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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): October 21, 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 12. Results of Operations and Financial Condition.
See the following press release, dated October 21, 2003, announcing
Commonwealth Industries, Inc.'s results of operations for the Third Quarter of
2003:
Contact: Kim S. Knotts
Director of Investor Relations
(502) 588-8207
COMMONWEALTH INDUSTRIES REPORTS
PROFITABLE THIRD QUARTER RESULTS
LOUISVILLE, Ky.(October 21, 2003) - Commonwealth Industries,
Inc.(NASDAQ/NM: CMIN) today announced results for the third quarter and
nine-month period ended September 30, 2003. During the third quarter,
Commonwealth experienced a resurgence in sales activity compared with the first
half of 2003. Higher shipments, combined with higher material margins associated
with product mix improvements and positive accounting effects related to metals
hedging activities, enabled Commonwealth to return to profitability following
losses in the first half of 2003.
While Commonwealth experienced a 15% increase in net sales from the second
quarter due to increased customer demand, net sales for the third quarter of
2003 declined 2% to $248.1 million from $253.9 million in the same period last
year. Commonwealth's gross profit increased 34% from the second quarter, while
the quarter declined 16% to $16.4 million compared with $19.4 million for the
year-earlier period. Operating income for the third quarter increased 312% from
the second quarter, but was 8% lower at $6.3 million versus $6.8 million in the
third quarter of 2002. Net income for the quarter totaled $2.9 million or $0.18
per share versus $6.1 million or $0.38 per share in the prior-year period. Net
income for the prior-year quarter included a $2.7 million favorable income tax
accrual adjustment.
For the first nine months of 2003, net sales declined 7% to $675.2 million
from $727.5 million in the year-earlier period. Gross profit for the first nine
months of 2003 declined 17% to $37.9 million from $45.6 million in the same
period last year, while operating income declined 58% to $4.6 million from $10.8
million in the year-to-date 2002 period. The net loss for the first nine months
of 2003 was $5.5 million or $0.34 per diluted share compared with a net loss of
$22.6 million or $1.40 per diluted share in the prior-year period, including the
impact of goodwill impairment charges recorded in the first quarter of 2002. The
Company's net income before the cumulative effect of an accounting change for
the first nine months of 2002 was $2.8 million or $0.17 per share.
Commenting on the results, Mark V. Kaminski, President and Chief Executive
Officer, said, "Obviously, we are pleased to report the Company's return to
profitability and are encouraged by the advances we have made over the past
three years to reduce our cost structure. This progress reflects great effort
and dedication from all of our employees in working to improve Commonwealth's
competitive position for the long term.
"I'm also pleased to announce that through the dedicated efforts of our
employees, Commonwealth is implementing a new information system designed to
streamline every aspect of our business," he continued. "These changes are part
of our continuous improvement effort to make the Company the most
customer-friendly corporation, while operating at maximum efficiency. We look
forward to the expanded capabilities this new tool brings to our future growth
and service quality."
While Commonwealth's aluminum shipments increased 10% from the second
quarter, shipments declined 16% to 195.4 million pounds in the third quarter of
2003 from 232.8 million pounds in the year-earlier period. Shipments of
electrical conduit and cable products declined 4% to 124.5 million feet from
130.3 million feet in the third quarter of 2002, but increased 12% from the
second quarter 2003. For the year-to-date period, aluminum shipments declined
18% to 557.3 million pounds from 680.2 million pounds in the first nine months
of 2002. Shipments of electrical conduit and cable products were down 6% to
350.9 million feet in the first nine months of 2003 from 374.8 million feet in
the comparable period last year.
The Company's gross profit margin for the third quarter increased to 6.6%
from 5.7% from the second quarter 2003, but declined from 7.6% in the
year-earlier period, reflecting lower gross profit margin in both its aluminum
products business and its electrical products business, Alflex. In
Commonwealth's aluminum products business, which accounted for approximately 89%
of the Company's total sales in the first nine months of 2003, gross profit
margin declined to 6.0% in the third quarter of 2003 from 6.5% in the same
period last year as the effects of lower shipment volume more than offset
improved material margins. Material margins in Commonwealth's aluminum business
increased to $0.346 per pound in the third quarter from $0.322 per pound in the
year-earlier period. Gross profit margin for Alflex declined to 11.2% in the
third quarter of 2003 from 15.0% in the same period last year, reflecting lower
shipment volume and lower material margins.
Included in the third quarter 2003 gross profit is a gain of approximately
$1.1 million or $0.07 per diluted share relating to certain aluminum hedge
transactions. The Company determined that hedges in place during the quarter to
reduce its exposure to aluminum price fluctuations did not meet certain
"effectiveness" requirements set forth in Statement of Financial Accounting
Standards No. 133 ("SFAS No. 133"). Accordingly, as prescribed by the provisions
of SFAS No. 133, the derivative instruments used as hedges were
marked-to-market, giving rise to the $1.1 million gain.
