As filed with the Securities and Exchange Commission on September 26, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-------------------
Date of Report (Date of earliest event reported) -
September 20, 1996
Commonwealth Aluminum Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-25642 13-3245741
- --------------------------------------------------------------------------------
(State of Incorporation) (Commission file number) (IRS employer
identification no.)
1200 Meidinger Tower, Louisville, Kentucky 40202
- --------------------------------------------------------------------------------
(Address, including zip code, of principal executive office)
(502) 589-8100
- --------------------------------------------------------------------------------
(Registrant's telephone no., including area code)
Item 1. Not Applicable
Item 2. Acquisition or Disposition of Assets
On September 20, 1996, Commonwealth Aluminum Corporation ("Commonwealth")
completed its previously announced acquisition via a cash tender offer for
$20.50 per share of common stock of CasTech Aluminum Group Inc. ("CasTech") as
described in the press release filed herewith as Exhibit 99 and incorporated
herein by reference. The press release includes forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to future earnings and operations which are subject to significant risks
and uncertainties relating to, among other things, aluminum prices and
cyclicality, uncertainties inherent in the integration of CasTech's operations
with those of Commonwealth's increased financial leverage and competition in the
markets for aluminum sheet products. Also on September 20, 1996 Commonwealth's
wholly owned subsidiary, CALC Corporation, merged with and into CasTech pursuant
to the Agreement and Plan of Merger, dated as of August 19, 1996, among
Commonwealth, CALC Corporation and CasTech, all remaining shares of CasTech
common stock were converted into the right to receive $20.50 per share (subject
to the right of holders who comply with applicable procedures under the Delaware
General Corporation Law to exercise the right to receive a judically determined
appraised value for their shares of CasTech common stock) and CasTech became a
wholly owned subsidiary of Commonwealth.
Items 3-6. Not Applicable
Items 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Financial Statements of Business Acquired
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
CasTech Aluminum Group Inc.
We have audited the accompanying consolidated balance sheets of CasTech
Aluminum Group Inc. and subsidiaries as of March 31, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended March 31, 1996. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CasTech Aluminum Group Inc. and subsidiaries at March 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Akron, Ohio
May 10, 1996
CASTECH ALUMINUM GROUP INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31
--------
1996 1995
---- ----
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 190 $ 359
Accounts receivable (Note 1)............................................ 57,802 73,641
Inventories (Note 3).................................................... 51,377 39,288
Prepaid expenses and other current assets............................... 4,454 5,030
----------- -----------
Total current assets............................................................ 113,823 118,318
Property, plant and equipment (Note 4).......................................... 74,294 71,779
Other long-term assets:
Loan fees .............................................................. 1,211 1,397
Goodwill (Note 1)....................................................... 22,082 22,803
Other................................................................... 1,874 1,417
----------- -----------
25,167 25,617
----------- -----------
Total assets.................................................................... $ 213,284 $ 215,714
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 34,041 $ 37,334
Accrued liabilities (Note 11)........................................... 9,774 11,911
Income taxes payable.................................................... 1,439 4,339
Current portion of long-term debt (Note 6).............................. 6,270 5,237
----------- -----------
Total current liabilities....................................................... 51,524 58,821
Long-term debt, less current portion (Note 6)................................... 39,500 58,518
Other non-current liabilities (Note 11)......................................... 2,364 1,396
Stockholders' equity:
Common stock, $.01 par value, 25,000 shares authorized, 12,943
and 12,920 shares issued and outstanding at
March 31, 1996 and 1995, respectively................................ 129 129
Paid in capital in excess of par value.................................. 136,445 136,202
Deficit................................................................. (16,678) (39,352)
----------- -----------
Total stockholders' equity...................................................... 119,896 96,979
----------- -----------
Total liabilities and stockholders' equity...................................... $ 213,284 $ 215,714
=========== ===========
See accompanying notes
CASTECH ALUMINUM GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended March 31
-------------------
1996 1995 1994
---- ---- ----
Net sales................................................ $ 400,449 $ 403,001 $ 262,793
Cost of goods sold....................................... 347,467 348,628 221,411
------------ ---------- ---------
Gross profit............................................. 52,982 54,373 41,382
Selling, general and administrative expense.............. 20,586 20,441 18,805
Other (income) expense................................... (708) 543 91
------------ ---------- ---------
Operating income......................................... 33,104 33,389 22,486
Interest expense......................................... 3,474 7,744 10,231
------------ ---------- ---------
Income before income taxes............................... 29,630 25,645 12,255
Income tax expense (Note 8).............................. 6,956 2,532 1,550
------------ ---------- ---------
Income before extraordinary gain......................... 22,674 23,113 10,705
Extraordinary gain (Note 6).............................. - 2,534 -
------------ ---------- ---------
Net income............................................... $ 22,674 $ 25,647 $ 10,705
============ ========== =========
Earnings per share (Note 1):
Income before extraordinary gain ................... $ 1.70 $ 2.10 $ 1.22
Extraordinary gain.................................. - .23 -
------------ ---------- ---------
Net income........................................ $ 1.70 $ 2.33 $ 1.22
============ ========== =========
See accompanying notes
CASTECH ALUMINUM GROUP INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
Capital In
Common Excess of
Stock Par Value Deficit Total
----- --------- ------- -----
Balance at April 1, 1993................................. $ 13 $ 82,651 $ (75,704) $ 6,960
Net income............................................... - - 10,705 10,705
Balance at March 31, 1994................................ 13 82,651 (64,999) 17,665
Effect of 7.25 for 1 stock split......................... 75 (75) - -
