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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): July 22, 2003
COMMONWEALTH INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3245741
(State of incorporation) (I.R.S. Employer Identification No.)
500 West Jefferson Street
PNC Plaza-19th Floor
Louisville, Kentucky 40202-2823
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (502) 589-8100
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Item 9. Regulation FD Disclosure.
See the following press release, dated July 22, 2003, announcing
Commonwealth Industries, Inc.'s results of operations for the Second Quarter of
2003. Note that this information is being provided under Item 9 and Item 12 of
Form 8-K:
Contact: Kim S. Knotts
Director of Investor Relations
(502) 588-8207
COMMONWEALTH INDUSTRIES REPORTS SECOND QUARTER RESULTS
LOUISVILLE, Ky. (July 22, 2003) - Commonwealth Industries, Inc. (NASDAQ/NM:
CMIN) today announced results for the second quarter and six-month period ended
June 30, 2003.
As announced last month, Commonwealth implemented cost-cutting actions in
the second quarter to partially counteract the difficult business conditions in
its aluminum products and electrical products business units, where weak demand
continues to pressure sales volumes. Declines in shipment volume resulted in
lower revenues for the second quarter and year-to-date period of 2003, as
reported below.
Commenting on the results, Mark V. Kaminski, President and Chief Executive
Officer, said, "Business conditions in the second quarter were weaker than we
originally anticipated, leading to much lower shipment volumes. Since much of
our manufacturing cost structure is fixed and cannot be easily reduced over a
short period of time, the impact of lower volume adversely affected our
profitability for the quarter. As these conditions became more apparent, we
implemented spending reductions across our organization to minimize variable
costs. These initiatives will position Commonwealth to reduce its break-even
point significantly in the months and years ahead while improving our
competitive position in the markets we serve."
Net sales for the second quarter of 2003 declined 15% to $215.1 million
from $251.7 million in the same period last year. Commonwealth's gross profit
for the quarter declined 22% to $12.2 million from $15.7 million for the
year-earlier period. The net loss for the second quarter of 2003 totaled $1.9
million or $0.12 per share compared with net income of $1.1 million or $0.07 per
share in the same quarter last year. During the second quarter Commonwealth
implemented changes to its post-retirement medical insurance program applicable
to all non-bargaining unit Kentucky employees, limiting eligibility and
increasing premiums. Because of these changes, the Company realized a second
quarter benefit of approximately $2.5 million after tax or $0.16 per share. The
Company recognized this benefit as reductions of approximately $1.3 million in
cost of goods sold and $1.2 million in selling, general and administrative
expenses.
For the first half of 2003, net sales declined 10% to $427.1 million
compared with $473.6 million in the year-earlier period. Gross profit for the
first six months of 2003 dropped 18% to $21.5 million versus $26.2 million for
the same period last year. The Company's net loss for the first half of 2003 was
$8.4 million or $0.52 per share, including the benefit from restructuring its
post-retirement medical insurance program. This compares with a net loss of $3.3
million or $0.21 per diluted share in the year-earlier period, excluding the
impact of goodwill impairment charges recorded in the first quarter of 2002.
Including goodwill impairment charges, the Company's net loss for the first half
of 2002 was $28.7 million or $1.79 per diluted share.
Commonwealth's aluminum shipments declined 25% to 178.2 million pounds in
the second quarter of 2003 from 237.9 million pounds in the year-earlier period,
while shipments of electrical conduit and cable products declined 6% to 111.5
million feet from 118.5 million feet in the second quarter of 2002. For the
year-to-date period, aluminum shipments declined 19% to 361.9 million pounds
from 447.4 million pounds in the first half of 2002. Shipments of electrical
conduit and cable products were down 7% to 226.4 million feet in the first six
months of 2003 from 244.5 million feet in the comparable period last year.
The Company's gross profit margin for the second quarter declined to 5.7%
from 6.2% in the year-earlier period due primarily to margin pressure at Alflex,
the Company's electrical products business. In Commonwealth's aluminum products
business, which accounted for more than 88% of the Company's total sales in the
first half of 2003, gross profit margin increased to 4.7% in the second quarter
of 2003 from 4.5% in the same period last year. Material margins improved to
$0.372 per pound from $0.300 per pound in the same quarter last year. Although
the gross profit margin for Alflex declined to 12.1% in the second quarter of
2003 from 19.0% in the same period last year, it improved from the first quarter
2003 gross margin of 8.7%.
Selling, general and administrative expenses for the second quarter of 2003
declined 3% to $10.7 million from $11.0 million in the same quarter last year,
primarily reflecting the net effect of the aforementioned $1.2 million
post-retirement medical insurance adjustment, which offset planned costs
associated with the Company's project to upgrade its information technology
systems.
At June 30, 2003, Commonwealth had $395.0 million in total assets compared
with $410.9 million a year ago. Stockholders' equity at June 30, 2003, was $99.6
million versus $114.0 million at the end of the second quarter of 2002.
Debt-to-capitalization was 56% at June 30, 2003, compared with 52% this same
time last year.
