISITION   PRE-TAX   AFTER-TAX
                                                   PROCEEDS        COST        GAIN       GAIN
                                                  -----------   -----------   -------   ---------
<S>                                               <C>           <C>           <C>       <C>
1996:
  Fab Products..................................    $246.6                    $ 71.7     $ 36.7
  Mexican Mining Investment.....................     160.0                      92.8       55.1
  Excess Primary Aluminum Capacity..............      89.3                      78.4       48.6
  Cressona Aluminum Company.....................                  $436.5
                                                    ------        ------      ------     ------
                                                    $495.9        $436.5      $242.9     $140.4
                                                    ======        ======      ======     ======
1995:
  Excess Primary Aluminum Capacity..............    $147.6                    $128.8     $ 81.3
                                                    ======                    ======     ======
</TABLE>
 
  Dispositions
 
     On September 25, 1996, the Company sold certain fabricated products
businesses ("Fab Products") in Western Europe and in the United States for
$246.6 in cash, net of cash sold of $5.4. The Company recorded an after-tax gain
of $36.7, net of a $35.0 tax provision, in the third quarter of 1996.
 
     In June 1996, the Company sold its investment in Mexican mining interests
for $160 in cash. The Company recorded an after-tax gain of $55.1, net of a
$37.7 tax provision, in the second quarter of 1996.
 
     In January 1996, the Company sold a 23 percent undivided interest in its
Mt. Holly primary aluminum reduction facility for $89.3, which the Company
applied to the early retirement of a $90.7 promissory note due in May 1996. The
Company recorded an after-tax gain of $48.6, net of a $29.8 tax provision, in
the first quarter of 1996. This transaction reduced the Company's ownership in
the Mt. Holly facility to 50.33 percent.
 
     In March 1995, the Company sold a 14 percent undivided interest in each of
the Company's Intalco and Eastalco primary aluminum reduction facilities for
cash proceeds of $147.6, resulting in an after-tax gain of $81.3, net of a $47.5
tax provision, recorded in the first quarter of 1995. This transaction reduced
the Company's ownership in each facility to 61 percent.
 
  Acquisition
 
     On January 31, 1996, the Company purchased all of the common shares of
privately held Cressona Aluminum Company ("Cressona") for a cash cost, including
expenses, of $436.5, net of $3.1 of cash acquired. In conjunction with the
acquisition, accounts payable, debt and other liabilities of $87.4 were
 
                                       39
<PAGE>   41
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
acquired. Cressona was a leading manufacturer of extruded aluminum products and
is now an integral part of Alumax Extrusions, Inc.
 
     The transaction has been accounted for as a purchase and the results of
operations of Cressona have been included in the consolidated financial
statements since January 31, 1996. The acquisition was financed with cash on
hand and $375 of borrowings obtained under a $400 bridge loan facility. All of
these borrowings have been repaid and the facility has been terminated.
 
  Pro Forma Information
 
     The following summary presents Alumax's unaudited pro forma consolidated
net sales, net earnings, and basic earnings per common share for 1996 and 1995,
respectively, as if the acquisition of Cressona and the sale of Fab Products
each occurred on January 1, 1996 and 1995. The pro forma adjustments for 1996
include the addition of Cressona's operating results for the month of January
1996. Since the acquisition occurred on January 31, 1996, the Company's actual
results include Cressona from February 1, 1996 through December 31, 1996.
 
<TABLE>
<CAPTION>
                                                               FOR THE YEAR ENDED
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1996        1995
                                                              --------    --------
<S>                                                           <C>         <C>
Net sales...................................................  $2,830.3    $2,910.1
Net earnings................................................  $  243.6    $  238.6
Basic earnings per common share.............................  $   5.12    $   5.14
</TABLE>
 
     The pro forma results were based upon certain assumptions and estimates,
which the Company believes are reasonable. The pro forma results do not purport
to be indicative of results that actually would have been obtained had these
transactions occurred on January 1, 1996 or 1995, nor are they intended to be a
projection of future results.
 
NOTE 3.  INVENTORIES
 
     Inventories, at December 31, were comprised of:
 
<TABLE>
<CAPTION>
                                                               1997     1996
                                                              ------   ------
<S>                                                           <C>      <C>
Raw materials...............................................  $300.6   $323.7
Work in process ............................................   110.7     87.3
Finished products...........................................   122.5    108.9
                                                              ------   ------
                                                              $533.8   $519.9
                                                              ======   ======
</TABLE>
 
     Approximately 78 percent of inventory at December 31, 1997 and 1996 has
been determined under the LIFO cost basis. The excess of replacement cost over
the LIFO basis of such inventory was approximately $82.6 and $74.0 at December
31, 1997 and 1996, respectively. The reduction in levels of LIFO valued
inventories during 1997, 1996, and 1995 resulted in $1.4, and $3.7, and $1.4 of
pre-tax income related to LIFO liquidation, respectively.
 
                                       40
<PAGE>   42
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 4.  INCOME TAXES
 
     The income tax provision was comprised of the following:
 
<TABLE>
<CAPTION>
                                                               1997     1996     1995
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Current:
  Federal...................................................  $108.6   $ 84.1   $ 67.8
  Foreign...................................................     3.0     34.0     10.5
  State.....................................................     6.5     13.1     10.3
                                                              ------   ------   ------
                                                               118.1    131.2     88.6
                                                              ------   ------   ------
Deferred:
  Federal...................................................    79.9     36.8     43.9
  Foreign...................................................     2.0      4.3      5.0
  State.....................................................     3.5       .3      1.6
                                                              ------   ------   ------
                                                                85.4     41.4     50.5
                                                              ------   ------   ------
          Total.............................................  $203.5   $172.6   $139.1
                                                              ======   ======   ======
</TABLE>
 
     The domestic and foreign components of earnings before income taxes were as
follows:
 
<TABLE>
<CAPTION>
                                                               1997     1996     1995
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Domestic....................................................  $231.8   $396.4   $338.1
Foreign.....................................................     5.4     26.2     38.4
                                                              ------   ------   ------
          Total.............................................  $237.2   $422.6   $376.5
                                                              ======   ======   ======
</TABLE>
 
     Reconciliation of the differences between income taxes computed at federal
statutory tax rates and the Company's consolidated income tax provision follows:
 
<TABLE>
<CAPTION>
                                                               1997     1996      1995
                                                              ------   -------   ------
<S>                                                           <C>      <C>       <C>
Tax at federal statutory rate...............................  $ 83.0   $ 147.9   $131.8
Foreign tax credits.........................................      --    (110.4)      --
Tax consolidation case......................................   108.6        --       --
Sale of foreign businesses..................................      --      86.8       --
Foreign taxes in excess of federal statutory rate...........     3.1      29.2      2.1
State income taxes, net of federal income tax benefit.......     6.5      10.2      7.7
Valuation allowance reversal................................      --        --    (13.4)
Other, net..................................................     2.3       8.9     10.9
                                                              ------   -------   ------
          Total.............................................  $203.5   $ 172.6   $139.1
                                                              ======   =======   ======
</TABLE>
 
     The 1996 foreign provision for income taxes included $28.7 of dividend
withholding taxes.
 
                                       41
<PAGE>   43
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The approximate tax effects of cumulative temporary differences at December
31 were as follows:
 
<TABLE>
<CAPTION>
                                                               1997      1996
                                                              -------   -------
<S>                                                           <C>       <C>
Accrued expenses............................................  $  50.3   $  52.2
Book versus tax basis of inventory..........................    (11.3)     (2.2)
Tax credit carryforwards....................................     52.8        --
Allowance for doubtful accounts.............................      2.9       4.5
                                                              -------   -------
Current, net................................................     94.7      54.5
                                                              -------   -------
Book versus tax basis of depreciable assets.................   (248.3)   (208.0)
Foreign capital cost allowance carryforward.................     57.8      59.8
Postretirement health care accrual..........................     57.7      56.6
Other.......................................................    (21.9)    (22.0)
                                                              -------   -------
Noncurrent, net.............................................   (154.7)   (113.6)
                                                              -------   -------
          Total, net........................................  $ (60.0)  $ (59.1)
                                                              =======   =======
</TABLE>
 
     At December 31, 1997, the Company had $139.2 in foreign capital cost
allowance carryforwards which accrued in periods prior to becoming an
independent public corporation in 1993. The Company has not provided for
domestic income taxes or foreign withholding taxes on $39.1 of foreign
subsidiaries' undistributed earnings as of December 31, 1997, which are
reinvested indefinitely.
 
