-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IaaSQn3pAnRffwMgjfHzldHaS88bDdujn57QPr2AJ52wDMukHWDidNYfiy3RKig0 +LF8740sg2hqYOi+cOQ87Q== 0000934747-00-000007.txt : 20000505 0000934747-00-000007.hdr.sgml : 20000505 ACCESSION NUMBER: 0000934747-00-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMONWEALTH INDUSTRIES INC/DE/ CENTRAL INDEX KEY: 0000934747 STANDARD INDUSTRIAL CLASSIFICATION: ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS [3350] IRS NUMBER: 133245741 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25642 FILM NUMBER: 618559 BUSINESS ADDRESS: STREET 1: 500 WEST JEFFERSON STREET STREET 2: 19TH FLOOR CITY: LOUISVILLE STATE: KY ZIP: 40202-2823 BUSINESS PHONE: 502-589-8100 MAIL ADDRESS: STREET 1: 500 WEST JEFFERSON STREET STREET 2: 19TH FLOOR CITY: LOUISVILLE STATE: KY ZIP: 40202-2823 FORMER COMPANY: FORMER CONFORMED NAME: COMMONWEALTH ALUMINUM CORP DATE OF NAME CHANGE: 19941228 10-Q 1 FORM 10-Q =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q --------- [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ -------------- Commission File No. 0-25642 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 19th Floor Louisville, Kentucky 40202-2823 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (502) 589-8100 ---------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ The registrant had 16,622,251 shares of common stock outstanding at May 1, 2000. ================================================================================ COMMONWEALTH INDUSTRIES, INC. FORM 10-Q For the Quarter Ended March 31, 2000 INDEX Part I - Financial Information Item 1. Financial Statements (unaudited) Page Number Condensed Consolidated Balance Sheet as of March 31, 2000 and December 31, 1999 3 Condensed Consolidated Statement of Income for the three months ended March 31, 2000 and 1999 4 Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6-13 Item 2. Management's Discussion and Analysis of Financial Condition 14-16 and Results of Operations Part II - Other Information Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 COMMONWEALTH INDUSTRIES, INC. Condensed Consolidated Balance Sheet (in thousands except share data)
March 31, December 31, 2000 1999 -------------- ------------- Assets Current assets: Cash and cash equivalents $ - $ - Accounts receivable, net 121 118 Inventories 204,999 207,413 Prepayments and other current assets 46,434 53,821 -------------- ------------- Total current assets 251,554 261,352 Property, plant and equipment, net 274,040 275,531 Goodwill, net 163,491 164,610 Other noncurrent assets 4,544 4,829 -------------- ------------- Total assets $ 693,629 $ 706,322 ============== ============= Liabilities Current liabilities: Outstanding checks in excess of deposits $ 10,876 $ 1,188 Accounts payable 82,049 97,937 Accrued liabilities 31,597 39,160 -------------- ------------- Total current liabilities 124,522 138,285 Long-term debt 125,000 125,000 Other long-term liabilities 8,317 8,412 Accrued pension benefits 12,472 12,482 Accrued postretirement benefits 85,253 85,467 -------------- ------------- Total liabilities 355,564 369,646 -------------- ------------- Commitments and contingencies - - Stockholders' Equity Common stock, $0.01 par value, 50,000,000 shares authorized, 16,611,835 and 16,606,000 shares outstanding at March 31, 2000 and December 31, 1999, respectively 166 166 Additional paid-in capital 409,137 409,062 Accumulated deficit (61,447) (61,866) Unearned compensation (68) (175) Notes receivable from sale of common stock (9,723) (10,511) -------------- ------------- Total stockholders' equity 338,065 336,676 -------------- ------------- Total liabilities and stockholders' equity $ 693,629 $ 706,322 ============== ============= See notes to condensed consolidated financial statements.