Concluding, Kaminski added, "Although sales volume declined, the 24%
increase in the aluminum unit's material margin partially offset the effect of
volume decline. Beyond that, our continued focus on reducing expenses and
strategic investment in new information systems will position Commonwealth to
take advantage of our markets as forecasted economic improvement materializes."
Commonwealth Industries is one of North America's leading manufacturers of
aluminum sheet for distributors and the transportation, construction, and
consumer durables end-use markets. The Company has direct-chill casting
facilities in Kentucky and continuous casting mini-mills in Ohio and California.
Commonwealth also is a leading manufacturer of innovative electrical products
through its Alflex operations in California and North Carolina. For more
information about the Company, visit Commonwealth's website at
www.ciionline.com.
A public, listen-only simulcast and replay of Commonwealth's second quarter
conference call may be accessed at the Company's web site or
www.companyboardroom.com. The simulcast will begin at approximately 10:00 a.m.
Eastern Daylight Time today, and a replay of the call will be available
beginning at approximately noon Eastern Daylight Time today through August 22,
2003.
Certain statements set forth above, may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. All statements regarding the Company's and its subsidiaries' expected
future financial position, results of operations, cash flows, funds from
operations, dividends, financing plans, business strategy, budgets, projected
costs, capital expenditures, competitive positions and growth opportunities are
forward-looking statements. Such forward-looking statements are based on
management's current expectations and include known and unknown risks,
uncertainties and other factors, many of which the Company is unable to predict
or control, that may cause the Company's actual results or performance to
materially differ from any future results or performance expressed or implied by
such statements. Such factors may include, without limitation, the effect of
global economic conditions, the ability to achieve the level of cost savings or
productivity improvements anticipated by management, the effect (including
possible increases in the cost of doing business) resulting from war or
terrorist activities or political uncertainties, the ability to successfully
implement new marketing and sales strategies, the impact of competitive products
and pricing, product development and commercialization, availability and cost of
critical raw materials, the ability to effectively hedge the cost of raw
materials, capacity and supply constraints or difficulties, the success of the
Company in implementing its business strategy, and other risks as detailed in
the Company's various filings with the Securities and Exchange Commission.
COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Statement of Operations
(in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
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Net sales $ 215,120 $ 251,728 $ 427,088 $ 473,586
Cost of goods sold 202,906 236,044 405,556 447,362
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Gross profit 12,214 15,684 21,532 26,224
Selling, general and administrative expenses 10,693 10,995 23,217 22,255
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Operating income (loss) 1,521 4,689 (1,685) 3,969
Other income (expense), net 414 213 908 486
Interest expense, net (3,786) (3,851) (7,487) (7,702)
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Income (loss) before income taxes and cumulative
effect of change in accounting principle (1,851) 1,051 (8,264) (3,247)
Income tax expense (benefit) 20 (47) 100 78
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Income (loss) before cumulative effect of
change in accounting principle (1,871) 1,098 (8,364) (3,325)
Cumulative effect of change in accounting principle -- -- -- (25,327)
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Net income (loss) $ (1,871) $ 1,098 $ (8,364) $ (28,652)
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Basic and diluted net income (loss) per share:
Income (loss) before cumulative effect of
change in accounting principle $ (0.12) $ 0.07 $ (0.52) $ (0.21)
Cumulative effect of change in accounting principle -- -- -- (1.58)
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Net income (loss) $ (0.12) $ 0.07 $ (0.52) $ (1.79)
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Weighted average shares outstanding:
Basic 16,011 15,994 16,011 15,989
Diluted 16,011 16,140 16,011 15,989
Dividends paid per share $ 0.05 $ 0.05 $ 0.10 $ 0.10
COMMONWEALTH INDUSTRIES, INC.
Operating and Financial Statistics
(dollars in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
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Net sales volume:
Aluminum products $ 190,099 $ 223,999 $ 377,385 $ 416,957
Electrical products $ 25,021 $ 27,729 $ 49,703 $ 56,629
Shipment volume:
Aluminum products (millions lbs.) 178.2 237.9 361.9 447.4
Electrical products (millions ft.) 111.5 118.5 226.4 244.5
Production volume:
Aluminum products (millions lbs.) 165.4 238.2 361.8 452.4
Electrical products (millions ft.) 111.5 120.2 228.0 244.9
Gross profit percent
Aluminum products 4.7% 4.5% 4.2% 3.6%
Electrical products 12.1% 19.0% 10.4% 18.3%
Consolidated Company 5.7% 6.2% 5.0% 5.5%
Operating income percent
Aluminum products 3.5% 3.4% 2.9% 2.3%
Electrical products (0.1%) 7.1% (2.1%) 6.9%
Consolidated Company 0.7% 1.9% (0.4%) 0.8%
EBITDA (1) (excluding non-cash goodwill
impairment charges of $25.3 million in 2002) $ 7,042 $ 10,231 $ 9,473 $ 15,099
EBITDA (1) (including non-cash goodwill
impairment charges of $25.3 million in 2002) $ 7,042 $ 10,231 $ 9,473 $ (10,228)
Current ratio 3.1x 2.5x 3.1x 2.5x
Interest coverage ratio (EBITDA excluding
non-cash goodwill impairment charges of $25.3
million in 2002 to interest expense) 1.9x 2.7x 1.3x 2.0x
Interest coverage ratio (EBITDA including
non-cash goodwill impairment charges of $25.3
million in 2002 to interest expense) 1.9x 2.7x 1.3x (1.3x)
Return on average stockholders' equity (annualized) (7.5%) 3.9% (16.3%) (47.8%)
Debt-to-capitalization 56% 52% 56% 52%
Note (1) Earnings before interest, income taxes, depreciation and amortization. See EBITDA Calculation on Page 6.