     The Internal Revenue Service (the "IRS") asserted that Alumax and certain
of its subsidiaries were improperly included in the 1984, 1985, and 1986
consolidated income tax returns of AMAX Inc. (the Company's former parent) and
on that basis has assessed a federal income tax deficiency against Alumax of
$129. In response to the IRS' notice of deficiency, the Company filed a petition
in the United States Tax Court (the "Court") seeking a redetermination in
respect of the purported deficiency. The parties waived their rights to a trial
and the matter was submitted to the Court for decision based upon the pleadings,
stipulations, memoranda and other documents submitted to the Court by the
parties. On September 30, 1997, the Court entered a decision in favor of the IRS
opining that AMAX Inc. did not have the 80 percent control necessary to
consolidate. As a result of the ruling, the Company recorded a charge of $108.6
in the third quarter of 1997. On October 27, 1997, the Company paid an aggregate
of $411 to the IRS, representing the expected deficiency and estimated accrued
interest. The payment was funded from cash on hand and borrowings of $355 under
the Company's revolving credit facility. On December 24, 1997, the Company filed
a notice of appeal of the Court's decision to the United States Court of Appeals
for the Eleventh Circuit.
 
NOTE 5.  PROPERTY, PLANT AND EQUIPMENT
 
     Components of property, plant and equipment at December 31, were as
follows:
 
<TABLE>
<CAPTION>
                                                                1997        1996
                                                              ---------   ---------
<S>                                                           <C>         <C>
Land and improvements.......................................  $    62.3   $    60.4
Machinery and equipment.....................................    2,766.4     2,634.6
Buildings...................................................      283.5       267.3
Other.......................................................      147.6       145.0
                                                              ---------   ---------
                                                                3,259.8     3,107.3
Less -- accumulated depreciation and amortization...........   (1,320.0)   (1,216.3)
                                                              ---------   ---------
                                                                1,939.8     1,891.0
Construction in progress....................................       87.1       136.4
                                                              ---------   ---------
                                                              $ 2,026.9   $ 2,027.4
                                                              =========   =========
</TABLE>
 
                                       42
<PAGE>   44
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 6.  DEBT
 
     Debt at December 31, consisted of:
 
<TABLE>
<CAPTION>
                                                                1997      1996
                                                              --------   ------
<S>                                                           <C>        <C>
Lauralco debt, payable 1998 to 2003 -- variable rate........  $  607.5   $645.0
Revenue and pollution control bonds, payable 1998 to
  2015 -- 3.9% to 9.5%......................................      62.0     62.9
Revolving credit -- variable rate...........................     330.0       --
Other.......................................................       2.5      2.5
                                                              --------   ------
                                                               1,002.0    710.4
Less -- current maturities..................................     (46.4)   (38.4)
                                                              --------   ------
          Total long-term debt..............................  $  955.6   $672.0
                                                              ========   ======
</TABLE>
 
     A project finance credit agreement was arranged in 1990 with a group of
banks permitting borrowings of up to $750 to finance construction of a primary
aluminum reduction plant in Quebec, Canada ("Lauralco Project Group"). The
credit agreement required the Company to establish facilities to effectively
limit the interest rate exposure on half of the commitment (Note 15). The
Company's rights to the Lauralco Project Group, including its ownership of the
reduction plant and its rights to various operating agreements, are pledged as
collateral under the credit agreement. The net book value of reduction plant
assets pledged was approximately $903.2 at December 31, 1997.
 
     The project finance credit agreement contains, among other restrictions,
provisions limiting the declaration or payment of dividends to the Company by
certain subsidiaries engaged in Lauralco activities. Additionally, the project
finance credit agreement contains provisions restricting the payment of
dividends on the Alumax Common Stock. At December 31, 1997, $442.2 of retained
earnings were available for the payment of dividends on common stock under this
restriction.
 
     In May 1995, the Company entered into a $400 revolving credit facility (the
"Credit Facility") to replace its then existing revolving credit facility, which
was terminated. During 1997, the credit agreement was amended, increasing the
total amount available under the facility to $800. The Credit Facility has a
term of five years, expiring in October 2002, with no provision for reduction in
commitments. Interest on outstanding balances will be based on either a base
rate or LIBOR option. The Credit Facility restricts the incurrence of
indebtedness by subsidiaries, as well as financial and other covenants. Under
the Credit Facility, the Company and its consolidated subsidiaries are
collectively required to maintain tangible net worth of at least $900 at any
time, and the Company and certain of its subsidiaries, excluding the Lauralco
Project Group, are collectively required to maintain a ratio of tangible net
assets to funded debt of at least 2.0 to 1.0 at any time.
 
     Commitment and facility fees for revolving credit arrangements amounted to
$.6 in 1997. The annual principal payments of long-term debt for the five-year
period ending December 31, 2002 are: 1998-$46.4; 1999-$69.4; 2000-$69.4,
2001-$91.9 and 2002-$445.0.
 
NOTE 7.  EMPLOYEE PENSION AND THRIFT PLANS
 
     Pension plans cover substantially all employees of the Company and are
generally non-contributory. The benefits of salaried employee plans are based on
the projected unit credit method. The benefits of hourly employee plans are
based on the unit credit method. The Company's funding policy is to meet minimum
funding requirements.
 
                                       43
<PAGE>   45
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Net periodic pension cost was comprised of the following:
 
<TABLE>
<CAPTION>
                                                               1997     1996     1995
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Service cost -- benefits earned during the period...........  $ 19.3   $ 19.3   $ 15.6
Interest cost on projected benefit obligations..............    24.8     23.7     20.9
Actual return on assets.....................................   (66.8)   (37.0)   (42.9)
Net amortization and deferral...............................    37.1     11.9     22.4
                                                              ------   ------   ------
  Net periodic pension cost.................................  $ 14.4   $ 17.9   $ 16.0
                                                              ======   ======   ======
</TABLE>
 
     The following table sets forth the funded status of the Company's pension
plans and amounts recognized in its statements of financial position at December
31, 1997 and 1996 for its pension plans:
 
<TABLE>
<CAPTION>
                                                          ASSETS EXCEED     ABO EXCEEDS
                                                               ABO             ASSETS
                                                         ---------------   --------------
                                                          1997     1996     1997    1996
                                                         ------   ------   ------   -----
<S>                                                      <C>      <C>      <C>      <C>
Actuarial present value of benefit obligations:
Vested benefit obligation..............................  $206.6   $234.3   $101.4   $14.8
                                                         ======   ======   ======   =====
Accumulated benefit obligation (ABO)...................  $225.2   $257.1   $113.9   $16.8
                                                         ======   ======   ======   =====
Projected benefit obligation...........................  $249.9   $314.9   $152.3   $19.2
Plan net assets at fair value..........................   298.8    336.5    106.7    10.7
                                                         ------   ------   ------   -----
Plan net assets in excess of (less than) projected
  benefit obligation...................................    48.9     21.6    (45.6)   (8.5)
Unrecognized net (gain) loss...........................   (16.6)    (6.6)    15.0     5.5
Unrecognized prior service cost........................    22.1     15.3      3.1     1.3
Unrecognized transition amounts........................    (5.2)    (6.5)      .3      .6
                                                         ------   ------   ------   -----
Prepaid (accrued) pension costs........................  $ 49.2   $ 23.8   $(27.2)  $(1.1)
                                                         ======   ======   ======   =====
</TABLE>
 
     Plan assets consisted of approximately 60 percent equities, 37 percent
fixed income and 3 percent cash and cash equivalents at December 31, 1997.
 
     Key economic assumptions used in the above calculations at December 31,
were:
 
<TABLE>
<CAPTION>
                                                              1997   1996   1995
                                                              ----   ----   ----
<S>                                                           <C>    <C>    <C>
Settlement discount rate....................................  7.0%   7.5%   7.0%
Rate of compensation increases..............................  5.0%   5.0%   5.0%
Expected long-term rate of return...........................  9.0%   9.0%   9.0%
</TABLE>
 
     Defined contribution employee thrift plans cover substantially all salaried
and certain hourly employees. Employee contributions are matched through Company
issuances of Alumax Common Stock. Alumax Common Stock issuances amounted to
$6.5, $5.3 and $4.9 in 1997, 1996 and 1995, respectively. Total administrative
expenses of these plans paid by the Company amounted to $5.7, $5.6 and $5.3 in
1997, 1996 and 1995, respectively.
 
NOTE 8.  POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
 
     In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees. A majority of the
Company's domestic employees may become eligible for such benefits if they reach
normal or, in certain cases, early retirement age while working for the Company.
 