COMMONWEALTH INDUSTRIES, INC. Condensed Consolidated Statement of Income (in thousands except per share data)
Three months ended March 31, ---------------------------------------- 2000 1999 --------------- -------------- Net sales $ 312,827 $ 238,750 Cost of goods sold 290,287 217,868 --------------- -------------- Gross profit 22,540 20,882 Selling, general and administrative expenses 14,645 11,962 Amortization of goodwill 1,119 1,119 --------------- -------------- Operating income 6,776 7,801 Other income (expense), net 240 425 Interest expense, net (5,327) (5,299) --------------- -------------- Income before income taxes 1,689 2,927 Income tax expense 439 761 --------------- -------------- Net income $ 1,250 $ 2,166 =============== ============== Basic and diluted net income per share $ 0.08 $ 0.14 =============== ============== Weighted average shares outstanding Basic 16,612 15,949 Diluted 16,637 15,976 Dividends paid per share $ 0.05 $ 0.05 See notes to condensed consolidated financial statements.
COMMONWEALTH INDUSTRIES, INC. Condensed Consolidated Statement of Cash Flows (in thousands)
Three months ended March 31, ---------------------------------- 2000 1999 ----------- ----------- Cash flows from operating activities: Net income $ 1,250 $ 2,166 Adjustments to reconcile net income to net cash (used in) provided by operations: Depreciation and amortization 9,814 8,786 Issuance of common stock in connection with stock awards 75 44 Changes in assets and liabilities: (Increase) in accounts receivable, net (3) (33) Decrease in inventories 2,414 3,720 Decrease (increase) in prepayments and other current assets 7,387 (19,904) (Increase) in other noncurrent assets (15) (166) (Decrease) increase in accounts payable (15,888) 15,808 (Decrease) increase in accrued liabilities (7,563) 4,121 (Decrease) increase in other liabilities (319) 497 ----------- ----------- Net cash (used in) provided by operating activities (2,848) 15,039 ----------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (6,801) (9,697) Proceeds from sale of property, plant and equipment 4 - ----------- ----------- Net cash (used in) investing activities (6,797) (9,697) ----------- ----------- Cash flows from financing activities: Increase in outstanding checks in excess of deposits 9,688 - Proceeds from long-term debt 40,400 23,150 Repayments of long-term debt (40,400) (23,150) Repayments of notes receivable from sale of common stock 788 - Cash dividends paid (831) (797) ----------- ----------- Net cash provided by (used in) financing activities 9,645 (797) ----------- ----------- Net increase in cash and cash equivalents - 4,545 Cash and cash equivalents at beginning of period - 6 ----------- ----------- Cash and cash equivalents at end of period $ - $ 4,551 =========== =========== Supplemental disclosures: Interest paid $ 1,845 $ 1,548 Income taxes paid 103 198 See notes to condensed consolidated financial statements.
COMMONWEALTH INDUSTRIES, INC. Notes to Condensed Consolidated Financial Statements 1. Basis of Presentation The accompanying condensed consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures normally required by generally accepted accounting principles. The condensed consolidated financial statements have been prepared in accordance with Commonwealth Industries, Inc.'s (the "Company's") customary accounting practices and have not been audited. In the opinion of management, all adjustments necessary to fairly present the results of operations for the reporting interim periods have been made and were of a normal recurring nature. 2. Inventories The Company uses the last-in, first-out (LIFO), first-in, first-out (FIFO) and average-cost accounting methods for valuing its inventories. (in thousands) March 31, 2000 December 31, 1999 - -------------- --------------- ----------------- Raw materials $ 65,949 $ 63,510 Work in process 89,359 80,210 Finished goods 61,021 62,278 Expendable parts and supplies 15,661 15,895 --------- --------- 231,990 221,893 LIFO reserve (26,991) (14,480) --------- --------- $ 204,999 $ 207,413 ========= ========= Inventories of approximately $181.1 million and $183.3 million, included in the above totals (before the LIFO reserve) at March 31, 2000 and December 31, 1999, respectively, are accounted for under the LIFO method of accounting while the remainder of the inventories are accounted for under the FIFO and average-cost methods. On March 31, 2000, the Company had deferred realized losses of $2.9 million on closed futures contracts which are recorded as an increase to the carrying value of inventory. The Company had deferred realized losses of $0.7 million at December 31, 1999. 3. Provision for Income Taxes The Company recognized an income tax expense of $0.4 million for the three months ended March 31, 2000 compared to an income tax expense of $0.8 million for the three months ended March 31, 1999. 4. Net Income Per Share Computations The following is a reconciliation of the numerator and denominator of the basic and diluted per share computations:
