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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): November 8, 2004
COMMONWEALTH INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-25642 13-3245741
(State of incorporation) (Commission File Number) (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
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
See the following press release, dated November 8, 2004, announcing
Commonwealth Industries, Inc.'s results of operations for the third quarter of
2004:
Contact: Kim S. Knotts
Director of Investor Relations
(502) 588-8207
COMMONWEALTH INDUSTRIES REPORTS
THIRD-QUARTER 2004 RESULTS
o Strong growth in aluminum shipments
o Improved metal margins
o Renewed focus on working capital management generates cash
o Estimated aluminum shipments for the year of 1 billion pounds
LOUISVILLE, KENTUCKY (November 8, 2004) - Commonwealth Industries, Inc.
(NASDAQ/NM: CMIN) today reported third-quarter income from continuing operations
of $2.6 million, or $0.15 per diluted share, compared to $2.8 million, or $0.17
per diluted share, in the third quarter of 2003. Results for the 2004 period
include the recognition of net charges totaling $1.5 million, including $5.2
million of restructuring and other costs associated with the Company's
previously announced merger with IMCO Recycling Inc., its streamlining
activities and the closure of its tube products line, offset by a mark-to-market
aluminum contract hedge gain of $3.7 million.
Exclusive of the $5.2 million of restructuring and other charges and $3.7
million aluminum hedge gain, the Company's income from continuing operations in
the third quarter of 2004 would be approximately $0.25 per diluted share after
those adjustments. Exclusive of the $1.1 million mark-to-market aluminum hedge
gain, income from continuing operations in the third quarter of 2003 would have
been approximately $0.11 per diluted share after that adjustment.
The diluted earnings per share that exclude the restructuring charges, other
costs and mark-to-market hedge gains are not measures defined under accounting
principles generally accepted in the United States of America (GAAP). Management
believes these numbers are useful to investors in understanding the results of
operations of the Company because they illustrate the impact that the
restructuring charges and hedge gains had separately from the Company's
operational results. A schedule which reconciles the non-GAAP earnings data
presented above to the most comparable financial measure calculated and
presented in accordance with GAAP is provided as part of the financial tables
included in this release.
Commonwealth's President and Chief Executive Officer Steven J. Demetriou said,
"In the third quarter, increased pricing and improved shipment volume translated
into increased sales, stronger margins and improved earnings from continuing
operations net of the effects of the hedge and restructuring activity. Actions
taken during the second quarter, including discontinuing certain projects,
divesting non-core assets and implementing price increases, have begun to
improve bottom line profitability.
"Material margins improved in the third quarter due to new pricing
arrangements. We expect material margins in the fourth quarter of 2004 and into
2005 to continue to increase and benefit from continued strong demand.
Additionally, our renewed focus on working capital management has resulted in
the reduction of inventory levels and receivable days outstanding, which
contributed to the one-time generation of approximately $10 million in cash
during the third quarter.
"Excluding the net charges incurred this quarter, we are seeing improvements in
our results and are continuing our rigorous focus on productivity gains while
positioning the Company for the merger and future success."
Third-Quarter 2004 Results
Commonwealth's third-quarter aluminum shipments improved 30% from 200.6 million
pounds in the 2003 period to 261.5 million pounds in the 2004 period. Improved
volumes reflected stronger customer demand across virtually all end-use
industries. Net sales, including aluminum sales to Alflex, improved 37% to
$309.3 million in the third quarter of 2004 from $225.1 million in the
comparable 2003 period.
Third-quarter 2004 gross profit improved 61% to $21.5 million from $13.3
million in the 2003 quarter. Gross profit margin improved to 7.0% from 6.0% in
the same period last year. The increase includes the effects of the $3.7 million
and $1.1 million mark-to-market net hedge gains in the 2004 and 2003 third
quarters respectively. In addition, material margins increased to $0.350 per
pound from $0.337 per pound in the third quarter of 2003. Excluding effects of
the hedge, third-quarter 2004 material margins increased to $0.336 per pound
from $0.332 per pound in the same period of 2003. On a sequential basis,
material margins improved $0.028 per pound from $0.308 per pound in the second
quarter of 2004 after adjustment for hedge gains and tube inventory write-downs.