                                       44
<PAGE>   46
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The components of periodic cost for these postretirement benefits were as
follows:
 
<TABLE>
<CAPTION>
                                                              1997    1996    1995
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Service cost -- benefits earned during the period...........  $ 3.5   $ 3.8   $ 3.7
Interest cost on accumulated postretirement benefit
  obligation................................................    9.9     9.2    10.0
Amortization of prior service cost related to plan
  amendments................................................   (4.7)   (5.2)   (5.3)
Amortization of (gains) losses..............................    (.1)     .6     (.4)
                                                              -----   -----   -----
Net periodic cost...........................................  $ 8.6   $ 8.4   $ 8.0
                                                              =====   =====   =====
</TABLE>
 
     The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded at December 31, were as follows:
 
<TABLE>
<CAPTION>
                                                               1997     1996
                                                              ------   ------
<S>                                                           <C>      <C>
Accumulated postretirement benefit obligation (APBO):
  Retirees..................................................  $ 65.6   $ 62.2
  Fully eligible active plan participants...................    19.3     18.4
  Other active participants.................................    62.9     54.2
  Unrecognized prior service cost related to plan
     amendments.............................................    16.1     22.4
  Unrecognized net gain.....................................      .9      4.6
                                                              ------   ------
Liability for postretirement health care and life insurance
  benefits..................................................  $164.8   $161.8
                                                              ======   ======
</TABLE>
 
     For measurement purposes, a 9.1 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998. The rate was
assumed to decrease gradually to 4.7 percent through the year 2006 and remain at
that level thereafter. An increase in the assumed health care cost trend rates
by one percent in each year would increase the APBO as of December 31, 1997 by
10 percent and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by 11 percent. The
weighted-average discount rate used in determining the APBO as of December 31,
1997 and 1996 was 7.0 and 7.5 percent, respectively.
 
     In addition to providing postretirement benefits to eligible retired
employees, the Company provides specified postemployment benefits to certain
former or inactive employees. Substantially all domestic employees may become
eligible to receive these benefits, which are either self-insured or provided
through the Company's insurance carriers.
 
NOTE 9.  COMMITMENTS AND CONTINGENCIES
 
     Minimum commitments under long-term noncancelable operating leases,
principally for operating and office facilities, totaled $88.5 at December 31,
1997. Lease commitments for future periods are as follows: 1998-$17.9,
1999-$15.3, 2000-$13.1, 2001-$11.3, 2002-$10.1 and 2003 to 2009-$20.8. Rent
expense amounted to $23.0, $23.0 and $25.8 in 1997, 1996 and 1995, respectively.
The Company arranged for letters of credit in the amount of $100.5 at December
31, 1997, primarily relating to collateral support for certain financing
arrangements and a power contract guarantee.
 
     In November 1997, Alumax Mill Products entered into a new five-year
operating lease, renewable for up to two additional years, covering the
Texarkana rolling mill facility. The new leasing arrangement enabled the Company
to forego a previously planned capital investment of $97 to purchase the
Texarkana facility.
 
     The Company has a noncancelable long-term contract for the purchase of
alumina and both noncancelable and cancelable contracts for electric power for
its primary aluminum reduction plants. Power contracts for each plant, except
for Intalco, and the alumina contract are with single suppliers. The power
contracts expire in the years 2001 through 2014, subject to certain extension
provisions. The alumina contract,
 
                                       45
<PAGE>   47
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
with renewal options, expires in increments between 2007 and 2018. Contracted
amounts of alumina and power approximate the Company's anticipated requirements.
 
     During 1996, the Company, through a subsidiary, entered into a joint
venture with Yunnan Aluminum Processing Factory in Kunming, China for the annual
production of 8,000 to 10,000 tonnes of light gauge aluminum foil for China's
packaging market. Alumax will invest a total of $38 of cash in the joint venture
to develop a continuous cast foil operation. As of December 31, 1997, the
Company had invested approximately $24 of cash in the joint venture.
 
     The Company has been named as a defendant or identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") and similar state laws by governmental agencies and
private parties at 38 pending waste disposal sites which, in most instances,
were owned and operated by third parties. Management periodically evaluates such
matters and records or adjusts liability reserves for remediation and other
costs and potential damages when expenditures for such costs are considered
probable and can be reasonably estimated.
 
     The Company's ultimate liability in connection with present and future
environmental claims will depend on many factors, including its volumetric share
of the waste at a given site, the remedial action required, the total cost of
remediation and the financial viability and participation of the other entities
which also sent waste to the site. Based upon current law and information known
to the Company concerning the size of the sites known to it, anticipated costs
of remediation, their years of operation, and the number of potentially
responsible parties, Management believes that it has adequate reserves for the
Company's probable share of the estimated aggregate liability for the costs of
remedial actions and related costs and expenses and that such liability and
related costs and expenses should not have a material adverse effect on the
financial condition or ongoing results of operations of the Company. In
addition, the Company establishes reserves for remedial measures required from
time to time at its own facilities. Any expenditures for remediation programs it
may be required to undertake, either individually or in the aggregate, are not
expected to have a material adverse effect on the financial condition or ongoing
results of operations of the Company. The Company's environmental reserves
totaled $29.6 at December 31, 1997 and 1996. Management believes that the
reasonably probable outcomes of these matters will not materially exceed
established reserves. Although the Company believes it has coverage for some
environmental claims under certain insurance policies, insurance recoveries are
not considered in estimating the Company's share of remediation costs at a site
unless an insurance carrier has agreed to pay a portion of such costs. Insurance
recoveries were not considered in establishing reserves for any of these sites
absent an agreement between the carriers and the Company.
 
     Management does not anticipate that commitments, operating expenses or
capital expenditures for environmental compliance through and including the next
fiscal year will have a material adverse effect on the Company's financial
condition or results of operations. Based on historical trends toward tighter
environmental standards, it appears likely that the Company will incur
additional expenditures to remain in compliance with federal and state
environmental laws.
 
NOTE 10.  STOCKHOLDERS' EQUITY
 
  Preferred Stock
 
     On November 4, 1996, the Company announced that it was redeeming all of the
outstanding shares of the $4.00 Series A Convertible Preferred Stock ("Preferred
Stock"), par value $1.00 per share, on December 18, 1996. Each share of the
Preferred Stock was redeemable at a price of $52.40 per share, plus an amount
equal to the quarterly dividend accrued on each share through the redemption
date for a total cash redemption price of $52.60 per share. As an alternative to
redemption, each share of the Preferred Stock was convertible at the option of
the holder into 4.11489 shares of the Company's Common Stock until the close of
business on
 
                                       46
<PAGE>   48
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
December 4, 1996. In December 1996, the outstanding shares of Preferred Stock
were converted into approximately 9.6 million shares of Alumax Common Stock.
 
  Common Stock
 
     As of December 31, 1997, authorized and unissued shares of Alumax Common
Stock were reserved for the following purposes: 2,650,000 for issuance of stock
options and other stock compensation plans, 832,100 for issuance under employee
thrift and 695,600 for issuance pursuant to employee deferred compensation
agreements.
 
  Earnings Per Share
 
     In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Prior year amounts have been
restated in accordance with this Statement. Basic earnings per share is computed
by dividing net earnings available to common stockholders by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share is computed similarly but reflects the potential dilution
that could occur if options were exercised or convertible securities were
converted into common stock. The following table calculates basic earnings per
common share and diluted earnings per common share at December 31:
 
<TABLE>
<CAPTION>
                                                               1997     1996     1995
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Basic Earnings per common share:
  Net earnings..............................................  $ 33.7   $250.0   $237.4
  Deduct -- Series A Convertible Preferred dividends........      --     (9.3)    (9.3)
                                                              ------   ------   ------
  Earnings applicable to common shares......................  $ 33.7   $240.7   $228.1
  Average common shares outstanding (in thousands)..........  54,735   45,731   44,637
                                                              ------   ------   ------
Basic earnings per common share.............................  $ 0.62   $ 5.26   $ 5.11
                                                              ======   ======   ======
Diluted earnings per common share:
  Earnings applicable to common shares......................  $ 33.7   $240.7   $228.1
  Add -- Series A Convertible Preferred dividends...........      --      9.3      9.3
                                                              ------   ------   ------
  Net earnings..............................................  $ 33.7   $250.0   $237.4
  Average common shares outstanding (in thousands)..........  54,735   45,731   44,637
  Add -- Conversion of preferred stock (in thousands).......      --    8,801    9,601
  Add -- Options and performance accelerated restricted
     stock awards (in thousands)............................     986      679      523
                                                              ------   ------   ------
  Average diluted shares outstanding (in thousands).........  55,721   55,211   54,761
                                                              ------   ------   ------
Diluted earnings per common share...........................  $ 0.60   $ 4.53   $ 4.34
                                                              ======   ======   ======
</TABLE>
 
  Treasury Stock
 
     In the fourth quarter of 1997, the Company began acquiring shares of its
common stock in connection with a stock repurchase program announced in July
1996. That program authorizes the Company to purchase up to 2.5 million common
shares from time to time on the open market or pursuant to negotiated
transactions at price levels the Company deems attractive. The Company purchased
1.8 million shares of common stock in 1997 at an aggregate cost of $59.1. The
purpose of the stock repurchase program is to help the Company achieve its
long-term goal of enhancing stockholder value. In February 1998, the Board of
Directors amended the program to provide that purchases reported to, and
ratified by, the Board of Directors or by the Executive Committee of the Board
shall not be counted in determining compliance with the 2.5 million share
limitation.
 