Three months ended ------------------ March 31, --------- 2000 1999 ---- ---- Income (numerator) amounts used for basic and diluted per share computations: Net income $1,250 $2,166 ====== ====== Shares (denominator) used for basic per share computations: Weighted average shares of common stock outstanding 16,612 15,949 ====== ====== Shares (denominator) used for diluted per share computations: Weighted average shares of common stock outstanding 16,612 15,949 Plus: dilutive effect of stock options 25 27 ------ ------ Adjusted weighted average shares 16,637 15,976 ====== ====== Net income per share data: Basic and diluted $0.08 $0.14 ===== ===== Options to purchase 773,500 and 563,000 common shares for the three months ended March 31, 2000 and 1999, respectively, were excluded from the calculations above because the exercise prices on the options were greater than the average market price for the periods.
5. Information Concerning Business Segments The Company has determined it has two reportable segments: aluminum and electrical products. The aluminum segment manufactures aluminum sheet for distributors and the transportation, construction, and consumer durables end-use markets. The electrical products segment manufactures flexible electrical wiring products for the commercial and do-it-yourself markets. The accounting policies of the reportable segments are the same as those described in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" in the Company's annual report to stockholders for the year ended December 31, 1999. All intersegment sales prices are market based. The Company evaluates the performance of its operating segments based upon operating income. The Company's reportable segments are strategic business units that offer different products to different customer groups. They are managed separately because each business requires different technology and marketing strategies. Summarized financial information concerning the Company's reportable segments is shown in the following table for the three months ended March 31, 2000 and 1999. The "Other" column includes corporate related items, including elimination of intersegment transactions, and as it relates to segment operating income, income and expense not allocated to reportable segments.
Electrical Aluminum Products Other Total --------- ----------- --------- ---------- Three months ended March 31, 2000 - --------------------------------- Net sales to external customers $279,297 $33,530 $ -- $312,827 Intersegment net sales 7,041 -- (7,041) -- Operating income (loss) 11,526 (897) (3,853) 6,776 Depreciation and amortization 8,685 1,022 107 9,814 Total assets 596,153 97,401 75 693,629 Capital expenditures 6,698 103 -- 6,801 Three months ended March 31, 1999 - --------------------------------- Net sales to external customers $208,844 $29,906 $ -- $238,750 Intersegment net sales 6,128 -- (6,128) -- Operating income 7,599 2,499 (2,297) 7,801 Depreciation and amortization 7,791 874 121 8,786 Total assets 565,074 105,119 166 670,359 Capital expenditures 6,963 2,734 -- 9,697
6. Guarantor Financial Statements The $125 million of 10.75% senior subordinated notes due 2006 issued by the Company, and the $100 million revolving credit facility are guaranteed by the Company's wholly-owned subsidiaries (collectively the "Subsidiary Guarantors"), other than Commonwealth Financing Corp. ("CFC"), a Securitization Subsidiary (as defined in the Indenture with respect to such debt) and certain subsidiaries of the Company without substantial assets or operations. Such guarantees are full, unconditional and joint and several. Separate financial statements of the Subsidiary Guarantors are not presented because management has determined that they would not be material to investors. The following supplemental financial information sets forth on a condensed combined basis, combining balance sheet, statement of income and statement of cash flows for the Parent Company Only, Subsidiary Guarantors, Non-guarantor Subsidiaries and for the Company as of March 31, 2000 and 1999 and for the three months ended March 31, 2000 and 1999. Combining Balance Sheet at March 31, 2000 (in thousands)