COMMONWEALTH INDUSTRIES, INC.
EBITDA Calculation (1)
(in thousands)
Three Months Ended Three Months Ended
June 30, June 30,
2003 2002 2003 2002
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Net cash provided by operating activities $ 10,147 $ 7,069 $ 1,914 $ 8,132
Adjustments to reconcile net cash provided by
operations to net income (loss):
Depreciation (5,107) (5,329) (10,250) (10,644)
Amortization (222) (218) (444) (537)
Goodwill impairment charges -- -- -- (25,327)
Loss on disposal of property, plant and equipment (28) (79) (40) (81)
Issuance of common stock in connection with stock awards -- (95) (90) (170)
Change in working capital and other net assets (6,661) (250) 546 (25)
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Net income (loss) $ (1,871) $ 1,098 $ (8,364) $ (28,652)
Add back depreciation 5,107 5,329 10,250 10,644
Add back amortization (2) -- -- -- --
Add back tax expense / subtract tax benefit 20 (47) 100 78
Add back interest expense, net (2) 3,786 3,851 7,487 7,702
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EBITDA including non-cash goodwill impairment charges 7,042 10,231 9,473 (10,228)
Add back non-cash goodwill impairment charges -- -- -- 25,327
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EBITDA excluding non-cash goodwill impairment charges $ 7,042 $ 10,231 $ 9,473 $ 15,099
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Note (1) EBITDA is used in the calculation of certain covenants under the Company's credit agreement.
(2) Amortization of financing costs for the three months ended June 30, 2003 and 2002
of $222 and $218, respectively, and the six months ended June 30, 2003 and 2002 of
$444 and $537, respectively, is included in interest expense, net instead of in
amortization in the above calculation.
COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Statement of Cash Flows
(in thousands)
Six Months Ended
June 30,
2003 2002
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Cash flows from operating activities:
Net income (loss) $ (8,364) $ (28,652)
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Depreciation 10,250 10,644
Amortization 444 537
Goodwill impairment charges -- 25,327
Loss on disposal of property, plant and equipment 40 81
Issuance of common stock in connection with stock awards 90 170
Change in working capital and other net assets (546) 25
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Net cash provided by operating activities 1,914 8,132
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Cash flows from investing activities:
Purchases of property, plant and equipment (7,091) (3,194)
Proceeds from sale of property, plant and equipment 155 3
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Net cash (used in) investing activities (6,936) (3,191)
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Cash flows from financing activities:
Proceeds from long-term debt 60,398 45,970
Repayments of long-term debt (60,398) (45,970)
Repayments of notes receivable form sale of common stock -- 1,561
Cash dividends paid (1,601) (1,599)
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Net cash (used in) financing activities (1,601) (38)
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Net (decrease) increase in cash and cash equivalents (6,623) 4,903
Cash and cash equivalents at beginning of period 13,211 6,393
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Cash and cash equivalents at end of period $ 6,588 $ 11,296
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COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(in thousands except share data)
June 30,
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2003 2002
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Assets
Cash and cash equivalents $ 6,588 $ 11,296
Accounts receivable, net 211 72
Inventories 142,374 115,630
Net residual interest in receivables sold 39,865 85,115
Prepayments and other current assets 7,819 2,715
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Total current assets 196,857 214,828
Property, plant and equipment, net 143,614 144,603
Goodwill, net 48,872 48,872
Other noncurrent assets 5,644 2,629
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Total assets $ 394,987 $ 410,932
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Liabilities
Accounts payable $ 39,347 $ 53,642
Accrued liabilities 24,122 30,700
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Total current liabilities 63,469 84,342
Long-term debt 125,000 125,000
Other long-term liabilities 4,969 5,816
Accrued pension benefits 29,149 3,939
Accrued postretirement benefits 72,837 77,838
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Total liabilities 295,424 296,935
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Commitments and contingencies -- --
Stockholders' Equity
Common stock, $0.01 par value, 50,000,000 shares authorized,
16,010,971 and 15,997,651 shares outstanding at
June 30, 2003 and 2002, respectively 160 160
Additional paid-in capital 405,703 405,613
Accumulated deficit (287,907) (288,783)
Accumulated other comprehensive income:
Minimum pension liability adjustment (21,391) --
Effects of cash flow hedges 2,998 (2,993)
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Total stockholders' equity 99,563 113,997
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Total liabilities and stockholders' equity $ 394,987 $ 410,932
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SIGNATURES
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 hereunto duly authorized.
COMMONWEALTH INDUSTRIES, INC.
By /s/ Mark V. Kaminski
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Mark V. Kaminski, President and
Chief Executive Officer
Date: July 22, 2003