Issuance of 4,600 shares of Common Stock,
net of related expenses.............................. 46 60,208 - 60,254
Repurchase of Common Stock............................... (5) (6,582) - (6,587)
Net income............................................... - - 25,647 25,647
------- --------- ----------- ---------
Balance at March 31, 1995................................ 129 136,202 (39,352) 96,979
Exercise of stock options (Note 7)...................... - 243 - 243
Net income............................................... - - 22,674 22,674
------- --------- ----------- ---------
Balance at March 31, 1996................................ $ 129 $ 136,445 $ (16,678) $ 119,896
======= ========= =========== =========
See accompanying notes
CASTECH ALUMINUM GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended March 31
-----------------------------------------------
1996 1995 1994
---- ---- ----
OPERATING ACTIVITIES
Net income................................................. $ 22,674 $ 25,647 $ 10,705
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization......................... 8,598 8,159 7,914
Deferred income taxes (benefit)....................... 1,716 (2,300) -
(Gain) loss on sale of assets......................... (18) 160 (218)
Extraordinary gain.................................... - (2,534) -
Changes in operating assets and liabilities:
Accounts receivable................................ 15,839 (26,282) (5,699)
Inventories........................................ (12,089) (888) (1,565)
Accounts payable................................... (3,293) 11,557 2,452
Other liabilities and other assets................. (5,764) (2,290) (1,825)
----------- ---------- ----------
Net cash provided by operating
activities............................................ 27,663 11,229 11,764
INVESTING ACTIVITIES
Purchase of property, plant and equipment.................. (10,361) (6,315) (4,381)
Net receipts on sales of assets............................ 271 - 333
----------- ---------- ---------
Net cash used by investing
activities............................................ (10,090) (6,315) (4,048)
FINANCING ACTIVITIES
Net change in notes payable................................ - - (1,800)
Proceeds from long-term borrowings......................... 17,000 80,500 11,952
Principal payments on long-term debt....................... (34,985) (145,985) (15,555)
Net proceeds from issuance of stock ....................... 243 60,254 -
Stock repurchase........................................... - (2,526) -
----------- ----------- ---------
Net cash used by financing
activities............................................ (17,742) (7,757) (5,403)
(Decrease)increase in cash and cash
equivalents........................................... (169) (2,843) 2,313
Cash and cash equivalents at beginning of year............. 359 3,202 889
----------- ---------- ---------
Cash and cash equivalents at end of year................... $ 190 $ 359 $ 3,202
=========== ========== =========
See accompanying notes
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
CasTech Aluminum Group Inc. ("CasTech") operates principally in the
United States in one business segment. CasTech is a manufacturer of continuous
cast aluminum sheet and flexible electrical conduit and cable products made
principally from recycled aluminum. A significant percentage of CasTech's sales
are made to customers operating in the domestic building and construction market
and the domestic commercial renovation market.
The operations of CasTech are conducted principally through two
divisions: (i) the Mill Products Division, a subsidiary, which manufactures and
markets continuous cast aluminum sheet products under the trade name "Barmet
Aluminum Corporation" ("Barmet"), and (ii) the Electrical Products Division, an
operating division, which produces and distributes flexible conduit and
pre-wired armored cable under the trade name "Alflex."
Principles of Consolidation
The consolidated financial statements include the accounts of CasTech
and its wholly owned subsidiaries. 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 affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Such estimates and assumptions also affect the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Concentrations of Credit Risk
Financial instruments which potentially subject CasTech to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. CasTech places its cash and temporary cash investments
with high credit quality institutions. At times, such investments may be in
excess of the FDIC insurance limit. Concentrations of credit risk with respect
to trade receivables are limited due to the large number of customers comprising
CasTech's customer base, and their dispersion across many different geographical
regions. CasTech routinely assesses the financial strength of its customers and
requires collateral such as letters of credit in certain circumstances.
Cash and Cash Equivalents
CasTech considers highly liquid investments with a maturity of three
months or less at the acquisition date to be cash equivalents. The carrying
amount of cash and cash equivalents approximates their fair value.
Accounts Receivable
Accounts receivable are net of an allowance of $1.0 million and $1.4
million at March 31, 1996 and 1995, respectively.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Inventories
Inventories are stated at the lower of cost or market. The methods of
accounting for inventories are described in Note 3.
Long-Lived Assets
Property, plant and equipment is recorded at cost. Depreciation is
computed by the straight-line method over the estimated useful lives of the
assets.
Goodwill, the excess of acquisition cost over the fair value of the net
assets of the Electrical Products Division, is amortized by the straight-line
method over forty years. Accumulated amortization was $6.7 million and $6.0
million at March 31, 1996 and 1995, respectively.
Impairment of long-lived assets is recognized when events or changes in
circumstances indicate that the carrying amount of the asset, or related group
of assets, may not be recoverable. Measurement of the amount of impairment may
be based on appraisal, market values of similar assets or estimated undiscounted
future cash flows resulting from use and ultimate disposition of the assets.
Income Taxes
Income taxes are provided based on earnings reported for financial
statement purposes. The provision for income taxes differs from the amount
currently payable because of timing differences in the recognition of certain
income and expense items for financial reporting and tax reporting purposes.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Stock Compensation
CasTech grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. CasTech accounts for stock option grants in accordance with APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and, accordingly, recognizes
no compensation expense for the stock option grants.
Earnings Per Share
Earnings per share is based on the weighted average number of shares of
Common Stock and Common Stock equivalents (stock options) outstanding during
each year. Weighted average shares outstanding were 13,327,402, 11,016,252, and
8,774,015 for fiscal 1996, 1995 and 1994, respectively.
