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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): March 11, 2004
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 March 11, 2004, announcing
Commonwealth Industries, Inc.'s revised results of operations for the Fourth
Quarter and Full Year 2003:
Contact: Kim S. Knotts
Director of Investor Relations
(502) 588-8207
COMMONWEALTH INDUSTRIES REPORTS $2.2 MILLION
NET FAVORABLE ADJUSTMENT TO
FOURTH-QUARTER AND FULL-YEAR 2003 FINANCIAL RESULTS
LOUISVILLE, KENTUCKY (March 11, 2004) - Commonwealth Industries, Inc.
(NASDAQ/NM: CMIN) today announced that the Company is recording a net favorable
adjustment of $2.2 million, or $0.13 per share, to fourth-quarter and full-year
2003 operating results previously announced by the Company on January 29, 2004,
following completion of the annual audit by its independent auditors. The
revised net loss for the fourth quarter is $23.4 million, or $1.47 per share,
compared to $25.6 million, or $1.60 per share, previously announced. Previously
reported results for the first three quarters of 2003 are not affected by the
adjustments.
For the year, the Company's revised net loss is $28.9 million, or $1.81 per
share, compared to the net loss of $31.1 million, or $1.94 per share, previously
announced. (The previously announced goodwill impairment charge of $29.6
million, or $1.85 per share, and the previously announced gain of $5.6 million,
or $0.35 per share, relating to certain aluminum hedge transactions, are
unchanged in the revised fourth-quarter and full-year results.)
The adjustments relating to the fourth-quarter and full-year 2003 results
are the effect of various corrections, detected after the Company's January 29,
2004, results announcement, resulting primarily from errors in sales and metal
costs accruals, which occurred during the implementation of an enterprise
resource planning (ERP) accounting system for its aluminum business in 2003.
These adjustments, which have been identified and corrected by Commonwealth, do
not affect the Company's net cash position.
President and Chief Executive Officer Mark V. Kaminski said, "We remain
fully dedicated to providing timely and accurate financial reporting, and
Commonwealth will continue its ongoing process of strengthening and improving
its internal control procedures. Following the release of earnings, audit
procedures detected that a number of work-around measures put in place during
implementation and testing of the ERP system failed to adequately and timely
detect the errors. Further internal control procedures have since been put into
effect and are currently being analyzed and tested. We believe that the internal
control procedures now in place are effective to ensure that material
information is recorded as required."
The principal changes from the 2003 fourth-quarter results previously
announced include an increase in aluminum business shipments and an increase in
gross profit.
Aluminum business shipments in the fourth quarter of 2003 increased 1.0%
from 215.2 million pounds to 217.3 million pounds due to incorrect data from the
ERP system. Net sales in the fourth quarter of 2003 decreased $1.6 million, or
0.7%, from $244.8 million to $243.2 million; however, the net sales decrease was
more than offset by a $4.3 million, or 1.9%, decrease in cost of goods sold from
$225.3 million to $221.0 million. The net effect in the fourth quarter of 2003
was an increase in gross profit of $2.7 million, or 13.8%, from $19.5 million to
$22.2 million, and was due primarily to adjustments to sales and metal costs
accruals from the ERP system. Selling, general and administrative expenses
increased by $0.5 million, or 4.3%, in the fourth quarter of 2003 due to
increased costs associated with the review of the Company's fourth-quarter and
full-year operational results and accrual adjustments.
The accompanying financial statements include the revision effects noted
above.
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.
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.
Financial Tables To Follow...
COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Statement of Operations
(in thousands except per share data)
Three Months Ended Year Ended
December 31, December 31,
2003 2002 2003 2002
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Net sales $ 243,191 $ 238,719 $ 918,396 $ 966,238
Cost of goods sold 220,958 216,994 858,274 898,927
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Gross profit 22,233 21,725 60,122 67,311
Selling, general and administrative expenses 12,774 12,198 46,085 46,977
Goodwill impairment charges 29,607 -- 29,607 --
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Operating income (loss) (20,148) 9,527 (15,570) 20,334
Other income (expense), net 440 818 1,771 1,636
Interest expense, net (3,736) (3,740) (14,951) (15,146)
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Income (loss) before income taxes and cumulative
effect of change in accounting principle (23,444) 6,605 (28,750) 6,824
Income tax expense (benefit) 34 240 184 (2,292)
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Income (loss) before cumulative effect of
change in accounting principle (23,478) 6,365 (28,934) 9,116
Cumulative effect of change in accounting principle -- -- -- (25,327)
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Net income (loss) $ (23,478) $ 6,365 $ (28,934) $ (16,211)
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Basic net income (loss) per share:
Income (loss) before cumulative effect of
change in accounting principle $ (1.47) $ 0.40 $ (1.81) $ 0.57
Cumulative effect of change in accounting principle -- -- -- (1.58)
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Net income (loss) $ (1.47) $ 0.40 $ (1.81) $ (1.01)
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Diluted net income (loss) per share:
Income (loss) before cumulative effect of
change in accounting principle $ (1.47) $ 0.40 $ (1.81) $ 0.57
Cumulative effect of change in accounting principle -- -- -- (1.57)
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Net income (loss) $ (1.47) $ 0.40 $ (1.81) $ (1.00)
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Weighted average shares outstanding:
Basic 16,011 15,998 16,011 15,994
Diluted 16,011 16,086 16,011 16,097
Dividends paid per share $ -- $ 0.05 $ 0.10 $ 0.20
COMMONWEALTH INDUSTRIES, INC.
Operating and Financial Statistics
(dollars in thousands except per share data)
Three Months Ended Year Ended
December 31, December 31,
2003 2002 2003 2002
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Net sales volume:
Aluminum products $ 219,113 $ 212,768 $ 817,711 $ 853,849
Electrical products $ 24,078 $ 25,951 $ 100,685 $ 112,389
Shipment volume:
Aluminum products (millions lbs.) 217.3 224.8 774.6 905.0
Electrical products (millions ft.) 104.0 111.9 454.8 486.7
Production volume:
Aluminum products (millions lbs.) 224.8 231.9 773.3 925.4
Electrical products (millions ft.) 115.5 108.4 457.7 482.7
Gross profit percent
Aluminum products 8.4% 8.4% 5.8% 5.5%
Electrical products 15.1% 12.6% 11.7% 16.1%
Consolidated Company 9.1% 9.1% 6.5% 7.0%
Operating income percent
Aluminum products 6.8% 6.5% 4.5% 4.1%
Electrical products (118.6%) 1.9% (29.4%) 4.9%
Consolidated Company (8.3%) 4.0% (1.7%) 2.1%
Current ratio 2.8x 2.6x 2.8x 2.6x
Interest coverage ratio (EBITDA excluding non-cash
goodwill impairment charges of $29.6 million in 2003
and non-cash goodwill impairment charges of $25.3
million in 2002 to interest expense) 4.1x 4.2x 2.4x 2.8x
Interest coverage ratio (EBITDA including non-cash
goodwill impairment charges of $29.6 million in 2003
and non-cash goodwill impairment charges of $25.3
million in 2002 to interest expense) (3.9x) 4.2x 0.5x 1.2x
Return on average stockholders' equity (annualized) (105.9%) 22.7% (29.8%) (13.9%)
Debt-to-capitalization 62% 54% 62% 54%
EBITDA (1) (excluding non-cash goodwill impairment
charges of $29.6 million in 2003 and non-cash
goodwill impairment charges of $25.3 million in 2002) $ 15,195 $ 15,547 $ 36,521 $ 43,112
EBITDA (1) (including non-cash goodwill impairment
charges of $29.6 million in 2003 and non-cash
goodwill impairment charges of $25.3 million in 2002) $ (14,412) $ 15,547 $ 6,914 $ 17,785
Note (1) Earnings before interest, income taxes, depreciation and amortization. See EBITDA Calculation on next page.
COMMONWEALTH INDUSTRIES, INC.