                                       47
<PAGE>   49
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 11.  STOCK-BASED COMPENSATION
 
     Under its 1993 Long-Term Incentive Plan ("Long-Term Plan"), the Company may
grant stock options, stock appreciation rights, restricted stock and other
stock-based awards to salaried employees for up to an aggregate of 5,210,129
shares of common stock. The 1995 Employee Equity Ownership Plan ("Equity
Ownership Plan") provides for discretionary stock option grants to salaried
employees in lower grade levels up to an aggregate of 1,000,000 shares of common
stock. Under its Non-Employee Directors Stock Compensation Plan ("Directors
Stock Plan"), the Company is authorized to grant options up to an aggregate of
750,000 shares of common stock. Upon joining the Board of Directors, each
non-employee director of the Company was provided with a one time stock option
grant of 10,000 shares of common stock. Annually, stock grants for 1,250 shares
of common stock are issued to each non-employee director.
 
     Options granted under the Long-Term Plan and the Equity Ownership Plan
generally vest two years after issue and have a term of ten years. Options
granted under the Directors Stock Plan vest ratably over three years. The
exercise price of options granted under each plan generally equals the market
price of the Company's stock on the date of grant. However, options may be
granted with differing vesting periods, terms and exercise prices. In 1996,
total options of 1,327,650 were granted, of which 687,800 were granted with a
vesting period of one to three years and a term of six years.
 
     In 1993 certain former AMAX Inc. executives became executives of the
Company and were awarded 623,350 options, not pursuant to the Long-Term Plan.
These options, which have a market based exercise price of $23.61 and vest
ratably over five years, were granted in consideration of the cancellation
without payment of rights which the executives may have had under severance
policies of AMAX Inc.
 
     The Company may grant performance accelerated restricted stock to key
management employees under the terms of the Long-Term Plan. The annual stock
awards vest approximately ten years after grant date with accelerated vesting if
the Company meets certain cumulative net income objectives.
 
     A summary of the status of the stock compensation plans as of December 31,
and changes during the years ended on those dates is presented below:
 
<TABLE>
<CAPTION>
                                                     OUTSTANDING                  EXERCISABLE
                                              --------------------------   --------------------------
                                                             WEIGHTED                     WEIGHTED
                                              NUMBER OF      AVERAGE       NUMBER OF      AVERAGE
                                               SHARES         PRICE         SHARES     EXERCISE PRICE
                                              ---------   --------------   ---------   --------------
<S>                                           <C>         <C>              <C>         <C>
Outstanding at December 31, 1994............  1,920,675       $25.41
  Granted (option value -- $11.30)..........    821,850       $33.13
  Exercised.................................     (3,333)      $19.44
  Cancelled.................................    (38,342)      $25.50
                                              ---------
Outstanding at December 31, 1995............  2,700,850       $27.76         296,008       $23.09
                                                                           =========       ======
  Granted (option value -- $11.24)..........    869,117       $32.16
  Granted (option value -- $8.92)...........    458,533       $38.12
  Exercised.................................   (144,200)      $26.80
  Cancelled.................................   (106,159)      $31.87
                                              ---------
Outstanding at December 31, 1996............  3,778,141       $29.95       1,463,484       $25.59
                                                                           =========       ======
  Granted (option value -- $11.30)..........  1,024,850       $32.56
  Exercised.................................   (226,916)      $26.40
  Cancelled.................................   (100,475)      $32.31
                                              ---------
Outstanding at December 31, 1997............  4,475,600       $30.68       2,289,405       $28.35
                                              =========                    =========       ======
Range of option exercise prices:
  $19.44 -- $27.13 (average life -- 6.5
    years)..................................  1,475,775       $25.09       1,351,105       $25.22
                                              =========       ======       =========       ======
  $30.63 -- $40.13 (average life -- 8.1
    years)..................................  2,999,825       $33.43         938,300       $32.85
                                              =========       ======       =========       ======
</TABLE>
 
     The following pro forma summary presents the Company's net earnings, basic
earnings per share and diluted earnings per share for the years ended December
31, 1997, 1996 and 1995 as if compensation cost had
 
                                       48
<PAGE>   50
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
been measured under the fair value based method. The effects of the fair value
of stock options in the following pro forma disclosure are not likely to be
representative of the effects for future years because outstanding options vest
over a period of up to three years and awards are generally made during the
fourth quarter of each year.
 
<TABLE>
<CAPTION>
                                                              1997     1996     1995
                                                              -----   ------   ------
<S>                                                           <C>     <C>      <C>
Pro Forma Information:
  Net earnings..............................................  $26.6   $247.1   $237.2
  Basic earnings per common share...........................  $0.49   $ 5.20   $ 5.11
  Diluted earnings per common share.........................  $0.48   $ 4.48   $ 4.33
</TABLE>
 
     The pro forma adjustments are determined using an option valuation model.
Option valuation models require the input of highly subjective assumptions,
including the expected stock price volatility. Because the Company's employee
stock options have characteristics significantly different from traded options,
and because changes in the subjective input assumptions can materially affect
the fair value estimate, in Management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options. The following assumptions were used for the years ended December
31:
 
<TABLE>
<CAPTION>
                                                                1997    1996    1995
                                                                ----    ----    ----
<S>                                                             <C>     <C>     <C>
Risk-free interest rate.....................................     5.8%    5.9%    5.5%
Expected life...............................................     5.0     5.0     5.0
Expected volatility.........................................    26.0%   26.0%   26.0%
Expected dividend yield.....................................      --      --      --
</TABLE>
 
     The Company also granted performance accelerated restricted stock awards of
65,350 and 13,900 shares to certain employees in March and December 1997,
respectively. The fair value per share on the date of the grants was $37.50 and
$32.56, respectively. In 1996 and 1995, the Company granted performance
accelerated restricted stock awards of 64,680 and 62,100 shares, respectively.
The fair value per share on the date of the grants in 1996 and 1995 was $34.25
and $27.50, respectively. During the years ended December 31, 1997, 1996 and
1995, compensation cost of $2.4, $1.7 and $1.0, respectively, has been
recognized in connection with these awards.
 
NOTE 12.  STOCKHOLDER RIGHTS AGREEMENT
 
     On February 22, 1996, the Executive Committee of the Board of Directors of
the Company declared a dividend distribution of one right (a "Right") for each
outstanding share of Common Stock held of record at the close of business on
February 22, 1996. The Rights attach automatically to each share of Common Stock
outstanding as of February 22, 1996, and to each share of Common Stock issued
after February 22, 1996.
 
     Each Right entitles the holder to purchase from the Company one
one-hundredth of a share of the Company's Participating Preferred Stock at an
exercise price of $130, subject to certain adjustments. The Rights will not be
exercisable or transferable apart from the Common Stock until either the tenth
business day after the announcement by a person or group of the commencement of
a tender or exchange offer for 15 percent or more of the Voting Stock or the
first date of announcement by the Company that a person or group has acquired
beneficial ownership of 15 percent or more of the Voting Stock (an "Acquiring
Person"). "Voting Stock" means shares of capital stock of the Company entitled
to vote generally in the election of directors. If the Company is consolidated
or merged with another company or 50 percent or more of its consolidated assets
or earning power are sold and, at the time, an Acquiring Person controls the
Company's Board of Directors, each holder of a Right will have the right to
receive, upon exercise at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which have a market
value of twice the then current exercise price of the Right. If any person
becomes an Acquiring Person, each holder of a Right other than by the Acquiring
Person (whose Rights will be void) will have the right to
 
                                       49
<PAGE>   51
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
receive, upon exercise at the then current exercise price of the Right, that
number of shares of Common Stock having a market value of twice the exercise
price of the Right. The Rights will expire on February 22, 2006 and may be
redeemed for $.01 per Right at any time prior to the time an Acquiring Person
becomes such. Until a Right is exercised, the record holder will have no rights
as a stockholder of the Company.
 