Recently Issued Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." CasTech intends to adopt the standard during fiscal
1997 and elect the disclosure method of reporting.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." CasTech intends to adopt this standard during the
first quarter of fiscal 1997. CasTech does not expect the adoption of the
standard to have a material impact on the financial statements for fiscal 1997.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUPPLEMENTAL CASH FLOW INFORMATION
Selected cash payments were as follows:
Year Ended March 31
---------------------------------
1996 1995 1994
---- ---- ----
(in thousands)
Income taxes...................................................... $ 8,140 $ 2,382 $ 367
Interest.......................................................... 3,982 7,445 8,221
3. INVENTORIES
Inventories consist of the following:
March 31
----------------------
1996 1995
---- ----
(in thousands)
Raw materials................................................................. $ 11,120 $ 12,403
Work in process............................................................... 21,178 16,537
Finished goods................................................................ 22,578 21,247
--------- ---------
54,876 50,187
LIFO reserve.................................................................. (3,499) (10,899)
---------- ----------
$ 51,377 $ 39,288
========= =========
The values of inventories in the consolidated balance sheets are based on the
following accounting methods:
March 31
----------------------
1996 1995
---- ----
(in thousands)
LIFO.......................................................................... $ 26,493 $ 16,278
FIFO.......................................................................... 6,730 4,722
Moving average................................................................ 18,154 18,288
--------- ---------
$ 51,377 $ 39,288
========= =========
During fiscal 1995, inventory quantities were reduced, resulting in
liquidation of certain LIFO inventory layers at costs which were lower than the
costs of current purchases. The effect of the reductions, recorded in the fourth
quarter, was to decrease cost of goods sold by approximately $1.9 million and to
increase net earnings by $1.5 million or $0.14 per share.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and equipment
is as follows:
March 31
------------------------------
1996 1995
---- ----
(in thousands)
Land.................................................................. $ 11,008 $ 11,028
Buildings and improvements............................................ 13,535 11,841
Machinery and equipment............................................... 97,899 88,188
Construction in progress.............................................. 1,596 4,202
----------- -----------
124,038 115,259
Less accumulated depreciation......................................... 49,744 43,480
----------- -----------
$ 74,294 $ 71,779
=========== ===========
5. FINANCIAL INSTRUMENTS
CasTech uses futures and option contracts to hedge a portion of its
exposure to market risks resulting from fluctuations in metal prices. In
determining its strategy with respect to such instruments, CasTech gives
consideration to market conditions, anticipated sales and purchase transactions
and other factors that may affect CasTech's level of risk. Metal price contracts
are obtained to hedge firm priced sales and anticipated purchase transactions
within one year of the contract date. Realized gains and losses on futures and
option contracts are deferred and recognized as a component of the related
transactions. The counterparties to these contracts are major brokerage houses
and management believes that losses related to credit risk are remote. CasTech
had no net realized gains or losses related to aluminum futures contracts
deferred at March 31, 1996. In addition, CasTech had no open aluminum futures
contracts as of March 31, 1996.
CasTech also uses interest rate cap, floor, and swap agreements to
manage interest rate risk of its floating rate debt portfolio. The total
notional amount of the interest rate agreements is limited to the amount of debt
outstanding. Fair value of the instruments is based on estimated settlement
costs. Realized gains and losses on interest rate agreements are deferred and
recognized as a component of interest expense over the term of the agreements.
At March 31, 1996, the carrying value of interest rate swaps and floors
approximates fair value. The counterparties to interest rate contracts are major
commercial banks and management believes that losses related to credit risk are
remote.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. FINANCING ARRANGEMENTS
March 31
---------------------------
1996 1995
---- ----
(in thousands)
Revolving notes payable................... $ 12,000 $ 26,000
Term notes payable........................ 33,750 37,500
Other..................................... 20 255
--------- -----------
45,770 63,755
Less current maturities 6,270 5,237
--------- -----------
$ 39,500 $ 58,518
========= ===========
On October 20, 1994, CasTech repaid $121.8 million representing all
outstanding amounts under its previous credit agreements with The Prudential
Insurance Company of America ("Prudential"), and $4.2 million related to a
separate note payable. The debt was satisfied with proceeds from CasTech's
initial public offering and borrowings of $69.0 million under a credit agreement
with a syndicate of banks and other financial institutions led by Chemical Bank
(the "Credit Agreement"). The Credit Agreement originally consisted of a $40.0
million term loan and a revolving credit facility with an aggregate commitment
of $50.0 million. On July 27, 1995, the Credit Agreement was amended to provide
for reduced interest rates and to increase borrowings available under the
revolving credit facility by $10 million.
The Credit Agreement is secured by a pledge of all of the outstanding
stock of its subsidiaries and substantially all of the assets of CasTech.
The term loan is repayable over a six-year period in quarterly
installments. CasTech is required to make prepayments in the event of certain
asset sales.
CasTech's ability to borrow under the revolving credit facility is
based on the sum of stated percentages of its eligible accounts receivable and
eligible inventory. Up to $10.0 million of the revolving credit facility is
available for standby and commercial letters of credit. The revolving credit
facility commitment terminates on October 20, 2000.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Borrowings under the Credit Agreement bear interest at a base rate per
annum, at CasTech's option, equal to a Reference Rate (as defined) or the rate
at which Eurodollar deposits for one, two, three or six months (as selected by
CasTech) are offered by Chemical Bank in the interbank Eurodollar market. Based
on a quarterly financial test, a range of .50% to 1.00% is added to the selected
base rate to obtain the rate per annum paid by CasTech for any period. In
addition, CasTech must pay to the lenders under the Credit Agreement, a
commitment fee ranging from .25% to .375% on the unused portion of the revolving
credit facility. The commitment fee percentage is determined based on the
results of a quarterly financial test. The blended interest rate on outstanding
borrowings of the Credit Agreement was approximately 6.4% at March 31, 1996.
CasTech must pay an administration fee to Chemical Bank in the amount
of $50,000 per annum. In addition, CasTech must pay a commission on all
outstanding letters of credit of 1.125% per annum on the face amount of each
letter of credit. At March 31, 1996, no letters of credit were outstanding under
the revolving credit agreement.
The Credit Agreement includes covenants relating to working capital,
net worth, interest coverage and capital expenditures. In addition, there are
restrictions on the payment of dividends; however, CasTech has never declared or
paid any dividends on its Common Stock and does not expect to pay dividends for
the foreseeable future. CasTech was in compliance with all covenants through
March 31, 1996.
At March 31, 1996, the interest rates on all amounts outstanding under
the term loan and revolving credit facilities are scheduled to adjust in two
months or less. Accordingly, the face amount of the term loan and revolving
credit facilities approximates fair value at March 31, 1996.
Upon repayment of all outstanding amounts under the previous credit
agreements with Prudential in fiscal 1995, all warrants to purchase Common Stock
of CasTech held by Prudential were surrendered to and canceled by CasTech. In
addition, upon satisfaction of the conditions thereto, CasTech exercised its
option to purchase from Prudential 453,850 shares of CasTech's Common Stock
owned by Prudential at a price of $1.034 per share. As a result of the repayment
of the credit agreements with Prudential, CasTech recorded an extraordinary gain
of $2.5 million in fiscal 1995.