EBITDA Calculation (1)
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
2003 2002 2003 2002
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Net cash provided by operating activities $ 4,466 $ 20,594 $ 3,991 $ 24,754
Adjustments to reconcile net cash provided by
operations to net income (loss):
Depreciation (5,296) (5,202) (20,713) (21,142)
Amortization (229) (222) (895) (984)
Goodwill impairment charges (29,607) -- (29,607) (25,327)
Loss on disposal of property, plant and equipment (486) (129) (554) (325)
Issuance of common stock in connection with stock awards -- -- (90) (170)
Change in working capital and other net assets 7,674 (8,676) 18,934 6,983
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Net income (loss) $ (23,478) $ 6,365 $ (28,934) $ (16,211)
Add back depreciation 5,296 5,202 20,713 21,142
Add back amortization (2) -- -- -- --
Add back tax expense / subtract tax benefit 34 240 184 (2,292)
Add back interest expense, net (2) 3,736 3,740 14,951 15,146
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EBITDA including non-cash goodwill impairment charges (14,412) 15,547 6,914 17,785
Add back non-cash goodwill impairment charges 29,607 -- 29,607 25,327
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EBITDA excluding non-cash goodwill impairment charges $ 15,195 $ 15,547 $ 36,521 $ 43,112
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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 December 31, 2003 and 2002
of $229 and $222, respectively, and the year ended December 31, 2003 and 2002 of
$895 and $984, 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)
Year Ended
December 31,
2003 2002
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Cash flows from operating activities:
Net income (loss) $ (28,934) $ (16,211)
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Depreciation 20,713 21,142
Amortization 895 984
Goodwill impairment charges 29,607 25,327
Loss on disposal of property, plant and equipment 554 325
Issuance of common stock in connection with stock awards 90 170
Change in working capital and other net assets (18,934) (6,983)
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Net cash provided by operating activities 3,991 24,754
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Cash flows from investing activities:
Purchases of property, plant and equipment (16,492) (16,321)
Proceeds from sale of property, plant and equipment 158 23
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Net cash (used in) investing activities (16,334) (16,298)
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Cash flows from financing activities:
Increase in outstanding checks in excess of deposits 733 --
Proceeds from long-term debt 108,970 77,270
Repayments of long-term debt (108,970) (77,270)
Repayments of notes receivable from sale of common stock -- 1,561
Cash dividends paid (1,601) (3,199)
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Net cash (used in) financing activities (868) (1,638)
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Net (decrease) increase in cash and cash equivalents (13,211) 6,818
Cash and cash equivalents at beginning of period 13,211 6,393
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Cash and cash equivalents at end of period $ -- $ 13,211
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COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(in thousands except share data)
December 31,
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2003 2002
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Assets
Cash and cash equivalents $ -- $ 13,211
Accounts receivable, net 451 66
Inventories 131,365 125,348
Net residual interest in receivables sold 64,214 81,195
Prepayments and other current assets 14,194 7,133
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Total current assets 210,224 226,953
Property, plant and equipment, net 142,035 146,968
Goodwill 19,265 48,872
Other noncurrent assets 7,802 6,111
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Total assets $ 379,326 $ 428,904
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Liabilities
Outstanding checks in excess of deposits $ 733 $ --
Accounts payable 50,308 59,594
Accrued liabilities 24,009 28,527
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Total current liabilities 75,050 88,121
Long-term debt 125,000 125,000
Other long-term liabilities 3,845 5,183
Accrued pension benefits 30,147 26,743
Accrued postretirement benefits 67,146 76,670
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Total liabilities 301,188 321,717
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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
December 31, 2003 and 2002, respectively 160 160
Additional paid-in capital 405,703 405,613
Accumulated deficit (308,477) (277,942)
Accumulated other comprehensive income:
Unrealized gain on security 34 --
Minimum pension liability adjustment (21,276) (21,391)
Effects of cash flow hedges 1,994 747
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Total stockholders' equity 78,138 107,187
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Total liabilities and stockholders' equity $ 379,326 $ 428,904
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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: March 11, 2004