     After the announcement that an Acquiring Person has become such and prior
to the acquisition by an Acquiring Person of 50 percent or more of the
outstanding Voting Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such Acquiring Person) at an exchange ratio
of one share of Common Stock, or one one-hundredth of a share of the Company's
Participating Preferred Stock, per Right, subject to adjustment.
 
     The Company's Board of Directors may amend the Rights Agreement, in any
respect, until the time an Acquiring Person becomes such. Thereafter, the
Company's Board of Directors may amend the Rights Agreement in any respect not
materially adverse to Rights holders generally.
 
NOTE 13.  INTEREST EXPENSE, NET
 
     Interest expense, net was comprised of:
 
<TABLE>
<CAPTION>
                                                            1997      1996      1995
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
Interest expense.......................................    $(62.5)   $(74.1)   $(81.6)
Interest income........................................       3.1       3.8      10.8
Capitalized interest...................................       1.6       7.5       5.4
                                                           ------    ------    ------
                                                           $(57.8)   $(62.8)   $(65.4)
                                                           ======    ======    ======
</TABLE>
 
NOTE 14.  OTHER INCOME, NET
 
     Other income, net for the years ended December 31, 1997, 1996 and 1995 was
$2.0, $10.6 and $7.3, respectively. Included in 1996 and 1995 respectively, were
$18.6 and $11.6 for dividends received from Mexican mining operations. The
Company sold its investments in the Mexican mining operations during 1996.
 
NOTE 15.  FINANCIAL INSTRUMENTS
 
     The Company utilizes certain financial instruments in connection with its
risk management. The risk of loss related to counter party nonperformance under
financial instrument agreements at December 31, 1997 was not significant.
 
     The Company enters into forward fixed price arrangements that are required
by certain customers and suppliers. The Company may utilize futures or option
contracts to hedge risks associated with forward fixed price arrangements. The
Company may also utilize futures or option contracts to manage price risk
associated with changes in inventory levels. The net amount of such contracts
was approximately 313,425 tonnes at December 31, 1997 and included varying
maturity dates through 2003. Gains or losses with respect to these positions are
reflected in earnings concurrent with consummation of underlying fixed price
transactions. Periodic value fluctuations of the futures contracts approximately
offset the value fluctuations of the underlying fixed price transactions.
 
     The Company also may, from time to time, establish a floor selling price
for varying quantities of future production. This may be accomplished by
entering into forward sales of primary aluminum, purchasing put options, or by
entering into forward sales of primary aluminum and purchases of call options,
which together provide the same price protection as purchasing put options in a
manner which correlates with the Company's production and sales of primary
aluminum. This strategy may be modified from time to time. At December 31, 1997,
the net amount of the Company's commitments with respect to these financial
 
                                       50
<PAGE>   52
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
instruments covered approximately 234,450 tonnes of future production. The book
value and market value of these financial instruments were $5.4 and $22.5
respectively, at December 31, 1997.
 
     Certain of the Company's foreign operating expenditures are denominated in
currencies other than the operations' functional currencies, which expose the
Company to exchange rate risks. In order to mitigate its exposure to exchange
rate risk where these conditions exist, the Company may utilize forward or
option contracts on foreign currencies. At December 31, 1997, the Company had
outstanding $214.9 in such contracts which mature at various dates through June
1999. The gains or losses related to these contracts are deferred and included
in the measurement of the related foreign denominated transactions. If these
contracts had been terminated at December 31, 1997, the Company would have
incurred a loss of approximately $4.5.
 
     The Company's debt instruments and related interest rate hedges are
susceptible to market fluctuations based on changes in the cost of borrowing. At
December 31, 1997, the fair value of total debt approximated book value. The
Lauralco credit facility, which has a variable interest rate, required the
Company to establish facilities to effectively limit the interest rate exposure
of the commitment. To meet this requirement, the Company has obtained interest
rate swaps with notional amounts totaling $400 through October 26, 2000 and
interest rate caps having a notional amount of $150 through October 26, 1998.
This program is designed to effectively cap interest rate exposure at a maximum
of approximately nine percent through October 26, 2000. The effective rate on
this debt amounted to 8.4 percent, 8.5 percent and 9.2 percent for the years
ended December 31, 1997, 1996 and 1995, respectively. The Company would have had
to pay approximately $32.3 to terminate these interest rate agreements at
December 31, 1997.
 
     The Company also purchases natural gas for its operations and enters into
forward contracts to manage the volatility in prices. At December 31, 1997, none
of these contracts was material.
 
     The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and equivalents and trade accounts
receivable. The fair value of these financial instruments approximated book
value at December 31, 1997. The Company places its cash and equivalents with
high credit quality institutions. At times, such investments may be in excess of
the Federal Deposit Insurance Corporation insurance limit. The Company routinely
assesses the financial strength of its customers and, as a consequence, believes
that its trade accounts receivable credit risk exposure is not significant.
 
NOTE 16.  OPERATIONS AND GEOGRAPHIC DATA
 
     The Company is an integrated producer of aluminum products, operating in a
single segment: aluminum processing. Alumax is the third largest aluminum
company in the United States and the fourth largest in North America, based on
sales, and operates over 70 plants and other manufacturing and distribution
facilities in 22 states, Canada, Western Europe, Mexico, Australia, the People's
Republic of China and Poland. Using alumina purchased from one principal
supplier, the Company produces primary aluminum at five reduction plants in the
United States and Canada. Primary products are sold externally or further
processed by Alumax into a broad range of semi-fabricated and fabricated
products. The Company's products are sold to a wide variety of markets,
including transportation, distributors, building and construction, consumer
durables, and packaging.
 
                                       51
<PAGE>   53
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Domestic and Canadian sales and earnings from operations are combined in
the geographic data below, as Canadian assets are primarily aluminum reduction
facilities that toll alumina for U.S. operations and sales. Sales of primary
products to affiliated customers are accounted for at prices comparable to
unaffiliated customer sales.
 
<TABLE>
<CAPTION>
                                                                1997       1996       1995
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Operations data:
Net sales to unaffiliated customers:
  Aluminum processing
     Primary products.......................................  $1,390.3   $1,335.5   $1,300.0
     Semi-fabricated products...............................   1,833.7    1,643.1    1,320.1
     Fabricated products....................................     540.7      863.2      967.9
     Intercompany...........................................    (833.8)    (682.5)    (661.9)
                                                              --------   --------   --------
                                                              $2,930.9   $3,159.3   $2,926.1
                                                              ========   ========   ========
Earnings from operations:
  Aluminum processing.......................................  $  342.3   $  275.6   $  339.7
  Corporate and other.......................................     (49.3)     (43.7)     (33.9)
                                                              --------   --------   --------
                                                              $  293.0   $  231.9   $  305.8
                                                              ========   ========   ========
Identifiable assets:
  Aluminum processing.......................................  $3,128.7   $3,063.7   $2,718.7
  Corporate and other.......................................     324.3      235.0      416.3
                                                              --------   --------   --------
                                                              $3,453.0   $3,298.7   $3,135.0
                                                              ========   ========   ========
Geographic data:
Net sales:
  United States and Canada..................................  $3,556.0   $3,532.4   $3,208.6
  Europe and other international............................     208.7      309.4      379.4
  Intercompany..............................................    (833.8)    (682.5)    (661.9)
                                                              --------   --------   --------
                                                              $2,930.9   $3,159.3   $2,926.1
                                                              ========   ========   ========
Earnings from operations:
  United States and Canada..................................  $  287.4   $  219.9   $  273.9
  Europe and other international............................       5.6       12.0       31.9
                                                              --------   --------   --------
                                                              $  293.0   $  231.9   $  305.8
                                                              ========   ========   ========
Identifiable assets:
  United States and Canada..................................  $3,307.2   $3,171.7   $2,820.6
  Europe and other international............................     145.8      127.0      314.4
                                                              --------   --------   --------
                                                              $3,453.0   $3,298.7   $3,135.0
                                                              ========   ========   ========
</TABLE>
 
     A significant portion of the Company's sales are to the building and
construction, transportation and distributors markets. Concentrations of credit
risk with respect to the trade receivables, relating to sales into these as well
as other markets, are limited due to the large number of customers and the
widely dispersed geographic areas in which the Company's businesses operate. The
Company's one principal supplier of alumina has been its supplier for over 20
years under a long-term contract which, with renewal options, expires in
increments between 2007 and 2018. An extended interruption of alumina supply
from this supplier could have a material adverse effect on the Company's
operations. In addition, each of the Company's primary aluminum reduction
plants, except for Intalco, is supplied by a single source of electric power.
Although the Company may experience power curtailments from time to time, a
sudden and extended interruption of power
 
                                       52
<PAGE>   54
 
                                  ALUMAX INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
at one or more of its primary aluminum reduction plants could have a material
adverse effect on the Company's operations.
 