Future aggregate maturities of long-term debt at March 31, 1996 are as
follows:
(IN THOUSANDS)
1997...................................... $ 6,270
1998...................................... 7,813
1999...................................... 8,750
2000...................................... 8,750
2001...................................... 14,187
---------
$ 45,770
=========
During fiscal 1996, CasTech exercised its option to call the
pollution control bonds which had been extinguished in June 1987 through an
"in-substance defeasance". After retirement of the bonds, CasTech closed the
trust that was used for satisfying the scheduled principal and interest payments
on the bonds.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. COMMON STOCK
On October 13, 1994, CasTech issued 4,600,000 common shares in
connection with an initial public offering. Net proceeds to CasTech before
deducting expenses of approximately $1.9 million were $62.2 million.
CasTech has a Stock Option Plan that allows the granting of
nonqualified stock options or incentive stock options to key employees of
CasTech. Up to 1,450,000 shares of Common Stock are available under the Stock
Option Plan. An option may be granted on such terms and conditions as the
Compensation Committee of the Board of Directors may approve provided that the
exercise price per share of Common Stock of a nonqualified stock option or an
incentive stock option shall not be less than the fair market value of a share
of Common Stock on the date the option is granted. Generally, all stock options
granted shall terminate following termination of employment or certain other
events. Unless the Compensation Committee otherwise provides, options shall
become exercisable as to 20% of the shares covered thereby on the date of grant
and as to an additional 20% of such shares on each of the first four
anniversaries of the date of grant. The options will terminate as to any and all
shares of Common Stock for which the option has not yet been exercised on the
tenth anniversary of the date of grant. The following table contains information
concerning the options:
Number of Securities Exercise Price
Underlying Options ($/Share)
------------------ ---------
Outstanding at April 1, 1994 1,154,561 $10.34
Granted 110,000 14.50
Outstanding at March 31, 1995 1,264,561 10.34 to 14.50
Granted 7,500 14.50
Exercised (22,500) 10.34 to 14.50
Canceled (5,000) 14.50
Outstanding at March 31, 1996 1,244,561 10.34 to 14.50
At March 31, 1996 and 1995, 780,481 and 581,689 options were exercisable,
respectively, at prices ranging from $10.34 to $14.50 per share.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. INCOME TAXES
Significant components of the income tax expense (benefit) from
continuing operations consist of the following:
March 31
-------------------------------------
1996 1995 1994
---- ---- ----
(in thousands)
Federal:
Current expense............................... $ 4,400 $ 4,000 $ 1,450
Deferred expense (benefit).................... 1,716 (2,300) -
State - current expense................................ 840 832 100
----------- --------- --------
$ 6,956 $ 2,532 $ 1,550
=========== ========= ========
The provision for income taxes from continuing operations differs from
the amount of income tax determined by applying the applicable U.S. statutory
federal income tax rate to pretax income from continuing operations as a result
of the following differences:
March 31
-------------------------------------
1996 1995 1994
---- ---- ----
Federal statutory rate................................. 35.0% 35.0% 35.0%
Increase (decrease) in rates:
Alternative minimum tax....................... - - (15.0)
State taxes, net of federal benefit........... 1.8 2.1 .5
Change in valuation reserve................... (14.3) (27.7) (12.3)
Other......................................... 1.0 .5 4.4
-------- --------- -------
Effective rate................................ 23.5% 9.9% 12.6%
======= ========= ========
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Significant components of CasTech's deferred tax liabilities and assets are
as follows:
March 31
------------------------
1996 1995
---- ----
(in thousands)
Deferred tax assets:
Net operating loss carryforwards............ $ 1,000 $ 6,300
Tax credit carryforwards.................... 6,500 7,100
Environmental costs......................... 4,450 4,900
Other....................................... 2,100 3,800
---------- ---------
Total deferred tax assets................... 14,050 22,100
Deferred tax liabilities:
Tax over book depreciation.................. 12,100 13,200
Other....................................... 370 300
----------- ---------
Total deferred tax liabilities.............. 12,470 13,500
---------- ---------
Net deferred tax asset............................... 1,580 8,600
Valuation allowance for deferred tax assets. 1,000 6,300
---------- ---------
Net deferred taxes.......................... $ 580 $ 2,300
========== =========
CasTech generally does not recognize benefits on those deferred tax
assets which have expiration dates. Therefore, no benefit has been recognized as
of March 31, 1996 and 1995 for the net operating loss carryforwards. The
remaining deferred tax assets and liabilities approximately match each other in
terms of timing and, the net deferred assets at March 31, 1996 should be
realizable in the future given CasTech's recent operating history.
CasTech has approximately $5.8 million of alternative minimum tax
credit carryforwards which do not expire.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. RETIREMENT PLANS
CasTech has defined contribution benefit plans covering
substantially all salaried employees. Contributions to the plans are at the
discretion of the Board of Directors and cannot exceed 15% of the participants'
annual wages.
CasTech also contributes to union sponsored defined benefit
multi-employer pension plans for certain of its hourly employees. The Employee
Retirement Income Security Act of 1974, as amended by the Multi-Employers
Pension Plan Amendment Act of 1980, imposes certain liabilities upon employers
who are contributors to multi-employer plans in the event of the employers'
withdrawal from such a plan or upon a termination of such a plan. Management
does not intend to take any action that would subject CasTech to any such
liabilities. Expense from continuing operations related to all retirement plans
was $1.4 million, $1.5 million and $1.3 million for the years ended March 31,
1996, 1995 and 1994, respectively.