Third-quarter 2004 manufacturing unit costs declined to $0.241 per pound from
$0.248 per pound in the prior-year quarter due to improved volume.
As a percent of net sales, selling, general and administrative expenses in the
third quarter were 3.2% for the third quarters of 2004 and 2003.
The announced sale of the Company's Alflex subsidiary to the Southwire Company
was completed on July 30. Alflex results are shown as discontinued operations
for all periods in the accompanying financial statements.
First Nine-Month 2004 Results
Commonwealth's aluminum shipments increased 32% to 756.4 million pounds in the
first nine months of 2004 compared with 572.5 million pounds in the year-earlier
period. Improvement in shipments reflected stronger customer demand across
virtually all end-use industries. Net sales, including aluminum sales to Alflex,
improved 39% to $847.1 million in the first nine months of 2004 from $611.0
million in the comparable prior-year period. Gross profit improved 37% to $40.6
million in the first nine months of 2004 from $29.7 million in the same period
of 2003, while gross profit margin decreased slightly to 4.9% in the 2004 period
from 5.0% in the 2003 period. Material margins were $0.316 per pound in the
first nine months of 2004 compared to $0.347 per pound in the same period of
2003. Adjusted for hedge gains and tube inventory write-downs, material margins
were $0.314 per pound in the first nine months of 2004 compared to $0.345 per
pound in the comparable 2003 period. Manufacturing unit costs, exclusive of tube
write-down charges, declined to $0.235 per pound from $0.271 per pound in the
first nine months of 2003. The gross profit improvement in the first nine months
of 2004 compared to the prior-year period, despite lower material margins, is
principally due to higher shipment volume and lower manufacturing unit costs.
Loss from continuing operations for the first nine months of 2004 was $20.3
million, compared with a loss of $4.8 million in the prior-year period.
Operating results for the first nine months of 2004 include $18.6 million of
restructuring and other charges, $2.1 million net mark-to-market hedge gains and
$2.2 million of tube closure costs included in cost of goods sold. The first
nine months of 2003 include mark-to-market hedge gains of $1.5 million.
Exclusive of the $18.6 million of restructuring charges, $2.2 million of tube
closure costs and $2.1 million of aluminum hedge gains, the Company's loss from
continuing operations in the nine months of 2004 would be approximately $1.6
million, or a loss of $0.10 per diluted share, after those adjustments.
Exclusive of the $1.5 million mark-to-market aluminum hedge gain, the loss from
continuing operations in the nine months of 2003 would have been approximately
$6.3 million, or a loss of $0.39 per diluted share, after the adjustment.
The diluted earnings per share that exclude the restructuring charges, other
costs and mark-to-market hedge gains are not measures defined under GAAP. As
previously stated, management believes these numbers are useful to investors in
understanding the results of operations of the Company because they illustrate
the impact that the restructuring charges, other costs and hedge gains had
separately from the Company's operational results. A schedule which reconciles
the non-GAAP earnings data presented above to the most comparable financial
measure calculated and presented in accordance with GAAP is provided as part of
the financial tables included in this release.
As a percent of net sales, selling, general and administrative cost decreased
to 3.7% in 2004 from 4.0% in 2003.
Proposed Merger with IMCO
Commonwealth Industries announced a proposed merger with IMCO Recycling on June
17, 2004. The Company currently anticipates completion of the merger in the
fourth quarter. The completion of the transaction remains subject to approval by
Commonwealth and IMCO shareholders. IMCO Recycling and Commonwealth Industries
have announced that, following the completion of their proposed merger, they
will name the merged company Aleris International, Inc.
