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UNITED STATES
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): May 7, 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 May 7, 2004, announcing
Commonwealth Industries, Inc.'s results of operations for the First Quarter of
2004:
Contact: Kim S. Knotts
Director of Investor Relations
(502) 588-8207
COMMONWEALTH INDUSTRIES REPORTS FIRST QUARTER 2004
FINANCIAL RESULTS
o Aluminum and electrical shipments start strong
o Selling price and operating profit improve
o Accounting-related net hedge gain recorded in quarter
o EBITDA increased 422% to $12.7 million
o Estimated aluminum shipments for the second and third quarters of 2004
of 490-510 million pounds
LOUISVILLE, KENTUCKY (May 7, 2004) - Commonwealth Industries, Inc. (NASDAQ/NM:
CMIN) today announced results for the first quarter ended March 31, 2004. The
recovery in aluminum shipments, which began in the second half of 2003,
continued to advance into the first quarter of 2004. Commonwealth's aluminum
shipments improved 32% to 241.9 million pounds in the first quarter of 2004
compared with 183.7 million pounds in the year-earlier period. Shipments of
electrical conduit products for the quarter improved 11% to 127.7 million feet
versus 114.9 million feet in the first quarter of 2003 due to strengthening in
the commercial construction market.
Net sales for the first quarter of 2004 improved 34% to $284.1 million from
$212.0 million in the same period last year. Gross profit for the quarter
improved 120% to $20.5 million from $9.3 million in the year-earlier quarter,
while operating income increased to $6.5 million from a loss of $3.2 million in
the same period last year. Net income for the first quarter of 2004 was $2.9
million, or $0.18 per diluted share, compared with a net loss of $6.5 million,
or $0.41 per diluted share, in the prior-year period.
Commonwealth's improvement in net sales and net income for the first quarter of
2004 primarily reflected improved selling prices and higher shipments at both
its Commonwealth Aluminum and Alflex electrical products businesses due to
stronger customer demand and improving markets. In addition, net income included
the recognition of a $3.0 million net hedge gain, or $0.19 per share.
Earnings before interest, taxes, depreciation and amortization charges (EBITDA)
for the first quarter of 2004 improved 422% to $12.7 million versus $2.4 million
in the year-earlier period.
Mark V. Kaminski, Commonwealth's President and Chief Executive Officer, said,
"Aluminum and electrical product shipments in the first quarter of this year
were strong and continued to improve over the fourth quarter of 2003. We are
optimistic as current bookings indicate a strong market through the third
quarter. We plan for material margins to improve as price increases take hold in
the third and fourth quarter of 2004."
The Company's gross profit margin for the first quarter improved to 7.2% from
4.4% in the year-earlier period, reflecting an improvement in both its aluminum
and electrical products business units. The gross profit margin for the aluminum
business increased to 5.6% in the first quarter of 2004 from 3.7% in the same
period last year despite a reduction in aluminum material margins. Material
margins decreased to $0.310 per pound from $0.343 per pound in the same quarter
last year, affected by a competitive marketplace, inventory mix, melt loss and
hardeners cost increases. Unit manufacturing costs also decreased by 19% to
$0.228 per pound from $0.283 per pound in the year-earlier quarter due to
improved volume in the 2004 period and manufacturing efficiencies implemented
over the past three years. In the Company's electrical products business, gross
profit margin improved to 19.5% in the first quarter of 2004 from 8.7% in the
same period last year, reflecting higher volume, improved mix and manufacturing
efficiency, as well as improved selling prices and new products.
Also included in the first quarter 2004 results is a net gain of approximately
$3.0 million, or $0.19 per share, relating to certain aluminum hedge
transactions. This net gain resulted from a determination by the Company that
hedges in place 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). The Company estimates that an
aggregate cost of $10.0 million will be carried over into future periods,
excluding the effects of new mark-to-market adjustments arising in the future.
Selling, general and administrative expenses for the first quarter of 2004
increased 11.1% to $13.9 million from $12.5 million in the same quarter last
year and represented 4.9% of net sales in the first quarter of 2004 versus 5.9%
of net sales in the first quarter of 2003. The increase from the year-earlier
period was due primarily to depreciation associated with the Company's project
to upgrade its information technology systems, professional service costs, sales
commissions and employee incentive plans. These items include an offset from
restructuring our post-retirement medical insurance program.
Kaminski concluded, "We are encouraged by the economic recovery and
strengthening outlook taking shape in 2004, and we maintain our estimate for
total aluminum shipments of 490 to 510 million pounds in the second and third
quarters of 2004. As we move into 2004, we are encouraged by the significant
operational advances we made in 2003, including continued focus on customer
satisfaction, product innovations and revenue growth."
At March 31, 2004, Commonwealth had total assets of $402.2 million compared
with $409.3 million a year ago. Stockholders' equity at March 31, 2004, was
$84.5 million versus $100.6 million at the end of the first quarter of 2003.
Debt-to-capitalization was 61% at March 31, 2004, compared with 55% in the
year-earlier quarter.
A public, listen-only simulcast and replay of Commonwealth's first quarter
conference call may be accessed at the Company's web site or
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=CMIN&script=1010
&item_id=879561.
The simulcast will begin at approximately 10:00 a.m. Eastern Daylight Time on
Friday, May 7, 2004, and a replay of the call will be available beginning at
approximately noon Eastern Daylight Time and will run until June 4, 2004.
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.
COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Statement of Operations
(in thousands except per share data)
Three Months Ended
March 31,
2004 2003
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Net sales $ 284,077 $ 211,968
Cost of goods sold 263,620 202,650
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Gross profit 20,457 9,318
Selling, general and administrative expenses 13,913 12,524
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Operating income (loss) 6,544 (3,206)
Other income (expense), net 494 494
Interest expense, net (4,094) (3,701)
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Income (loss) before income taxes 2,944 (6,413)
Income tax expense 70 80
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Net income (loss) $ 2,874 $ (6,493)
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Basic and diluted net income (loss) per share $ 0.18 $ (0.41)
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Weighted average shares outstanding:
Basic 16,020 16,011
Diluted 16,187 16,011
Dividends paid per share $ -- $ 0.05
COMMONWEALTH INDUSTRIES, INC.
Operating and Financial Statistics
(dollars in thousands except per share data)
Three Months Ended
March 31,
2004 2003
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Net sales volume:
Aluminum products $ 252,254 $ 187,286
Electrical products $ 31,823 $ 24,682
Shipment volume:
Aluminum products (millions lbs.) 241.9 183.7
Electrical products (millions ft.) 127.7 114.9
Production volume:
Aluminum products (millions lbs.) 244.0 196.4
Electrical products (millions ft.) 123.0 116.4
Gross profit percent
Aluminum products 5.6% 3.7%
Electrical products 19.5% 8.7%
Consolidated Company 7.2% 4.4%
Operating income percent
Aluminum products 4.7% 2.5%
Electrical products 9.3% (4.1%)
Consolidated Company 2.3% (1.5%)
Current ratio 2.5x 2.8x
Interest coverage ratio (EBITDA to interest expense) 3.1x 0.7x
Return on average stockholders' equity (annualized) 14.1% (25.0%)
Debt-to-capitalization 61% 55%
EBITDA (1) $ 12,681 $ 2,431
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
March 31,
2004 2003
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Net cash (used in) operating activities $ (1,479) $ (8,233)
Adjustments to reconcile net cash (used in)
operations to net income (loss):
Depreciation (5,643) (5,143)
Amortization (255) (222)
Loss on disposal of property, plant and equipment (21) (12)
Issuance of common stock in connection with stock awards (90) (90)
Change in working capital and other net assets 10,362 7,207
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Net income (loss) $ 2,874 $ (6,493)
Add back depreciation 5,643 5,143
Add back amortization (2) -- --
Add back tax expense 70 80
Add back interest expense, net (2) 4,094 3,701
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EBITDA $ 12,681 $ 2,431
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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 March 31, 2004 and 2003
of $255 and $222, 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)
Three Months Ended
March 31,
2004 2003
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Cash flows from operating activities:
Net income (loss) $ 2,874 $ (6,493)
Adjustments to reconcile net income (loss) to net cash
(used in) operations:
Depreciation 5,643 5,143
Amortization 255 222
Loss on disposal of property, plant and equipment 21 12
Issuance of common stock in connection with stock awards 90 90
Change in working capital and other net assets (10,362) (7,207)
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Net cash (used in) operating activities (1,479) (8,233)
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Cash flows from investing activities:
Purchases of property, plant and equipment (2,118) (4,598)
Proceeds from sale of property, plant and equipment 62 3
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Net cash (used in) investing activities (2,056) (4,595)
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Cash flows from financing activities:
(Decrease) increase in outstanding checks in excess of deposits (733) 418
Proceeds from long-term debt 77,648 33,707
Repayments of long-term debt (72,544) (33,707)
Cash dividends paid -- (801)
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Net cash provided by (used in) financing activities 4,371 (383)
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Net increase (decrease) in cash and cash equivalents 836 (13,211)
Cash and cash equivalents at beginning of period -- 13,211
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Cash and cash equivalents at end of period $ 836 $ --
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COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(in thousands except share data)
March 31,
--------------------------
2004 2003
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Assets
Cash and cash equivalents $ 836 $ --
Accounts receivable, net 551 209
Inventories 143,407 140,555
Net residual interest in receivables sold 73,006 59,995
Prepayments and other current assets 18,983 7,423
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Total current assets 236,783 208,182
Property, plant and equipment, net 138,427 146,408
Goodwill 19,265 48,872
Other noncurrent assets 7,753 5,867
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Total assets $ 402,228 $ 409,329
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Liabilities
Outstanding checks in excess of deposits $ -- $ 418
Long-term debt due within one year 5,104 --
Accounts payable 57,748 45,833
Accrued liabilities 31,032 28,225
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Total current liabilities 93,884 74,476
Long-term debt 125,000 125,000
Other long-term liabilities 3,707 5,076
Accrued pension benefits 31,234 28,136
Accrued postretirement benefits 63,898 76,075
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Total liabilities 317,723 308,763
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Commitments and contingencies -- --
Stockholders' Equity
Common stock, $0.01 par value, 50,000,000 shares authorized, 16,020,397 and
16,010,971 shares outstanding at March 31, 2004
and 2003, respectively 160 160
Additional paid-in capital 405,793 405,703
Accumulated deficit (305,603) (285,236)
Accumulated other comprehensive income:
Unrealized gain on security -- --
Minimum pension liability adjustment (21,276) (21,391)
Effects of cash flow hedges 5,431 1,330
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Total stockholders' equity 84,505 100,566
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Total liabilities and stockholders' equity $ 402,228 $ 409,329
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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: May 7, 2004