10. OPERATING LEASES
CasTech leases certain office and manufacturing facilities and
equipment under operating leases expiring through 1999. Certain of the
agreements contain renewal options and provide for minimum annual rentals plus
the payment of property taxes, insurance and normal maintenance. CasTech, in
the ordinary course of business, leases offices and warehouse space from a
stockholder. Rent expense pursuant to these lease agreements was $0.7 million,
$1.0 million and $1.0 million for each of the years ended March 31, 1996, 1995
and 1994, respectively. Rental expense from continuing operations under all
operating leases was $2.1 million, $1.8 million, and $1.8 million for the years
ended March 31, 1996, 1995 and 1994, respectively. Future minimum rental
payments for operating leases are $1.4 million, $0.7 million, $0.7 million, $0.5
million and $0.5 million for Fiscal 1997 through 2001, respectively, and $3.8
million in the aggregate for the duration of the operating leases.
11. CONTINGENCIES
CasTech's operations are subject to numerous laws and regulations
relating to the protection of human health and the environment, including, for
example, those relating to air and water pollution and solid waste disposal. The
Company believes its facilities are in substantial compliance with current laws
and regulations. The cost and administration of compliance with current laws and
regulations at CasTech's present facilities are not expected to have a
material adverse effect on CasTech's financial condition or results of
operations. CasTech does not have any material capital expenditures for
environmental control facilities planned for fiscal 1997.
CASTECH ALUMINUM GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Owners and operators of sites containing hazardous wastes, as well as
generators and transporters of hazardous wastes, are subject to broad liability
under various federal, state and local environmental laws and regulations,
including liability for clean up costs and damages associated with past waste
disposal activity. CasTech has been designated as a Potentially Responsible
Party ("PRP") by the EPA under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") at four federal Superfund
sites and is conducting remedial investigations at two of the sites for past
waste disposal activity associated with closed recycling facilities. At the two
other federal Superfund sites, CasTech is a minor contributor and expects to
resolve its liability for a nominal amount. CasTech is also under orders by
agencies in three states for environmental remediation at plants, one of which
is currently operating and two of which have been closed. CasTech had $5.1
million of environmental accruals remaining at March 31, 1996. CasTech
believes that any differences in the total future expenditures for all
environmental matters of which CasTech is aware, when compared to
environmental accrual estimates, will not have a material adverse effect on the
financial condition or results of operations of CasTech. It is not possible,
however, to predict the amount or timing of costs for future environmental
matters which may subsequently be determined. Although the outcome of any such
matters, to the extent they exceed any applicable reserves, could have a
material adverse effect on CasTech's results of operations for the
applicable period, CasTech has no reason to believe that such outcome will
have a material adverse effect on CasTech's financial condition or results
of operations.
Risks of environmental costs and liabilities are inherent in certain of
CasTech's operations, as is the case with other companies involved in the
aluminum industry, and there can be no assurance that significant costs and
liabilities will not be incurred by CasTech in the future. It is also possible
that other developments, such as increasingly strict environmental laws,
regulations and enforcement policies thereunder and claims for damages to
property or persons resulting from plant or waste emissions, could result in
substantial costs and liabilities to CasTech in the future. However, CasTech
does not believe that the ultimate outcome of all known environmental
liabilities will have a material adverse effect on CasTech's financial
condition, results of operations and liquidity.
Total environmental accruals are $5.1 million and $5.0 million at March
31, 1996 and 1995, respectively, of which $1.8 million and $1.1 million at March
31, 1996 and 1995, respectively, are included in the "other non-current
liabilities" section of the balance sheet.
CasTech is also party to various non-environmental legal
proceedings and administrative actions, all arising from the ordinary course of
business. Although it is impossible to predict the outcome of any legal
proceeding, CasTech believes that any liability that may finally be
determined with respect to such legal proceedings should not have a material
effect on CasTech's consolidated financial position or results of
operations.
SUPPLEMENTARY FINANCIAL INFORMATION
Selected unaudited quarterly financial data for the fiscal years 1996 and 1995
is summarized below:
(In thousands, except per share amounts) June 30 Sept. 30 Dec. 31 March 31
------- -------- ------- --------
1996
Sales $109,214 $102,814 $94,490 $ 93,931
Gross profit 15,554 13,792 12,065 11,571
Net income 6,836 6,494 5,310 4,034
Earnings per Common Share $ 0.51 $ 0.49 $ 0.40 $ 0.30
1995
Sales $ 89,136 $103,516 $98,269 $112,080
Gross profit 12,689 14,693 12,818 14,173
Income before extraordinary item 4,561 6,710 5,892 5,950
Net income (a) 4,561 6,710 8,426 5,950
Earnings per Common Share before extraordinary item $ 0.52 $ 0.76 $ 0.47 $ 0.45
Earnings per Common Share $ 0.52 $ 0.76 $ 0.66 $ 0.45
(a) An extraordinary credit of $2,534 was recognized in the third quarter as a
result of a gain on the extinguishment of debt.
CasTech Aluminum Group Inc.
Consolidated Balance Sheets
(in thousands, except per share data)
June 30, March 31,
1996 1996
---- ----
(unaudited)
Cash and cash equivalents $ 389 $ 190
Accounts receivable, net 72,176 57,802
Inventories 45,774 51,377
Prepaid expenses and supplies 5,434 4,454
--------- ---------
Total current assets 123,773 113,823
Property, plant and equipment, net 72,924 74,294
Other long-term assets:
Loan fees, net 1,139 1,211
Goodwill, net 21,902 22,082
Other long-term assets 1,061 1,874
--------- ---------
24,102 25,167
--------- ---------
Total assets $ 220,799 $ 213,284
========= =========
Accounts payable $ 32,329 $ 34,041
Accrued liabilities 10,364 9,774
Income taxes payable 4,057 1,439
Current portion of long-term debt 5,012 6,270
--------- ---------
Total current liabilities 51,762 51,524
Long-term debt, less current portion 42,750 39,500
Other long-term liabilities 2,256 2,364
Common stock, $.01 par value, 25,000 shares
authorized, 12,942 shares issued and outstanding
at June 30, 1996 and March 31, 1996, respectively 136,574 136,574
Deficit (12,543) (16,678)
--------- ---------
Total stockholders' equity 124,031 119,896
--------- ---------
Total liabilities and stockholders' equity $ 220,799 $ 213,284
========= =========
See accompanying notes.
CasTech Aluminum Group Inc.