Parent Company Subsidiary Non-guarantor Combined Only Guarantors Subsidiaries Eliminations Totals ------- ---------- ------------- ------------ ---------- Assets Current assets: Cash and cash equivalents $ - $ - $ - $ - $ - Accounts receivable, net 96,372 90,975 - (187,226) 121 Inventories - 204,999 - - 204,999 Prepayments and other current assets 75 4,829 41,530 - 46,434 ------- ---------- ------ -------- ---------- Total current assets 96,447 300,803 41,530 (187,226) 251,554 Property, plant and equipment, net - 274,040 - - 274,040 Goodwill, net - 163,491 - - 163,491 Other noncurrent assets 243,101 4,524 - (243,081) 4,544 ------- ---------- ------ -------- ---------- Total assets $ 339,548 $ 742,858 $ 41,530 $(430,307) $ 693,629 ======= ========== ====== ======== ========== Liabilities Current liabilities: Outstanding checks in excess of deposits $ - $ 10,876 $ - $ - $ 10,876 Accounts payable - 178,421 90,854 (187,226) 82,049 Accrued liabilities 1,483 29,946 168 - 31,597 ------- ---------- ------ -------- ---------- Total current liabilities 1,483 219,243 91,022 (187,226) 124,522 Long-term debt - 125,000 - - 125,000 Other long-term liabilities - 8,317 - - 8,317 Accrued pension benefits - 12,472 - - 12,472 Accrued postretirement benefits - 85,253 - - 85,253 ------- ---------- ------ -------- ---------- Total liabilities 1,483 450,285 91,022 (187,226) 355,564 ------- ---------- ------ -------- ---------- Commitments and contingencies - - - - - Stockholders' Equity Common stock 166 1 - (1) 166 Additional paid-in capital 409,137 273,774 5,000 (278,774) 409,137 Accumulated deficit (61,447) 18,798 (54,492) 35,694 (61,447) Unearned compensation (68) - - - (68) Notes receivable from sale of common stock (9,723) - - - (9,723) ------- ---------- ------ -------- ---------- Total stockholders' equity 338,065 292,573 (49,492) (243,081) 338,065 ------- ---------- ------ -------- ---------- Total liabilities and stockholders' equity $339,548 $ 742,858 $ 41,530 $(430,307) $693,629 ======= ========== ====== ======== ==========
Combining Balance Sheet at March 31, 1999 (in thousands)
Parent Company Subsidiary Non-guarantor Combined Only Guarantors Subsidiaries Eliminations Totals ------- ---------- ------------- ------------ ---------- Assets Current assets: Cash and cash equivalents $ - $ 4,551 $ - $ - $ 4,551 Accounts receivable, net 89,011 66,620 - (155,370) 261 Inventories - 171,248 - - 171,248 Prepayments and other current assets 1 7,935 37,335 - 45,271 ------- ---------- ------ -------- -------- Total current assets 89,012 250,354 37,335 (155,370) 221,331 Property, plant and equipment, net - 272,288 - - 272,288 Goodwill, net - 167,967 - - 167,967 Other noncurrent assets 232,066 8,753 - (232,046) 8,773 ------- ---------- ------ -------- -------- Total assets $ 321,078 $ 699,362 $ 37,335 $(387,416) $670,359 ======= ========== ====== ======== ======== Liabilities Current liabilities: Outstanding checks in excess of deposits $ - $ - $ - $ - $ - Accounts payable - 158,898 66,524 (155,370) 70,052 Accrued liabilities (9,116) 44,404 (34) - 35,254 ------- ---------- ------ -------- -------- Total current liabilities (9,116) 203,302 66,490 (155,370) 105,306 Long-term debt - 125,000 - - 125,000 Other long-term liabilities - 8,708 - - 8,708 Accrued pension benefits - 16,340 - - 16,340 Accrued postretirement benefits - 86,942 - - 86,942 ------- ---------- ------ -------- -------- Total liabilities (9,116) 440,292 66,490 (155,370) 342,296 ------- ---------- ------ -------- -------- Commitments and contingencies - - - - - Stockholders' Equity Common stock 159 1 - (1) 159 Additional paid-in capital 398,838 273,774 5,000 (278,774) 398,838 Accumulated deficit (68,252) (12,574) (34,155) 46,729 (68,252) Unearned compensation (551) - - - (551) Accumulated other comprehensive income: Minimum pension liability adjustment - (2,131) - - (2,131) ------- ---------- ------ -------- -------- Total stockholders' equity 330,194 259,070 (29,155) (232,046) 328,063 ------- ---------- ------ -------- -------- Total liabilities and stockholders' equity $321,078 $ 699,362 $ 37,335 $(387,416) $670,359 ======= ========== ====== ======== ========
