8-K 1 jb8k4q03a.txt 4Q2003A FORM 8-K ================================================================================ 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 ================================================================================ 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 ----------- ----------- ---------- ----------- Net sales $ 243,191 $ 238,719 $ 918,396 $ 966,238 Cost of goods sold 220,958 216,994 858,274 898,927 ----------- ---------- ----------- ---------- 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 -- ----------- ---------- ----------- ---------- 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) ----------- ---------- ----------- ---------- 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) ----------- ---------- ----------- ---------- 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) ----------- ---------- ----------- ---------- Net income (loss) $ (23,478) $ 6,365 $ (28,934) $ (16,211) =========== ========== =========== ========== 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) ----------- ----------- ----------- ----------- Net income (loss) $ (1.47) $ 0.40 $ (1.81) $ (1.01) =========== =========== =========== =========== 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) ----------- ----------- ----------- ----------- Net income (loss) $ (1.47) $ 0.40 $ (1.81) $ (1.00) =========== =========== =========== =========== 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 ----------- ----------- ----------- ----------- 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 ----------- ----------- ----------- ----------- 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 ------------ ----------- ------------ ----------- 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 ----------- ----------- ----------- ----------- 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 ----------- ----------- ----------- ----------- EBITDA excluding non-cash goodwill impairment charges $ 15,195 $ 15,547 $ 36,521 $ 43,112 =========== =========== =========== =========== 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 ------------ ----------- 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) ------------ ----------- Net cash provided by operating activities 3,991 24,754 ------------ ----------- 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 ----------- ----------- Net cash (used in) investing activities (16,334) (16,298) ----------- ----------- 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) ----------- ----------- Net cash (used in) financing activities (868) (1,638) ----------- ----------- Net (decrease) increase in cash and cash equivalents (13,211) 6,818 Cash and cash equivalents at beginning of period 13,211 6,393 ----------- ----------- Cash and cash equivalents at end of period $ -- $ 13,211 =========== ===========
COMMONWEALTH INDUSTRIES, INC. Condensed Consolidated Balance Sheet (in thousands except share data)
December 31, -------------------------- 2003 2002 ----------- ----------- 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 ----------- ----------- 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 ----------- ----------- Total assets $ 379,326 $ 428,904 =========== =========== Liabilities Outstanding checks in excess of deposits $ 733 $ -- Accounts payable 50,308 59,594 Accrued liabilities 24,009 28,527 ----------- ----------- 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 ----------- ----------- Total liabilities 301,188 321,717 ----------- ----------- 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 ----------- ----------- Total stockholders' equity 78,138 107,187 ----------- ----------- Total liabilities and stockholders' equity $ 379,326 $ 428,904 =========== ===========
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 --------------------------------------- Mark V. Kaminski, President and Chief Executive Officer Date: March 11, 2004