NOTE 17.  QUARTERLY DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                            1997 QUARTERS                       1996 QUARTERS
                                  ---------------------------------   ---------------------------------
                                  FIRST    SECOND   THIRD    FOURTH   FIRST    SECOND   THIRD    FOURTH
                                  ------   ------   ------   ------   ------   ------   ------   ------
<S>                               <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Net sales.......................  $701.8   $730.9   $717.1   $781.1   $802.6   $851.4   $809.1   $696.2
                                  ------   ------   ------   ------   ------   ------   ------   ------
Earnings from operations........  $ 58.2   $ 71.0   $ 66.6   $ 97.2   $ 75.1   $ 64.4   $ 44.4   $ 48.1
                                  ------   ------   ------   ------   ------   ------   ------   ------
Net earnings (loss)(a)..........  $ 26.7   $ 35.8   $(76.0)  $ 47.2   $ 95.4   $ 83.1   $ 52.4   $ 19.1
                                  ======   ======   ======   ======   ======   ======   ======   ======
Earnings (loss) per share: (b)
  Basic.........................  $  .49   $  .65   $(1.38)  $  .87   $ 2.08   $ 1.80   $ 1.11   $  .35
                                  ======   ======   ======   ======   ======   ======   ======   ======
  Diluted(c)....................  $  .48   $  .64   $(1.38)  $  .86   $ 1.73   $ 1.50   $  .95   $  .35
                                  ======   ======   ======   ======   ======   ======   ======   ======
</TABLE>
 
---------------
 
(a) Included in the third quarter of 1997 was a $108.6 provision associated with
    a United States Tax Court decision concerning an alleged income tax
    deficiency and a $6.1 after-tax charge related to consolidation efforts at
    the Company's semi-solid forging business. Included in 1996 was a first
    quarter after-tax gain of $48.6 related to the sale of a 23 percent interest
    in the Mt. Holly primary aluminum reduction plant, a second quarter
    after-tax gain of $55.1 related to the sale of mining interests and a third
    quarter after-tax gain of $36.7 related to the sale of Fab Products.
(b) In the fourth quarter of 1997, the Company adopted Statement of Financial
    Accounting Standards No. 128, "Earnings per Share." Prior period amounts
    have been restated in accordance with this Statement.
(c) The computation of diluted loss per common share for the third quarter of
    1997 excluded 1,199,000 of potential common shares because their effect was
    antidilutive. The computation of diluted earnings per common share for the
    fourth quarter of 1996 included the effect of the conversion of the
    Preferred Stock as if it had occurred at the beginning of the quarter.
 
                                       53
<PAGE>   55
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     None.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Information in response to this Item is incorporated herein by reference to
the sections entitled "Information Concerning Directors and Nominees", "Security
Ownership" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders
(the "Proxy Statement").
 
     Information concerning Executive Officers required by this Item is
incorporated herein by reference to the section in Part I hereof entitled
"Executive Officers of the Registrant."
 
ITEM 11. EXECUTIVE COMPENSATION
 
     Information in response to this Item is incorporated herein by reference to
the sections entitled "Directors' Meetings, Compensation and Committees,"
"Executive Compensation" and "Common Stock Performance Graph" in the Proxy
Statement.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     Information in response to this Item is incorporated herein by reference to
the section entitled "Security Ownership" in the Proxy Statement. Alumax knows
of no arrangements, including any pledges by any person of its securities, the
operation of which may at a subsequent date result in a change in control of the
Company.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Information in response to this Item is incorporated herein by reference to
the sections entitled "Certain Transactions" and "Executive Employment and
Separation Agreements" in the Proxy Statement.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
     FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.  The Company's
financial statements, the notes thereto and the report of the independent
accountants are set forth on pages 33 through 53 of this Form 10-K.
 
     The following report and additional financial data should be read in
conjunction with the Company's financial statements:
 
     Independent Accountant's Report of Coopers & Lybrand L.L.P. dated January
     27, 1998 on the Company's financial statement schedule filed as a part
     hereof for the fiscal years ended December 31, 1997, 1996 and 1995.
 
     Schedule II -- Valuation and Qualifying Accounts for the fiscal years ended
December 31, 1997, 1996 and 1995.
 
     Schedules other than the one referred to above are omitted because they are
not required or the information is included in the financial statements or the
notes thereto.
 
                                       54
<PAGE>   56
 
     EXHIBITS.  Unless otherwise indicated, exhibits are incorporated by
reference to the exhibits filed with the Company's Registration Statement on
Form S-1 (Commission File No. 33-69442).
 
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                            DESCRIPTION
  -------                           -----------
  <C>       <S>
    2.02    Agreement and Plan of Distribution, dated as of May 24,
              1993, by and between AMAX Inc. and Alumax Inc.
    2.03    Tax Disaffiliation Agreement, dated as of May 24, 1993, by
              and between AMAX Inc. and Alumax Inc.
    2.04    Amendment No. 1 to the Agreement and Plan of Distribution,
              dated as of November 15, 1993, by and between AMAX Inc.
              and Alumax Inc.*
    3.01    Restated Certificate of Incorporation of the Company*
    3.02    Restated By-laws of Alumax Inc., as amended on September 5,
              1996, filed as Exhibit 3.01 to the Company's Quarterly
              Report on Form 10-Q for the quarterly period ended
              September 30, 1996 and incorporated herein by reference.
    4.01    Form of Common Stock Certificate
    4.02    Rights Agreement, dated as of February 22, 1996, between
              Alumax Inc. and Chemical Mellon Shareholder Services,
              L.L.C., as Rights Agent, including as Exhibit A the forms
              of Rights Certificate and Election to Exercise and as
              Exhibit B the form of Certificate of Designation and Terms
              of Participating Preferred Stock of the Company, filed as
              Exhibit 4 to the Company's Current Report on Form 8-K,
              dated February 22, 1996 and incorporated herein by
              reference.
    4.03    Credit Agreement, dated as of September 14, 1990, as amended
              as of November 13, 1990 and as further amended as of
              February 19, 1991, by and among Aluminerie Lauralco, Inc.,
              as Borrower, Canalco, Inc., as Continuing Guarantor, and
              Bank of Montreal and National Westminster Bank PLC, as
              Arrangers, Bank of Montreal, as Agent, and the Banks named
              therein
    4.04    Amended and Restated Credit Agreement, dated as of October
              9, 1997, among Alumax Inc., Royal Bank of Canada, as
              Agent, Arranger and Letter of Credit Issuer, Canadian
              Imperial Bank of Commerce, as Administrative Agent, and
              the Banks signatory thereto, filed as Exhibit 4.01 to the
              Company's Quarterly Report on Form 10-Q for the quarterly
              period ended September 30, 1997 and incorporated herein by
              reference
   Note:    No other long-term debt instrument issued by the Company
              exceeds 10% of the consolidated total assets of the
              Company and its subsidiaries. In accordance with paragraph
              4(iii) of Item 601 of Regulation S-K, the Company will
              furnish to the Commission upon request copies of long-term
              debt instruments and related agreements
   10.01    Form of Alumax Inc. Excess Benefit Plan***(-)
   10.02    1993 Long-Term Incentive Plan (as Amended and Restated and
              as Further Amended on October 3, 1996)***(-)
   10.03    Deferred Compensation Plan (as Amended on October 3,
              1996)***(-)
   10.04    1993 Annual Incentive Plan (as Amended and Restated and as
              Further Amended on October 3, 1996)***(-)
   10.05    Executive Separation Policy*(-)
   10.06    Non-Employee Directors Stock Compensation Plan (as Amended
              on October 3, 1996)***(-)
   10.07    Non-Employee Directors Deferred Compensation Plan (as
              Amended on October 3, 1996)***(-)
   10.08    Participation Agreement, dated as of November 25, 1997,
              among Alumax Mill Products, Inc., Alumax Inc., BMO Leasing
              (U.S.), Inc. and Bank of Montreal**
</TABLE>
 