Combining Statement of Income for the three months ended March 31, 2000 (in thousands)
Parent Company Subsidiary Non-guarantor Combined Only Guarantors Subsidiaries Eliminations Totals ------- ---------- ------------- ------------ ---------- Net sales $ - $ 312,827 $ - $ - $ 312,827 Cost of goods sold - 290,287 - - 290,287 ------- ---------- ------ -------- -------- Gross profit - 22,540 - - 22,540 Selling, general and administrative expenses 222 14,423 - - 14,645 Amortization of goodwill - 1,119 - - 1,119 ------- ---------- ------ -------- -------- Operating income (loss) (222) 6,998 - - 6,776 Other income (expense), net 1,321 240 - (1,321) 240 Interest income (expense), net 151 39 (5,517) - (5,327) ------- ---------- ------ -------- -------- Income (loss) before income taxes 1,250 7,277 (5,517) (1,321) 1,689 Income tax expense - 439 - - 439 ------- ---------- ------ -------- -------- Net income (loss) $ 1,250 $ 6,838 $ (5,517) $ (1,321) $ 1,250 ======= ========== ====== ======== ========
Combining Statement of Income for the three months ended March 31, 1999 (in thousands)
Parent Company Subsidiary Non-guarantor Combined Only Guarantors Subsidiaries Eliminations Totals ------- ---------- ------------- ------------ ---------- Net sales $ - $ 238,750 $ - $ - $ 238,750 Cost of goods sold - 217,868 - - 217,868 ------- ---------- ------ -------- -------- Gross profit - 20,882 - - 20,882 Selling, general and administrative expenses 209 11,753 - - 11,962 Amortization of goodwill - 1,119 - - 1,119 ------- ---------- ------ -------- -------- Operating income (loss) (209) 8,010 - - 7,801 Other income (expense), net 2,359 425 - (2,359) 425 Interest income (expense), net 16 (883) (4,432) - (5,299) ------- ---------- ------ -------- -------- Income (loss) before income taxes 2,166 7,552 (4,432) (2,359) 2,927 Income tax expense - 761 - - 761 ------- ---------- ------ -------- -------- Net income (loss) $ 2,166 $ 6,791 $ (4,432) $ (2,359) $ 2,166 ======= ========== ====== ======== ========
Combining Statement of Cash Flows for the three months ended March 31, 2000 (in thousands)
Parent Company Subsidiary Non-guarantor Combined Only Guarantors Subsidiaries Eliminations Totals -------- ---------- ------------ ------------ --------- Cash flows from operating activities: Net income (loss) $ 1,250 $ 6,838 $ (5,517) $ (1,321) $ 1,250 Adjustments to reconcile net income (loss) to net cash provided (used in) by operations: Depreciation and amortization 107 9,707 - - 9,814 Issuance of common stock in connection with stock awards 75 - - - 75 Equity in undistributed net income of subsidiaries - (1,321) - 1,321 - Changes in assets and liabilities: (Increase) decrease in accounts receivable, net (1,033) (6,721) - 7,751 (3) Decrease in inventories - 2,414 - - 2,414 Decrease (increase) in prepayments and other current assets 117 8,820 (1,550) - 7,387 (Increase) decrease in other noncurrent assets (1,543) 1,528 - - (15) (Decrease) increase in accounts payable - (14,855) 6,718 (7,751) (15,888) Increase (decrease) in accrued liabilities 1,070 (8,982) 349 - (7,563) (Decrease) in other liabilities - (319) - - (319) ------- ------- -------- ------- ------- Net cash provided by (used in) operating activities 43 (2,891) - - (2,848) ------- ------- -------- ------- ------- Cash flows from investing activities: Purchases of property, plant and equipment - (6,801) - - (6,801) Proceeds from sale of property, plant and equipment - 4 - - 4 ------- ------- -------- ------- ------- Net cash (used in) investing activities - (6,797) - - (6,797) ------- ------- -------- ------- ------- Cash flows from financing activities: Increase in outstanding checks in excess of deposits - 9,688 - - 9,688 Proceeds from long-term debt - 40,400 - - 40,400 Repayments of long-term debt - (40,400) - - (40,400) Repayments of notes receivable from sale of common stock 788 - - - 788 Cash dividends paid (831) - - - (831) ------- ------- -------- ------- ------- Net cash (used in) provided by financing activities (43) 9,688 - - 9,645 ------- ------- -------- ------- ------- Net increase (decrease) in cash and cash equivalents - - - - - Cash and cash equivalents at beginning of period - - - - - ------- ------- -------- ------- ------- Cash and cash equivalents at end of period $ - $ - $ - $ - $ - ======= ======= ======== ======= =======