Commonwealth Industries has commenced a cash tender offer to purchase all of
its outstanding $125 million aggregate principal amount of 10 3/4% Senior
Subordinated Notes due 2006 on the terms and conditions set forth in the Offer
to Purchase and Consent Solicitation Statement dated October 21, 2004 (the
Statement). The consummation of the tender offer is subject to the conditions
set forth in the Statement, including satisfaction of the conditions to the
merger. In connection with the tender offer, the Company is also soliciting
consents from holders of the Notes for which the Company will pay a consent
payment of $10.00 per $1,000 principal amount of Notes to tendering holders of
Notes, if the consent solicitation is successful.
A public, listen-only simulcast and replay of Commonwealth's third-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=960743.
The simulcast will begin at approximately 1:00 p.m. Eastern Daylight Time on
Monday, November 8, and a replay of the webcast will be available beginning at
approximately 3:00 p.m. Eastern Daylight Time and will run until December 8.
Commonwealth Industries is one of North America's leading manufacturers of
aluminum sheet for distributors and the transportation, construction, and
consumer durables product industries. The Company has direct-chill casting
facilities in Kentucky and continuous casting mini-mills in Ohio and California.
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 consummation of the closing of the merger between
Commonwealth and IMCO Recycling Inc., and the Company's and its subsidiaries'
expected future financial position, results of operations, cash flows,
dividends, financing plans, business strategy, budgets, projected costs, capital
expenditures, competitive position 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, our compliance with the provisions of the
Sarbanes-Oxley Act, the effect of global economic conditions, the ability to
achieve the level of cost savings or productivity improvements anticipated by
management, including synergies that the IMCO merger are expected to produce,
necessary financing for and the timing of the closing of the proposed merger
with IMCO, 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,
2004 2003 2004 2003
----------- ----------- ---------- -----------
Net sales $ 308,497 $ 221,213 $ 834,385 $ 598,598
Cost of goods sold 287,022 207,870 793,744 568,890
----------- ---------- ----------- ----------
Gross profit 21,475 13,343 40,641 29,708
Selling, general and administrative expenses 9,817 7,109 30,728 24,113
Restructuring and other charges 5,243 -- 18,580 --
----------- ---------- ----------- ----------
Operating income (loss) 6,415 6,234 (8,667) 5,595
Other income (expense), net 459 423 1,328 1,331
Interest expense, net (4,230) (3,867) (12,783) (11,621)
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Income (loss) from continuing operations
before income taxes 2,644 2,790 (20,122) (4,695)
Income tax expense 87 33 130 100
----------- ---------- ----------- ----------
Income (loss) from continuing operations 2,557 2,757 (20,252) (4,795)
Discontinued operations:
Income (loss) from operations before income taxes (752) 168 4,412 (611)
Income (loss) on disposition 11 -- (1,559) --
Income tax expense (benefit) (292) 17 720 50
----------- ---------- ----------- ----------
Income (loss) from discontinued operations (449) 151 2,133 (661)
----------- ---------- ----------- ----------
Net income (loss) $ 2,108 $ 2,908 $ (18,119) $ (5,456)
=========== ========== =========== ==========
Basic net income (loss) per share:
Income (loss) from continuing operations $ 0.16 $ 0.17 $ (1.25) $ (0.30)
Income (loss) from discontinued operations (0.03) 0.01 0.13 (0.04)
Net income (loss) 0.13 0.18 (1.12) (0.34)
Diluted net income (loss) per share:
Income (loss) from continuing operations $ 0.15 $ 0.17 $ (1.25) $ (0.30)
Income (loss) from discontinued operations (0.03) 0.01 0.13 (0.04)
Net income (loss) 0.13 0.18 (1.12) (0.34)
Weighted average shares outstanding:
Basic 16,435 16,011 16,176 16,011
Diluted 16,568 16,034 16,176 16,011
Dividends paid per share $ 0.00 $ 0.00 $ 0.00 $ 0.10
COMMONWEALTH INDUSTRIES, INC.