                                       55
<PAGE>   57
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                            DESCRIPTION
  -------                           -----------
  <C>       <S>
   10.09    Master Lease, Deed of Trust and Security Agreement, dated as
              of November 25, 1997, among BMO Leasing (U.S.), Inc.,
              Alumax Mill Products, Inc. and Ward Williford, Esq.**
   10.10    Restated Sales Agreement, dated as of January 1, 1986, as
              amended and supplemented as of April 8, 1992 and April 9,
              1992, by and between Alcoa of Australia Limited and Alumax
              Inc. (Certain portions of this agreement have been deleted
              and filed separately with the Secretary of the Securities
              and Exchange Commission pursuant to a request for
              confidential treatment.)
   10.11    Power Sales Agreement, dated September 28, 1995, as amended,
              between Intalco Aluminum Corporation and Bonneville Power
              Administration (Certain portions of this agreement have
              been deleted and filed separately with the Secretary of
              the Securities and Exchange Commission pursuant to a
              request for confidential treatment.)****
   10.12    Power Sales Agreement, dated as of October 1, 1995, between
              British Columbia Power Exchange Corporation and Intalco
              Aluminum Corporation (Certain portions of this agreement
              have been deleted and filed separately with the Secretary
              of the Securities and Exchange Commission pursuant to a
              request for confidential treatment.)****
   10.13    Electric Service Agreement, dated as of November 11, 1994,
              between Eastalco Aluminum Company and The Potomac Edison
              Company, filed as Exhibit 10.02 to the Company's Quarterly
              Report on Form 10-Q for the quarterly period ended June
              30, 1997 and incorporated herein by reference
   10.14    Amendment No. 1 to Electric Service Agreement, dated October
              10, 1997, between Eastalco Aluminum Company and The
              Potomac Edison Company**
   10.15    Agreement, dated as of July 1, 1997, by and between the
              South Carolina Public Service Authority and Alumax of
              South Carolina, Inc., filed as Exhibit 10.01 to the
              Company's Quarterly Report on Form 10-Q for the quarterly
              period ended June 30, 1997 and incorporated herein by
              reference
   10.16    Electricity Contract, dated February 1, 1990, as amended on
              October 15, 1992, by and between Aluminerie Lauralco, Inc.
              and Hydro-Quebec (Certain portions of this agreement have
              been deleted and filed separately with the Secretary of
              the Securities and Exchange Commission pursuant to a
              request for confidential treatment.)
   10.17    Employment Agreement, as Amended and Restated as of December
              5, 1996, between Alumax Inc. and C. Allen Born***(-)
   10.18    Employment Agreement, dated as of December 4, 1997, between
              Alumax Inc. and Thomas G. Johnston**(-)
   10.19    Agreement, dated as of November 15, 1993, as amended as of
              February 3, 1994, among AMAX Inc., Alumax Inc. and Helen
              M. Feeney*(-)
   10.20    Agreement, dated as of March 10, 1994, between Alumax Inc.
              and Helen M. Feeney, amending the Agreement, dated as of
              November 15, 1993, as amended as of February 3,
              1994*****(-)
   10.21    Grantor Trust Agreement, dated as of April 1, 1997, between
              Alumax Inc. and The Chase Manhattan Bank**(-)
   10.22    Purchase Agreement, dated as of June 24, 1996, between
              Euramax International, Ltd. and Alumax Inc., filed as
              Exhibit 10.01 to the Company's Quarterly Report on Form
              10-Q for the quarterly period ended June 30, 1996 and
              incorporated herein by reference.
   10.23    Agreement, dated as of June 28, 1996, by and between Minas
              Penoles, S.A. de C.V. and The Fresnillo Company, filed as
              Exhibit 10.01 to the Company's Quarterly Report on Form
              10-Q for the quarterly period ended June 30, 1996 and
              incorporated herein by reference.
   11.01    Calculation of Earnings per Common Share**
</TABLE>
 
                                       56
<PAGE>   58
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                            DESCRIPTION
  -------                           -----------
  <C>       <S>
   21.01    Subsidiaries of the Company**
   23.01    Consent of Coopers & Lybrand L.L.P.**
   24.01    Power of Attorney**
   27.01    Financial Data Schedule** (For SEC use only)
</TABLE>
 
---------------
 
     * Previously filed as an exhibit to the Company's 1993 Annual Report on
       Form 10-K and incorporated herein by reference.
 
    ** Filed herewith.
 
   *** Previously filed as a exhibit to the Company's 1996 Annual Report on Form
       10-K and incorporated herein by reference.
 
  **** Previously filed as an exhibit to Amendment No. 1 to the Company's 1995
       Annual Report on Form 10-K/A and incorporated herein by reference.
 
 ***** Previously filed as an exhibit to Amendment No. 1 to the Company's 1993
       Annual Report on Form 10-K/A and incorporated herein by reference.
 
(-) Management contract or compensatory plan or arrangement required to be filed
    as an exhibit pursuant to Item 601 of Regulation S-K.
 
     REPORTS ON FORM 8-K.  During the quarter ended December 31, 1997, the
Company filed a Report on Form 8-K, dated October 1, 1997, reporting under Item
5 the United States Tax Court's decision in favor of the Internal Revenue
Service in a suit against Alumax regarding an alleged income tax deficiency.
 
                                       57
<PAGE>   59
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on February 6, 1998.
 
                                          Alumax Inc.
 
                                          By       /s/ HELEN M. FEENEY
                                            ------------------------------------
                                                      HELEN M. FEENEY
                                                Vice President and Secretary
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on February 6, 1998.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                              TITLE
                      ---------                                              -----
<C>                                                      <C>
 
                          *                              Chairman, Chief Executive Officer and Director
-----------------------------------------------------             (Principal Executive Officer)
                     ALLEN BORN
 
                          *                                                 Director
-----------------------------------------------------
                  J. DENNIS BONNEY
 
                          *                                                 Director
-----------------------------------------------------
                    HAROLD BROWN
 
                          *                                                 Director
-----------------------------------------------------
                    L. DON BROWN
 
                          *                                                 Director
-----------------------------------------------------
                PIERRE DES MARAIS II
 
                          *                                                 Director
-----------------------------------------------------
              JAMES C. HUNTINGTON, JR.
 
                          *                                                 Director
-----------------------------------------------------
                  W. LOEBER LANDAU
 
                          *                                                 Director
-----------------------------------------------------
                   PAUL W. MACAVOY
 
                          *                                                 Director
-----------------------------------------------------
                     ANNE WEXLER
 
                          *                                Vice President and Chief Financial Officer
-----------------------------------------------------             (Principal Financial Officer)
                MICHAEL T. VOLLKOMMER
 
                          *                                 Vice President and Controller (Principal
-----------------------------------------------------                  Accounting Officer)
                  KEVIN J. KRAKORA
 
*By             /s/ HELEN M. FEENEY
   --------------------------------------------------
                   HELEN M. FEENEY
            As Attorney-in-Fact for each
              of the persons indicated
</TABLE>
 
                                       58
<PAGE>   60
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders and Board of Directors of Alumax Inc.
 
     Our report dated January 27, 1998, on our audits of the financial
statements of Alumax Inc. is included on page 33 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed under Item 14 of this Form 10-K.
 
     In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
 
                                          COOPERS & LYBRAND L.L.P.
 
Atlanta, Georgia
January 27, 1998
 
                                       59
<PAGE>   61
 
                                  ALUMAX INC.
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (MILLIONS OF DOLLARS)
 
<TABLE>
<CAPTION>
                COLUMN A                    COLUMN B            COLUMN C              COLUMN D        COLUMN E
----------------------------------------  ------------   -----------------------   ---------------   ----------
                                                                ADDITIONS
                                                         -----------------------
                                                            (1)          (2)
                                           BALANCE AT    CHARGED TO   CHARGED TO                     BALANCE AT
                                           BEGINNING     COSTS AND      OTHER        DEDUCTIONS        END OF
              DESCRIPTION                  OF PERIOD      EXPENSES     EXPENSES    FROM RESERVE(A)     PERIOD
              -----------                 ------------   ----------   ----------   ---------------   ----------
<S>                                       <C>            <C>          <C>          <C>               <C>
Year Ended December 31, 1997
  Reserves deducted from assets
     Accounts receivable, trade.........     $16.6          $0.9        $  --          $ (4.3)         $13.2
Year Ended December 31, 1996
  Reserves deducted from assets
     Accounts receivable, trade.........     $17.7          $5.2        $  --          $ (6.3)         $16.6
Year Ended December 31, 1995
  Reserves deducted from assets
     Deferred income taxes..............     $13.4          $ --        $  --          $(13.4)         $  --
     Accounts receivable, trade.........     $20.1          $2.7        $  --          $ (5.1)         $17.7
</TABLE>
 
---------------
 
(a) 1996 amount includes $4.1 related to write-offs, net of recoveries, and $2.2
    related to divestitures, net of acquisitions, which occurred in 1996.
 