Combining Statement of Cash Flows for the three months ended March 31, 1999 (in thousands)
Parent Company Subsidiary Non-guarantor Combined Only Guarantors Subsidiaries Eliminations Totals -------- ---------- ------------ ------------ --------- Cash flows from operating activities: Net income (loss) $ 2,166 $ 6,791 $ (4,432) $(2,359) $ 2,166 Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation and amortization 121 8,665 - - 8,786 Issuance of common stock in connection with stock awards 44 - - - 44 Equity in undistributed net income of subsidiaries - (2,359) - 2,359 - Changes in assets and liabilities: Decrease (increase) in accounts receivable, net 80 (25,505) - 25,392 (33) Decrease in inventories - 3,720 - - 3,720 Decrease (increase) in prepayments and other current assets 1 1,407 (21,312) - (19,904) (Increase) decrease in other noncurrent assets (1,562) 1,396 - - (166) Increase (decrease) in accounts payable - 15,713 25,487 (25,392) 15,808 (Decrease) increase in accrued liabilities (53) 3,917 257 - 4,121 Increase in other liabilities - 497 - - 497 ------- ------- -------- ------- ------- Net cash provided by operating activities 797 14,242 - - 15,039 ------- ------- -------- ------- ------- Cash flows from investing activities: Purchases of property, plant and equipment - (9,697) - - (9,697) ------- ------- -------- ------- ------- Net cash (used in) investing activities - (9,697) - - (9,697) ------- ------- -------- ------- ------- Cash flows from financing activities: Proceeds from long-term debt - 23,150 - - 23,150 Repayments of long-term debt - (23,150) - - (23,150) Cash dividends paid (797) - - - (797) ------- ------- -------- ------- ------- Net cash (used in) financing activities (797) - - - (797) ------- ------- -------- ------- ------- Net increase in cash and cash equivalents - 4,545 - - 4,545 Cash and cash equivalents at beginning of period - 6 - - 6 ------- ------- -------- ------- ------- Cash and cash equivalents at end of period $ - $ 4,551 $ - $ - $ 4,551 ======= ======= ======== ======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains statements which are forward-looking rather than historical fact. These forward-looking statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act, as amended and involve risks and uncertainties that could render them materially different, including, but not limited to, the effect of global economic conditions, the impact of competitive products and pricing, product development and commercialization, availability and cost of critical raw materials, the rate of technological change, product demand and market acceptance risks, 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 Securities and Exchange Commission filings. Overview The Company manufactures non-heat treat coiled aluminum sheet for distributors and the transportation, construction and consumer durables end use markets and electrical flexible conduit and prewired armored cable for the non-residential construction and renovation markets. The Company's principal raw materials are aluminum scrap, primary aluminum, copper and steel. Trends in the demand for aluminum sheet products in the United States and in the prices of aluminum primary metal, aluminum scrap and copper commodities affect the business of the Company. The Company's operating results also are affected by factors specific to the Company, such as the margins between selling prices for its products and its cost of raw material ("material margins") and its unit cost of converting raw material into its products ("conversion cost"). While changes in aluminum and copper prices can cause the Company's net sales to change significantly from period to period, net income is more directly impacted by the fluctuation in material margins. During the first quarter of 2000, shipments of the Company's aluminum sheet products increased by 15% from the first quarter of 1999. While overall demand for aluminum sheet products remained strong, material margins for the first quarter of 2000 decreased slightly from the fourth quarter of 1999. The Company had increased its maintenance spending in its aluminum operations during 1999, especially in the hot mill department, to support higher volumes, increase machine reliability, and increase the probability of excellent quality