Consolidated Statements of Income
(in thousands, except per share data)
Three months ended
June 30,
1996 1995
---- ----
(unaudited)
Net sales $ 107,602 $ 109,214
Cost of goods sold 94,962 93,660
--------- ---------
Gross profit 12,640 15,554
Selling and administrative expenses 5,155 5,644
Other income (65) (64)
--------- ---------
Operating income 7,550 9,974
Interest expense 770 1,194
--------- ---------
Income before income taxes 6,780 8,780
Income tax expense 2,644 1,944
--------- ---------
Net income $ 4,136 $ 6,836
========= =========
Earnings per share $ 0.31 $ 0.51
========= =========
See accompanying notes.
CasTech Aluminum Group Inc.
Consolidated Statements of Cash Flows
(in thousands)
Three months ended
June 30,
1996 1995
---- ----
(unaudited)
OPERATING ACTIVITIES
Net income $ 4,136 $ 6,836
Adjustments to reconcile net income
to net cash provided (used) by operating
activities:
Depreciation and amortization 2,567 2,214
Changes in operating assets and liabilities:
Accounts receivable (14,374) 4,478
Inventories 5,602 (9,424)
Accounts payable (1,711) 3,715
Other liabilities and other assets 2,931 (3,289)
-------- -------
Net cash (used) provided by operating activities (849) 4,530
INVESTING ACTIVITIES
Purchase of property, plant and equipment (944) (2,312)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 4,500 4,000
Principal payments on long-term debt (2,508) (6,447)
-------- -------
Net cash provided (used) by financing activities 1,992 (2,447)
-------- -------
Increase (decrease) in cash and cash equivalents 199 (229)
Cash and cash equivalents at beginning
of period 190 359
-------- -------
Cash and cash equivalents at end of period $ 389 $ 130
======== =======
See accompanying notes
CasTech Aluminum Group Inc.
Notes to Consolidated Financial Statements
June 30, 1996
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Results for the three month period ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 1997. The interim financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Report and with the consolidated
financial statements of CasTech and the notes thereto for the year ended March
31, 1996 included in CasTech's Form 10-K as filed with the Securities and
Exchange Commission.
2. INVENTORIES
Inventories consist of the following:
June 30, March 31,
1996 1996
---- ----
(in thousands)
Raw materials $ 14,178 $ 11,120
Work in process 15,723 21,178
Finished goods 20,414 22,578
---------- ----------
50,315 54,876
LIFO reserve (4,541) (3,499)
---------- ----------
$ 45,774 $ 51,377
========== ==========
3. FINANCIAL INSTRUMENTS
CasTech may enter into aluminum futures contracts to hedge its
exposure to price fluctuations on its anticipated raw material requirements
during a maximum nine month period and on fixed price sales contracts in its
mill products operations. Gains and losses on hedging contracts are deferred and
recognized in mill products operating expenses as part of the cost of raw
materials over the hedged period. There were no open futures contracts as of
June 30, 1996.
CasTech uses interest rate swap, cap and floor agreements to reduce the
impact of interest rate changes on future income. Approximately $20 million and
$8.2 million of CasTech's outstanding debt was subject to interest rate floor
and swap agreements, respectively, at June 30, 1996.
(b) Pro Forma Financial Information
Pursuant to the Agreement and Plan of Merger, dated as of August 19,
1996, among CasTech, Commonwealth and CALC Corporation ("CALC"), a wholly-owned
subsidiary of Commonwealth (the "Merger Agreement"), CALC commenced a tender
offer to purchase all of the outstanding shares of common stock of CasTech, par
value $0.01 per share (the "Shares"), for $20.50 per share in cash (the "Merger
Consideration"), net to the seller and without interest thereon (the "Offer").
The Offer expired at 12:00 midnight, New York City Time, on September 19, 1996.
On September 20, 1996, CALC accepted for payment all of the approximately
12,650,418 Shares, representing approximately 98% of the Shares, which were
validly tendered and not withdrawn. Also on September 20, 1996, CALC merged with
and into CasTech pursuant to the Merger Agreement, and following the completion
of the Offer all remaining Shares were converted into the right to receive the
Merger Consideration and CasTech became a wholly owned subsidiary of
Commonwealth (the "Merger").
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 1996 was prepared assuming the Merger had occurred on June 30,
1996. The Unaudited Pro Forma Consolidated Statements of Operations for the six
months ended June 30, 1996 and for the year ended December 31, 1995 were
prepared assuming the Merger had occurred on January 1, 1995. The Merger will be
accounted for using the purchase method of accounting. Under purchase
accounting, tangible and identifiable intangible assets acquired and liabilities
assumed are recorded at their respective fair values. The pro forma adjustments
are based on preliminary assumptions of the allocation of the purchase price and
are subject to substantial revision once appraisals, evaluations and other
studies of the fair value of CasTech's assets and liabilities are completed.
Actual purchase accounting adjustments may differ significantly from the pro
forma adjustments presented herein.
The unaudited pro forma consolidated financial statements are based
upon and should be read in conjunction with the historical consolidated
financial statements of Commonwealth, including the notes thereto, included in
the reports and documents filed by Commonwealth with the Securities and Exchange
Commission and the historical consolidated financial statements of CasTech,
including the notes thereto, included herein under Item 7(a). The unaudited pro
forma consolidated financial statements presented herein are based on certain
assumptions, are for informational purposes only and do not necessarily reflect
future results of operations and financial position or what the results of
operations or financial position would have been had such transactions occurred
at the beginning of the periods presented.