Operating and Financial Statistics
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net sales volume (1) $ 309,327 $ 225,119 $ 847,069 $ 611,020
Shipment volume (millions lbs.)(2) 261.5 200.6 756.4 572.5
Production volume (millions lbs.) 262.0 186.7 768.3 548.5
Gross profit percent 7.0% 6.0% 4.9% 5.0%
Operating income percent 2.1% 2.8% (1.0%) 0.9%
Current ratio 2.8x 2.8x 2.8x 2.8x
Interest coverage ratio (EBITDA to interest expense, net) 2.9x 2.9x 0.7x 1.8x
Return on average stockholders' equity (annualized) 12.4% 11.7% (32.3%) (7.2%)
Debt-to-capitalization 63% 56% 63% 56%
EBITDA (3) $ 12,112 $ 11,265 $ 8,500 $ 20,666
Note (1)includes sales to discontinued electrical products operations of $830 and $3,906, respectively, for the one month
ended July 31, 2004 and the three months ended September 30, 2003 and $12,684 and $12,422, respectively, for the seven
months ended July 31, 2004 and the nine months ended September 30, 2003.
(2)includes shipments to discontinued electrical products operations of 0.7 and 4.1, respectively, for the one month
ended July 31, 2004 and the three months ended September 30, 2003 and 11.5 and 15.2, respectively, for the seven
months ended July 31, 2004 and the nine months ended September 30, 2003.
(3)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 Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net cash (used in) continuing operations $ (39,814) $ (1,737) $ (41,099) $ (2,378)
Adjustments to reconcile net cash (used in) continuing
operations to income (loss) from continuing operations:
Depreciation (4,971) (4,608) (15,486) (13,740)
Amortization (534) (222) (1,138) (666)
Loss on disposal of property, plant and equipment (26) (28) (604) (68)
Issuance of common stock in connection with stock awards (6) -- (212) (90)
Change in working capital and other net assets 47,908 9,352 38,287 12,147
------------ ----------- ------------ -----------
Income (loss) from continuing operations $ 2,557 $ 2,757 $ (20,252) $ (4,795)
Add back depreciation 4,971 4,608 15,486 13,740
Add back amortization (2) 267 -- 353 --
Add back tax expense 87 33 130 100
Add back interest expense, net (2) 4,230 3,867 12,783 11,621
----------- ----------- ----------- -----------
EBITDA $ 12,112 $ 11,265 $ 8,500 $ 20,666
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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, 2004 and 2003
of $267 and $222, respectively, and the nine months ended September 30, 2004 and 2003 of
$785 and $666, 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,
2004 2003
------------ -----------
Cash flows from operating activities:
Net income (loss) $ (18,119) $ (5,456)
(Income) loss from discontinued operations (2,133) 661
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operations:
Depreciation 15,486 13,740
Amortization 1,138 666
Loss on disposal of property, plant and equipment 604 68
Issuance of common stock in connection with stock awards 212 90
Change in working capital and other net assets (38,287) (12,147)
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Net cash (used in) continuing operations (41,099) (2,378)
Net cash (used in) provided by discontinued operations (652) 1,567
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Net cash (used in) discontinued operations (41,751) (811)
------------ -----------
Cash flows from investing activities:
Proceeds from sale of electrical products segment 64,041 --
Purchases of property, plant and equipment (6,452) (11,198)
Proceeds from sale of property, plant and equipment 182 158
----------- -----------
Net cash provided by (used in) investing activities 57,771 (11,040)
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Cash flows from financing activities:
(Decrease) in outstanding checks in excess of deposits (947) --
Proceeds from long-term debt 167,879 75,168
Repayments of long-term debt (167,879) (71,978)
Proceeds from issuance of common stock 1,783 --
Cash dividends paid -- (1,601)
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Net cash provided by financing activities 836 1,589
----------- -----------
Net increase (decrease) in cash and cash equivalents 16,856 (10,262)