and service to the Company's customers. Demand for the Company's electrical conduit and cable products continues to be strong in 2000; however, the supply of these products has increased as a result of expansions of existing production by competitors, and the entry of new participants into the market. As a result, material margins for the Company's electrical conduit and cable products have come under pressure and are below the levels achieved in 1999. Demand for the Company's armored cable products, in particular, continues to be good. Other factors which continued to contribute to lower material margins were increases in raw material costs and ramp-up efficiency issues from our new Rocky Mount plant (the Company opened a new plant in Rocky Mount, North Carolina during the second quarter of 1999). The new plant increased production capacity of electrical conduit and cable products by 50% and enhanced the Company's competitive position by placing that capacity closer to attractive markets along the eastern United States. Results of Operations for the three months ended March 31, 2000 and 1999 Net Sales. Net sales for the quarter ended March 31, 2000, increased 31% to $313 million (including $33.5 million from Alflex) from $239 million (including $29.9 million from Alflex) for the same period in 1999. The increase is due to higher aluminum prices and higher shipments. Unit sales volume of aluminum increased 15% to 274.3 million pounds for the first quarter of 2000 from 237.9 million pounds for the first quarter of 1999. Alflex unit sales volume was 164.5 million feet for the first quarter of 2000 versus 135.0 million feet for the comparable period in 1999. Gross Profit. Gross profit for the quarter ended March 31, 2000, increased to $22.5 million from $20.9 million for the same period in 1999. This increase was attributable to increased sales volumes which offset the 23% decrease in material margins at Alflex which were due to the reasons previously noted in the "Overview Section". The Company's aluminum business manufacturing costs decreased on a unit basis compared to the same period in 1999 as a result of the higher volumes while material margins were slightly lower in the first quarter of 2000 than in the first quarter of 1999. Unit manufacturing costs at Alflex increased 4% in the first quarter of 2000 compared to the first quarter of 1999 principally associated with production ramp-up costs at the Rocky Mount plant. Operating Income. The Company produced operating income of $6.8 million for the first quarter of 2000 compared with $7.8 million for the first quarter of 1999. Selling, general and administrative expenses during the first quarter of 2000 were $14.6 million, compared with $12.0 million for the same period in 1999. Contributing to the increase were increases relating to a new variable compensation plan, a new executive compensation plan related to the Company's executive stock purchase incentive program and additional office expenses due to renovation and expansion of office facilities. In addition, there were increases at Alflex associated with the new Rocky Mount plant. Net Income. Net income was $1.3 million for the quarter ended March 31, 2000, compared with $2.2 million for the same period in 1999. Interest expense was $5.3 million for the quarter ended March 31, 2000 which was unchanged from the amount recorded for the first quarter of 1999. Income tax expense was $0.4 million in the first quarter of 2000 compared to an income tax expense of $0.8 million for the same period in 1999. Liquidity and Capital Resources The Company's sources of liquidity are cash flows from operations, the Company's accounts receivable securitization facility described below and borrowings under its $100 million revolving credit facility. The Company believes these sources will be sufficient to fund its working capital requirements, capital expenditures, debt service and dividend payments at least through 2000. On September 26, 1997, the Company sold all of its trade accounts receivables to a 100% owned subsidiary, Commonwealth Financing Corp. ("CFC"). Simultaneously, CFC entered into a three-year accounts receivable securitization facility with a financial institution and its affiliate, whereby CFC sells, on a revolving basis, an undivided interest in certain of its receivables and receives up to $150.0 million from an unrelated third party