Commonwealth Aluminum Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1996
Commonwealth CasTech Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- --------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . $ 802 $389 $ $ 1,191
Accounts receivable. . . . . . . . . . . . . . . . 102,410 72,176 174,586
Inventories. . . . . . . . . . . . . . . . . . . . 106,067 45,774 6,000 (1) 157,841
Due from broker. . . . . . . . . . . . . . . . . . (2,316) - (2,316)
Prepayments and other current assets . . . . . . . 5,925 5,434 (418)(2) 10,941
-------- -------- ------- --------
Total current assets . . . . . . . . . . . . 212,888 123,773 5,582 342,243
Property, plant and equipment . . . . . . . . . . . . 185,669 72,924 25,000 (3) 283,593
Goodwill. . . . . . . . . . . . . . . . . . . . . . . - 21,902 (21,902)(4) 177,987
177,987 (5)
Other noncurrent assets . . . . . . . . . . . . . . . 3,737 2,200 (1,145)(6) 12,935
(1,157)(2)
9,300 (7)
-------- -------- -------- --------
Total assets . . . . . . . . . . . . . . . . $402,294 $220,799 $193,665 $816,758
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt. . . . . . . . . $ 6,862 $ 5,012 $ (6,874)(8) $ 5,000
Accounts payable . . . . . . . . . . . . . . . . . 36,408 32,329 68,737
Accrued liabilities. . . . . . . . . . . . . . . . 12,907 10,364 14,775 (9) 38,046
Income taxes payable . . . . . . . . . . . . . . . - 4,057 4,057
Deferred gain. . . . . . . . . . . . . . . . . . . (2,316) - (2,316)
-------- -------- -------- --------
Total current liabilities. . . . . . . . . . 53,861 51,762 7,901 113,524
Long-term debt . . . . . . . . . . . . . . . . . . 30,307 42,750 174,245 (8) 247,302
Senior subordinated notes. . . . . . . . . . . . . - - 125,000 (8) 125,000
Other long-term liabilities. . . . . . . . . . . . 3,492 2,256 5,748
Accrued pension benefits . . . . . . . . . . . . . 18,788 - 18,788
Deferred income taxes. . . . . . . . . . . . . . . - - 12,125 (10) 12,125
Accrued postretirement benefits. . . . . . . . . . 79,061 - 79,061
-------- -------- -------- --------
Total liabilities. . . . . . . . . . . . . . 185,509 96,768 319,271 601,548
Commitments and Contingencies
Stockholders' equity:
Common stock. . . . . . . . . . . . . . . . . . 102 129 (129)(11) 102
Other . . . . . . . . . . . . . . . . . . . . . 216,683 123,902 (123,902)(11) 215,108
(1,575)(2)
-------- -------- -------- --------
Total stockholders' equity . . . . . . . . . 216,785 124,031 (125,606) 215,210
-------- -------- -------- --------
Total liabilities and stockholders' equity . $402,294 $220,799 $193,665 $816,758
======== ======== ======== ========
(footnotes on following page)
<FN>
- ----------
(1) To record the revaluation of inventories acquired to estimated fair market
value.
(2) To eliminate the capitalized debt financing costs of Commonwealth, which
will be charged to earnings as a loss on early extinguishment of debt upon
completion of the Offer and the Merger.
(3) To record the revaluation of property, plant and equipment acquired to
estimated fair market value.
(4) To eliminate acquired goodwill of CasTech.
(5) To record the purchase price in excess of net tangible and identifiable
intangible assets acquired.
(6) To eliminate the acquired capitalized debt financing costs of CasTech.
(7) To record the estimated capitalized debt financing costs to be incurred in
connection with the borrowings to finance the Offer and the Merger.
(8) To record the incremental borrowings necessary to finance the remaining
portion of the Offer and the Merger and to refinance existing long-term
debt of Commonwealth and CasTech.
(9) To record estimated liabilities associated with the Offer and the Merger
including lease terminations, severance and other costs.
(10) To record deferred income taxes associated with the revaluation of
inventories, property, plant and equipment and accrued liabilities.
(11) To eliminate the acquired equity of CasTech.
</FN>
Commonwealth Aluminum Corporation
Unaudited Pro Forma Consolidated Statement of Operations(1)
Six-Month Period Ended June 30, 1996
Commonwealth CasTech Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- --------
(in thousands, except per share amounts)
Net sales . . . . . . . . . . . . . . . . . . . . . . $327,216 $201,533 $ $528,749
Cost of goods sold. . . . . . . . . . . . . . . . . . 308,535 177,321 992 (2) 486,848
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . . 18,681 24,212 (992) 41,901
Selling, general and administrative expenses. . . . . 12,200 10,656 (386)(3) 24,695
2,225 (2)
-------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . . 6,481 13,556 (2,831) 17,206
Other income (expense), net . . . . . . . . . . . . . (247) 309 132 (4) 194
Interest expense, net . . . . . . . . . . . . . . . . (1,122) (1,365) (14,395)(5) (16,882)
-------- -------- -------- --------
Income before income tax . . . . . . . . . . . . . 5,112 12,500 (17,094) 518
Provision for income taxes. . . . . . . . . . . . . . 617 4,329 (4,883)(6) 63
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . $ 4,495 $ 8,171 $(12,211) $ 455
======== ======== ======== ========
Weighted average common shares outstanding. . . . . . 10,196 10,196
======== ========
Earnings per common share . . . . . . . . . . . . . . $ .44 $ .04
======== ========
<FN>
- ----------
(1) Commonwealth's Historical Consolidated Statement of Operations for the year ended December 31, 1995 and Commonwealth's
Unaudited Historical Condensed Consolidated Statement of Operations for the six-month period ended June
30, 1996 were derived from amounts presented in Commonwealth's Form 10-K and Form 10-Q/A for the respective
periods. CasTech's Historical Consolidated Statement of Operations for the year ended March 31, 1996
and CasTech's Unaudited Historical Condensed Consolidated Statement of Operations for the six-month
period ended June 30, 1996 were derived from amounts presented in CasTech's Form 10-K and Form 10-Q (by
adding the amounts presented in CasTech's Form 10-Q for the three months ended June 30, 1996 to the
difference between the amounts presented in CasTech's Form 10-K for the year ended March 31, 1996 and
the amounts presented in CasTech's Form 10-Q for the nine-month period ended December 31, 1995). The
Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1995 was
prepared by combining Commonwealth's statement of operations for the year ended December 31, 1995 with CasTech's
statement of operations for the year ended March 31, 1996. The Unaudited Pro Forma Consolidated
Statement of Operations for the six-month period ended June 30, 1996 includes CasTech's Net sales and
Net income of approximately $93,000 and $4,000, respectively, for the period from January 1, 1996 to
March 31, 1996, which amounts have also been included in the Unaudited Pro Forma Consolidated Statement
of Operations for the year ended December 31, 1995.