Selling, general and administrative expenses for the third quarter of 2003
declined 19% to $10.1 million from $12.5 million in the same quarter last year.
Selling, general and administrative expenses totaled 4.1% as a percentage of net
sales in the third quarter of 2003, down from 4.9% in the same period last year.
For the year to date, selling, general and administrative expenses totaled 4.9%
of net sales compared with 4.8% of net sales for the first nine months of 2002.
Kaminski noted that the Company's results for the quarter, most noticeably
the reduction accomplished in selling, general and administrative expenses and
cost of goods sold, reflected the impact of cost-cutting measures implemented
during the past year. These initiatives have reduced overall costs by $4.5
million thus far this year, including $2.0 million in the third quarter. The
third quarter savings are reflected in reductions of approximately $1.0 million
each in selling, general and administrative expenses and cost of goods sold.
At September 30, 2003, Commonwealth had $403.2 million in total assets
compared with $419.6 million a year ago. Stockholders' equity at September 30,
2003, was $99.3 million versus $117.2 million at the end of the third quarter of
2002. Debt-to-capitalization was 56% at September 30, 2003, compared with 52%
the same time last year.
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 web site at
www.ciionline.com.
A public, listen-only simulcast and replay of Commonwealth's third quarter
conference call may be accessed at the Company's web site or at
www.companyboardroom.com. The simulcast will begin at approximately 10:00 a.m.
Eastern Time today, and a replay of the call will be available beginning at
approximately noon Eastern Time today through November 21, 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 success of
the implementation of the company-wide information system, 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 Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
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Net sales $ 248,117 $ 253,933 $ 675,205 $ 727,519
Cost of goods sold 231,760 234,571 637,316 681,933
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Gross profit 16,357 19,362 37,889 45,586
Selling, general and administrative expenses 10,094 12,524 33,311 34,779
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Operating income 6,263 6,838 4,578 10,807
Other income (expense), net 423 332 1,331 818
Interest expense, net (3,728) (3,704) (11,215) (11,406)
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Income (loss) before income taxes and cumulative
effect of change in accounting principle 2,958 3,466 (5,306) 219
Income tax expense (benefit) 50 (2,610) 150 (2,532)
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Income (loss) before cumulative effect of
change in accounting principle 2,908 6,076 (5,456) 2,751
Cumulative effect of change in accounting principle -- -- -- (25,327)
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Net income (loss) $ 2,908 $ 6,076 $ (5,456) $ (22,576)
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Basic net income (loss) per share:
Income (loss) before cumulative effect of
change in accounting principle $ 0.18 $ 0.38 $ (0.34) $ 0.17
Cumulative effect of change in accounting principle -- -- -- (1.58)
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Net income (loss) $ 0.18 $ 0.38 $ (0.34) $ (1.41)
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Diluted net income (loss) per share:
Income (loss) before cumulative effect of
change in accounting principle $ 0.18 $ 0.38 $ (0.34) $ 0.17
Cumulative effect of change in accounting principle -- -- -- (1.57)
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Net income (loss) $ 0.18 $ 0.38 $ (0.34) $ (1.40)
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Weighted average shares outstanding:
Basic 16,011 15,998 16,011 15,992
Diluted 16,034 16,092 16,011 16,100
Dividends paid per share $ -- $ 0.05 $ 0.10 $ 0.15
COMMONWEALTH INDUSTRIES, INC.