purchaser at a cost of funds linked to commercial paper rates plus a charge for administrative and credit support services. At March 31, 2000, the Company had outstanding $131.0 million under the agreement and had $41.5 million of net residual interest in the securitized receivables. The net residual interest in the securitized receivables is included in other current assets in the Company's consolidated financial statements. Capital expenditures were $6.8 million during the quarter ended March 31, 2000. At March 31, 2000, the Company had commitments of $6.7 million for the purchase or construction of capital assets. Total capital expenditures for the year 2000 are expected to be approximately $39 million, all generally related to upgrading and expanding the Company's manufacturing and other facilities and meeting environmental requirements. Risk Management The price of aluminum is subject to fluctuations due to unpredictable factors on the worldwide market. To reduce this market risk, the Company follows the policy of hedging its anticipated raw material requirements based on firm-priced sales and purchase orders. The Company purchases and sells futures contracts and options on the London Metal Exchange ("LME") based on its net metal position. The Company's metal position consists of inventories, purchase commitments, committed and anticipated sales, which is hedged using LME futures contracts and options. At March 31, 2000, the Company held purchase and sales commitments through 2000 totaling $75 million and $286 million, respectively. The Company also uses futures contracts to manage risks associated with its natural gas requirements. The Company held open aluminum futures contracts and options and natural gas futures, marked-to-market at March 31, 2000, with a net unrealized loss of $0.2 million. Before entering into futures contracts and options, the Company reviews the credit rating of the counterparty and assesses any possible credit risk. While the Company is exposed to certain losses in the event of non-performance by the counterparties to these agreements, the Company does not anticipate non-performance by such counterparties. The Company has entered into an interest rate swap agreement with a notional amount of $5 million. With respect to this agreement, the Company pays a fixed rate of interest and receives a LIBOR-based floating rate. Recently Issued Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded on the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in net income unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. The Company currently expects to adopt SFAS No. 133 in the Company's first quarter 2001 reporting, as required by the Financial Accounting Standards Board's Statement of Financial Accounting Standard No. 137, issued in June 1999, which defers SFAS No. 133's effective date to the first quarter of 2001. Management is currently evaluating the impact of SFAS No. 133, including an Exposure Draft of a Proposed Amendment to SFAS No. 133 issued March 2000, on the Company's future financial reporting. PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is a party to non-environmental legal proceedings and administrative actions all of which are of an ordinary routine nature incidental to the operations of the Company. Although it is impossible to predict the outcome of any legal proceeding, in the opinion of management such proceedings and actions should not, individually or in aggregate, have a material adverse effect on the Company's financial condition, results of operations or cash flows, although resolution in any year or quarter could be material to the results of operation for that period. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended March 31, 2000. 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 thereunto duly authorized. COMMONWEALTH INDUSTRIES, INC. By: /s/ Donald L. Marsh, Jr. ------------------------ Donald L. Marsh, Jr. Executive Vice President, Chief Financial Officer and Secretary Date: May 3, 2000 Exhibit Index Exhibit Number Description 27 Financial Data Schedule. EX-27 2 EXHIBIT 27
5 1,000 US$ year Dec-31-1999 Jan-1-1999 Dec-31-1999 1 0 0 118 0 207,413 261,352 575,569 300,038 706,322 138,285 125,000 0 0 166 336,510 706,322 1,045,916 1,045,916 959,051 959,051 0 591 19,333 11,968 957 11,011 0 0 0 11,011 0.68 0.68
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