(2) To record depreciation ($992) and amortization ($2,225) related to the revaluation of property, plant
and equipment and the excess of purchase price over net tangible and identifiable intangible assets
acquired. Acquired property, plant and equipment will be depreciated over approximately 12 years, the
estimated remaining useful life. The excess of purchase price over net assets acquired will be
amortized over 40 years.
(3) To eliminate the amortization of goodwill recorded by CasTech.
(4) To eliminate the amortization of CasTech's capitalized debt financing costs.
(5) To record the estimated incremental interest expense related to borrowings necessary to finance the
acquisition and to refinance the existing long-term debt of Commonwealth and CasTech, including amortization of
capitalized debt financing costs. The borrowings have an assumed interest rate as follows:
Long-term debt............................ $252,302 7.50%
Senior subordinated notes................. 125,000 10.75%
--------
$377,302
========
(6) The pro forma provision for income taxes of $63 was calculated by applying the Commonwealth 1996 historical
effective tax rate of 12% to Commonwealth's pro forma combined income before income tax of $518. The
effective tax rate differs from the statutory rate due to the existence of historical net operating
loss carryforwards, valuation allowances related to net deferred tax assets, Internal Revenue Code
Section 382 net operating loss limitations and other non-deductible expenses. Commonwealth anticipates
that its effective tax rate will be higher in the future. If the pro forma provision for income taxes
had been calculated using a combined federal and state income tax rate of 40%, Commonwealth's pro forma
combined provision for income taxes would be $207, net income would be $311 and earnings per common
share would be $.03 per share.
</FN>
Commonwealth Aluminum Corporation
Unaudited Pro Forma Consolidated Statement of Operations(1)
Year Ended December 31, 1995
Year Ended Year Ended
December 31, March 31,
1995 1996
Commonwealth CasTech Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- --------
(in thousands, except per share amounts)
Net sales . . . . . . . . . . . . . . . . . . . . . . $ 671,501 $400,449 $ $1,071,950
Cost of goods sold. . . . . . . . . . . . . . . . . . 606,751 347,467 1,985 (2) 956,203
--------- -------- -------- ----------
Gross profit . . . . . . . . . . . . . . . . . . . 64,750 52,982 (1,985) 115,747
Selling, general and administrative expenses. . . . . 22,510 20,586 (772)(3) 46,774
4,450 (2)
--------- -------- -------- ----------
Operating income . . . . . . . . . . . . . . . . . 42,240 32,396 (5,663) 68,973
Halco income. . . . . . . . . . . . . . . . . . . . . 1,636 - 1,636
Other income (expense), net . . . . . . . . . . . . . 2,670 708 264 (4) 3,642
Interest expense, net . . . . . . . . . . . . . . . . (3,473) (3,474) (27,146)(5) (34,093)
--------- -------- -------- ----------
Income before income taxes . . . . . . . . . . . . 43,073 29,630 (32,545) 40,158
Provision for income taxes. . . . . . . . . . . . . . 9,286 6,956 (7,584)(6) 8,658
--------- -------- -------- ----------
Net income . . . . . . . . . . . . . . . . . . . . $ 33,787 $ 22,674 $(24,961) $ 31,500
========= ======== ======== ==========
Weighted average common shares outstanding. . . . . . 10,191 10,191
========= ==========
Earnings per common share . . . . . . . . . . . . . . $ 3.32 $ 3.09
========= ==========
<FN>
(1) See note (1) to the Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six-month
period ended June 30, 1996.
(2) To record depreciation ($1,985) and amortization ($4,450) related to the revaluation of property, plant and
equipment and the excess of purchase price over net tangible and identifiable intangible assets acquired.
Acquired property, plant and equipment will be depreciated over approximately 12 years, the estimated
remaining useful life. The excess of purchase price over net assets acquired will be amortized over 40 years.
(3) To eliminate the amortization of goodwill recorded by CasTech.
(4) To eliminate the amortization of CasTech's capitalized debt financing costs.
(5) To record the estimated incremental interest expense related to borrowings necessary to finance the
acquisition and to refinance existing long-term debt of Commonwealth and CasTech, including amortization of
capitalized debt financing costs. The borrowings have an assumed interest rate as follows:
Long-term debt........................... $252,302 7.50%
Senior subordinated notes................ 125,000 10.75%
--------
$377,302
========
(6) The pro forma provision for income taxes of $8,658 was calculated by applying the Commonwealth 1995 historical
effective tax rate of 22% to Commonwealth's pro forma combined income before tax of $40,158. The effective tax
rate differs from the statutory rate due to the existence of historical net operating loss carryforwards,
valuation allowances related to net deferred tax assets, Internal Revenue Code Section 382 net operating loss
limitations and other non-deductible expenses. Commonwealth anticipates that its effective tax rate will be
higher in the future. If the pro forma provision for income taxes had been calculated using a combined
federal and state income tax rate of 40%, Commonwealth's pro forma combined tax provision would be $16,063,
net income would be $24,095 and earnings per common share would be $2.36.
</FN>
(c) Exhibits Required by Item 601 of Regulation S-K
Exhibit No. Description
23 Consent, dated September 20, 1996, of Ernst & Young LLP,
independent auditors for CasTech Aluminum Group Inc.
99 Press Release, dated September 20, 1996, of Commonwealth
Aluminum Corporation, announcing the completion of its all
cash tender offer for all of the outstanding shares of common
stock of CasTech Aluminum Group Inc.
Item 8. Not Applicable
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
Dated: September 24, 1996
COMMONWEALTH ALUMINUM CORPORATION
By: /s/ Mark V. Kaminski
Name: Mark V. Kaminski
Title: President & Chief
Executive Officer
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
23 Consent, dated September 20, 1996, of Ernst &
Young LLP, independent auditors for CasTech
Aluminum Group Inc.
99 Press Release, dated September 20, 1996, of
Commonwealth Aluminum Corporation, announcing
the completion of its all cash tender offer for
all of the outstanding shares of common stock
of CasTech Aluminum Group Inc.