                                       60
<PAGE>   62
 
                                 EXHIBIT INDEX
 
     Unless otherwise indicated, exhibits are incorporated by reference to
exhibits filed with the Company's Registration Statement on Form S-1 (Commission
File No. 33-69442).
 
<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                            DESCRIPTION
    -------                           -----------
    <C>       <S>
      2.02    Agreement and Plan of Distribution, dated as of May 24,
                1993, by and between AMAX Inc. and Alumax Inc.
      2.03    Tax Disaffiliation Agreement, dated as of May 24, 1993, by
                and between AMAX Inc. and Alumax Inc.
      2.04    Amendment No. 1 to the Agreement and Plan of Distribution,
                dated as of November 15, 1993, by and between AMAX Inc.
                and Alumax Inc.*
      3.01    Restated Certificate of Incorporation of the Company*
      3.02    Restated By-laws of Alumax Inc., as amended on September 5,
                1996, filed as Exhibit 3.01 to the Company's Quarterly
                Report on Form 10-Q for the quarterly period ended
                September 30, 1996 and incorporated herein by reference
      4.01    Form of Common Stock Certificate
      4.02    Rights Agreement, dated as of February 22, 1996, between
                Alumax Inc. and Chemical Mellon Shareholder Services,
                L.L.C., as Rights Agent, including as Exhibit A the forms
                of Rights Certificate and Election to Exercise and as
                Exhibit B the form of Certificate of Designation and Terms
                of Participating Preferred Stock of the Company, filed as
                Exhibit 4 to the Company's Current Report on Form 8-K,
                dated February 22, 1996, and incorporated herein by
                reference
      4.03    Credit Agreement, dated as of September 14, 1990, as amended
                as of November 13, 1990 and as further amended as of
                February 19, 1991, by and among Aluminerie Lauralco, Inc.,
                as Borrower, Canalco, Inc., as Continuing Guarantor, and
                Bank of Montreal and National Westminster Bank PLC, as
                Arrangers, Bank of Montreal, as Agent, and the Banks named
                therein
      4.04    Amended and Restated Credit Agreement, dated as of October
                9, 1997 among Alumax Inc., Royal Bank of Canada, as Agent,
                Arranger And Letter of Credit Issuer, Canadian Imperial
                Bank of Commerce, as Administrative Agent, and the Banks
                signatory thereto, filed as Exhibit 4.01 to the Company's
                Quarterly Report on Form 10-Q for the quarterly period
                ended September 30, 1997 and incorporated herein by
                reference
     Note:    No other long-term debt instrument issued by the Company
                Exceeds 10% of the consolidated total assets of the
                Company and its subsidiaries. In accordance with paragraph
                4(iii) of Item 601 of Regulation S-K, the Company will
                furnish to the Commission upon request copies of long-term
                debt instruments and related agreements
     10.01    Form of Alumax Inc. Excess Benefit Plan***(-)
     10.02    1993 Long-Term Incentive Plan (as Amended and Restated and
                as Further Amended on October 3, 1996)***(-)
     10.03    Deferred Compensation Plan (as Amended on October 3,
                1996)***(-)
     10.04    1993 Annual Incentive Plan (as Amended and Restated and as
                Further Amended on October 3, 1996)***(-)
     10.05    Executive Separation Policy*(-)
     10.06    Non-Employee Directors Stock Compensation Plan (as Amended
                on October 3, 1996)***(-)
     10.07    Non-Employee Directors Deferred Compensation Plan (as
                Amended on October 3, 1996)***(-)
     10.08    Participation Agreement, dated as of November 25, 1997,
                among Alumax Mill Products, Inc., Alumax Inc., BMO Leasing
                (U.S.), Inc. and Bank of Montreal**
</TABLE>
<PAGE>   63
<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                            DESCRIPTION
    -------                           -----------
    <C>       <S>
     10.09    Master Lease, Deed of Trust and Security Agreement, dated as
                of November 25, 1997, among BMO Leasing (U.S.), Inc.,
                Alumax Mill Products, Inc. and Ward Williford, Esq.**
     10.10    Restated Sales Agreement, dated as of January 1, 1986, as
                Amended and supplemented as of April 8, 1992 and April 9,
                1992, by and between Alcoa of Australia Limited and Alumax
                Inc. (Certain portions of this agreement have been deleted
                and filed separately with the Secretary of the Securities
                and Exchange Commission pursuant to a request for
                confidential treatment.)
     10.11    Power Sales Agreement, dated September 28, 1995, as amended,
                Between Intalco Aluminum Corporation and Bonneville Power
                Administration (Certain portions of this agreement have
                been deleted and filed separately with the Secretary of
                the Securities and Exchange Commission pursuant to a
                request for confidential treatment.)****
     10.12    Power Sales Agreement, dated as of October 1, 1995, between
                British Columbia Power Exchange Corporation and Intalco
                Aluminum Corporation (Certain portions of this agreement
                have been deleted and filed separately with the Secretary
                of the Securities and Exchange Commission pursuant to a
                request for confidential treatment.)****
     10.13    Electric Service Agreement, dated as of November 11, 1994,
                between Eastalco Aluminum Company and The Potomac Edison
                Company, filed as Exhibit 10.02 to the Company's Quarterly
                Report on Form 10-Q for the quarterly period ended June
                30, 1997 and incorporated herein by reference
     10.14    Amendment No. 1 to Electric Service Agreement, dated October
                10, 1997, between The Potomac Edison Company and Eastalco
                Aluminum Company**
     10.15    Agreement, dated as of July 1, 1997, by and between the
                South Carolina Public Service Authority and Alumax of
                South Carolina, Inc., filed as Exhibit 10.01 to the
                Company's Quarterly Report on Form 10-Q for the quarterly
                period ended June 30, 1997 and incorporated herein by
                reference.
     10.16    Electricity Contract, dated February 1, 1990, as amended on
                October 15, 1992, by and between Aluminerie Lauralco, Inc.
                and Hydro-Quebec (Certain portions of this agreement have
                been deleted and filed separately with the Secretary of
                the Securities and Exchange Commission pursuant to a
                request for confidential treatment.)
     10.17    Employment Agreement, As Amended and Restated as of December
                5, 1996, between Alumax Inc. and C. Allen Born***(-)
     10.18    Employment Agreement, dated as of December 4, 1997, between
                Alumax Inc. and Thomas G. Johnston**(-)
     10.19    Agreement, dated as of November 15, 1993, as amended as of
                February 3, 1994, among AMAX Inc., Alumax Inc. and Helen
                M. Feeney*(-)
     10.20    Agreement, dated as of March 10, 1994, between Alumax Inc.
                and Helen M. Feeney, amending the Agreement, dated as of
                November 15, 1993, as amended as of February 3,
                1994*****(-)
     10.21    Grantor Trust Agreement, dated as of April 1, 1997, between
                Alumax Inc. and The Chase Manhattan Bank**(-)
     10.22    Purchase Agreement, dated as of June 24, 1996, between
                Euramax International, Ltd. and Alumax Inc., filed as
                Exhibit 10.01 to the Company's Quarterly Report on Form
                10-Q for the quarterly period ended June 30, 1996 and
                incorporated herein by reference.
     10.23    Agreement, dated as of June 28, 1996, by and between Minas
                Penoles, S.A. de C.V. and The Fresnillo Company, filed as
                Exhibit 10.01 to the Company's Quarterly Report on Form
                10-Q for the quarterly period ended June 30, 1996 and
                incorporated herein by reference.
</TABLE>
<PAGE>   64
<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                            DESCRIPTION
    -------                           -----------
    <C>       <S>
     11.01    Calculation of Earnings per Common Share**
     21.01    Subsidiaries of the Company**
     23.01    Consent of Coopers & Lybrand L.L.P.**
     24.01    Power of Attorney**
     27.01    Financial Data Schedule** (For SEC use only)
</TABLE>
 
---------------
 
  * Previously filed as an exhibit to the Company's 1993 Annual Report on Form
    10-K and incorporated herein by reference.
 
     ** Filed herewith.
 
   *** Previously filed as an exhibit to the Company's 1996 Annual Report on
       Form 10-K and incorporated herein by reference.
 
  **** Previously filed as an exhibit to Amendment No. 1 to the Company's 1995
       Annual Report on Form 10-K/A and incorporated herein by reference.
 
 ***** Previously filed as an exhibit to Amendment No. 1 to the Company's 1993
       Annual Report on Form 10-K/A and incorporated herein by reference.
 
(-) Management contract or compensatory plan or arrangement required to be filed
    as an exhibit pursuant to Item 601 of Regulation S-K.