Cash and cash equivalents at beginning of period -- 13,199
----------- -----------
Cash and cash equivalents at end of period $ 16,856 $ 2,937
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COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(in thousands except share data)
September 30,
--------------------------
2004 2003
----------- -----------
Assets
Cash and cash equivalents $ 16,856 $ 2,937
Accounts receivable, net 141 158
Inventories 111,555 102,262
Net residual interest in receivables sold 91,140 60,083
Prepayments and other current assets 24,470 4,910
Current assets of discontinued operations 243 35,972
----------- -----------
Total current assets 244,405 206,322
Property, plant and equipment, net 117,790 128,270
Other noncurrent assets 7,836 5,423
Noncurrent assets of discontinued operations -- 63,470
----------- -----------
Total assets $ 370,031 $ 403,485
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Liabilities
Accounts payable $ 50,672 $ 41,836
Accrued liabilities 34,284 24,421
Current liabilities of discontinued operations 1,918 8,720
----------- -----------
Total current liabilities 86,874 74,977
Long-term debt 125,000 128,190
Other long-term liabilities 3,256 3,921
Accrued pension benefits 23,533 26,043
Accrued postretirement benefits 58,368 70,085
Noncurrent liabilities of discontinued operations 775 1,000
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Total liabilities 297,806 304,216
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Commitments and contingencies -- --
Stockholders' Equity
Common stock, $0.01 par value, 50,000,000 shares authorized,
16,644,343 and 16,010,971 shares outstanding at
September 30, 2004 and 2003, respectively 166 160
Additional paid-in capital 410,103 405,703
Accumulated deficit (326,596) (284,999)
Unearned compensation (2,058) --
Accumulated other comprehensive income:
Minimum pension liability adjustment (21,276) (21,391)
Effects of cash flow hedges 11,886 (204)
----------- -----------
Total stockholders' equity 72,225 99,269
----------- -----------
Total liabilities and stockholders' equity $ 370,031 $ 403,485
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COMMONWEALTH INDUSTRIES, INC.
Reconciliation of Non-GAAP Earnings Data to Most Comparable Financial
Measure Calculated and Presented in Accordance with GAAP (1)
(in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Income (loss) from continuing operations $ 2,557 $ 2,757 $ (20,252) $ (4,795)
add back restructuring and other charges 5,243 - 18,580 -
add back tube closure costs included in cost of goods sold - - 2,208 -
deduct mark-to-market aluminum hedge gains (3,645) (1,027) (2,090) (1,455)
------------ ----------- ------------ -----------
Income (loss) from continuing operations excluding
restructuring and other charges and hedge gains $ 4,155 $ 1,730 $ (1,554) $ (6,250)
============ =========== ============ ===========
Basic net income (loss) per share:
Income (loss) from continuing operations $ 0.16 $ 0.17 $ (1.25) $ (0.30)
Restructuring and other charges 0.32 - 1.15 -
Tube closure costs included in cost of goods sold - - 0.14 -
Mark-to-market aluminum hedge gains (0.22) (0.06) (0.13) (0.09)
Income (loss) from continuing operations excluding
restructuring and other charges and hedge gains 0.25 0.11 (0.10) (0.39)
Diluted net income (loss) per share:
Income (loss) from continuing operations $ 0.15 $ 0.17 $ (1.25) $ (0.30)
Restructuring and other charges 0.32 - 1.15 -
Tube closure costs included in cost of goods sold - - 0.14 -
Mark-to-market aluminum hedge gains (0.22) (0.06) (0.13) (0.09)
Income (loss) from continuing operations excluding
restructuring and other charges and hedge gains 0.25 0.11 (0.10) (0.39)
Weighted average shares outstanding:
Basic 16,435 16,011 16,176 16,011
Diluted 16,568 16,034 16,176 16,011
Note (1) GAAP = generally accepted accounting principles accepted in the United States of America.
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/ Henry Del Castillo
---------------------------------------
Henry Del Castillo
Vice President Finance
Date: November 8, 2004