Operating and Financial Statistics
(dollars in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
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Net sales volume:
Aluminum products $ 221,213 $ 224,124 $ 598,598 $ 641,081
Electrical products $ 26,904 $ 29,809 $ 76,607 $ 86,438
Shipment volume:
Aluminum products (millions lbs.) 195.4 232.8 557.3 680.2
Electrical products (millions ft.) 124.5 130.3 350.9 374.8
Production volume:
Aluminum products (millions lbs.) 186.7 241.1 548.5 693.5
Electrical products (millions ft.) 114.3 129.4 342.2 374.4
Gross profit percent
Aluminum products 6.0% 6.5% 4.9% 4.6%
Electrical products 11.2% 15.0% 10.7% 17.2%
Consolidated Company 6.6% 7.6% 5.6% 6.3%
Operating income percent
Aluminum products 4.9% 5.0% 3.6% 3.2%
Electrical products 0.1% 3.8% (1.3%) 5.9%
Consolidated Company 2.5% 2.7% 0.7% 1.5%
Current ratio 2.8x 2.4x 2.8x 2.4x
Interest coverage ratio (EBITDA excluding
non-cash goodwill impairment charges of $25.3
million in 2002 to interest expense) 3.2x 3.4x 1.9x 2.4x
Interest coverage ratio (EBITDA including
non-cash goodwill impairment charges of $25.3
million in 2002 to interest expense) 3.2x 3.4x 1.9x 0.2x
Return on average stockholders' equity (annualized) 11.7% 21.0% (7.2%) (25.2%)
Debt-to-capitalization 56% 52% 56% 52%
EBITDA (1) (excluding non-cash goodwill
impairment charges of $25.3 million in 2002) $ 11,853 $ 12,466 $ 21,326 $ 27,565
EBITDA (1) (including non-cash goodwill
impairment charges of $25.3 million in 2002) $ 11,853 $ 12,466 $ 21,326 $ 2,238
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 Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
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Net cash (used in) provided by operating activities $ (2,389) $ (3,972) $ (475) $ 4,160
Adjustments to reconcile net cash (used in) provided by
operations to net income (loss):
Depreciation (5,167) (5,296) (15,417) (15,940)
Amortization (222) (225) (666) (762)
Goodwill impairment charges -- -- -- (25,327)
Loss on disposal of property, plant and equipment (28) (115) (68) (196)
Issuance of common stock in connection with stock awards -- -- (90) (170)
Change in working capital and other net assets 10,714 15,684 11,260 15,659
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Net income (loss) $ 2,908 $ 6,076 $ (5,456) $ (22,576)
Add back depreciation 5,167 5,296 15,417 15,940
Add back amortization (2) -- -- -- --
Add back tax expense / subtract tax benefit 50 (2,610) 150 (2,532)
Add back interest expense, net (2) 3,728 3,704 11,215 11,406
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EBITDA including non-cash goodwill impairment charges 11,853 12,466 21,326 2,238
Add back non-cash goodwill impairment charges -- -- -- 25,327
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EBITDA excluding non-cash goodwill impairment charges $ 11,853 $ 12,466 $ 21,326 $ 27,565
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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 September 30, 2003 and 2002
of $222 and $225, respectively, and the nine months ended September 30, 2003 and 2002 of
$666 and $762, 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)
Nine Months Ended
September 30,
2003 2002
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Cash flows from operating activities:
Net income (loss) $ (5,456) $ (22,576)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operations:
Depreciation 15,417 15,940
Amortization 666 762
Goodwill impairment charges -- 25,327
Loss on disposal of property, plant and equipment 68 196
Issuance of common stock in connection with stock awards 90 170
Change in working capital and other net assets (11,260) (15,659)
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Net cash (used in) provided by operating activities (475) 4,160
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Cash flows from investing activities:
Purchases of property, plant and equipment (11,543) (10,089)
Proceeds from sale of property, plant and equipment 158 23
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Net cash (used in) investing activities (11,385) (10,066)
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Cash flows from financing activities:
Increase in outstanding checks in excess of deposits -- 351
Proceeds from long-term debt 75,168 55,700
Repayments of long-term debt (71,978) (55,700)
Repayments of notes receivable form sale of common stock -- 1,561
Cash dividends paid (1,601) (2,399)
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Net cash provided by (used in) financing activities 1,589 (487)
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Net (decrease) in cash and cash equivalents (10,271) (6,393)
Cash and cash equivalents at beginning of period 13,211 6,393
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Cash and cash equivalents at end of period $ 2,940 $ --
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COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(in thousands except share data)
September 30,
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2003 2002
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Assets
Cash and cash equivalents $ 2,940 $ --
Accounts receivable, net 312 137
Inventories 116,067 116,369
Net residual interest in receivables sold 81,633 100,185
Prepayments and other current assets 5,051 4,036
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Total current assets 206,003 220,727
Property, plant and equipment, net 142,868 146,067
Goodwill 48,872 48,872
Other noncurrent assets 5,423 3,901
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Total assets $ 403,166 $ 419,567
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Liabilities
Outstanding checks in excess of deposits $ -- $ 351
Accounts payable 47,151 54,264
Accrued liabilities 27,507 36,564
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Total current liabilities 74,658 91,179
Long-term debt 128,190 125,000
Other long-term liabilities 3,921 5,511
Accrued pension benefits 27,043 3,529
Accrued postretirement benefits 70,085 77,121
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Total liabilities 303,897 302,340
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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
September 30, 2003 and 2002, respectively 160 160
Additional paid-in capital 405,703 405,613
Accumulated deficit (284,999) (283,507)
Accumulated other comprehensive income:
Minimum pension liability adjustment (21,391) --
Effects of cash flow hedges (204) (5,039)
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Total stockholders' equity 99,269 117,227
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Total liabilities and stockholders' equity $ 403,166 $ 419,567
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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: October 21, 2003