Commonwealth Industries Announces Second Quarter 2004 Financial Results and Completion of Alflex Divestiture.LOUISVILLE Louisville (l  `ēvĭl), city (1990 pop. 269,063), seat of Jefferson co., NW Ky., at the Falls of the Ohio; inc. 1780. , Ky. -- Commonwealth Industries, Inc. (NASDAQ/NM:CMIN Cmin Trough serum concentration, see there ):--New management refocuses on core aluminum sheet business --Aluminum shipments continued to improve during the quarter --Facility closure and commencement of various other restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities position Commonwealth for the future --Proceeds of $64 million from sale of Alflex subsidiary received --Merger with IMCO In my considered opinion." See digispeak. Recycling recycling, the process of recovering and reusing waste products—from household use, manufacturing, agriculture, and business—and thereby reducing their burden on the environment. Inc. on track --Shipments for the second half of 2004 in line with first half Commonwealth Industries, Inc. (NASDAQ/NM:CMIN) today reported a second-quarter net loss of $23.1 million, or $1.44 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, in line with the Company's prior announcement, compared to a loss of $1.9 million, or $0.12 per diluted share, in the second quarter of 2003. Charges totaling $17.8 million were recorded during the quarter, including $9.4 million of severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. costs related to the proposed merger with IMCO Recycling Inc., $5.8 million related to the closure of the Company's tube manufacturing facility in Kings Mountain, North Carolina “Kings Mountain” redirects here. For other uses, see Kings Mountain (disambiguation). Kings Mountain is a city in Cleveland County and Gaston Counties, North Carolina, United States. The population was 9,693 at the 2000 census. , and $2.6 million, net of tax, of transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). related to the recent sale of the Company's Alflex subsidiary. Commonwealth's new President and Chief Executive Officer Steven Ste´ven n. 1. Voice; speech; language. Ye have as merry a steven As any angel hath that is in heaven. - Chaucer. 2. An outcry; a loud call; a clamor. To set steven to make an appointment. J. Demetriou said, "The new management team's initial assessment of the Company has resulted in several immediate actions that will sharpen sharp·en tr. & intr.v. sharp·ened, sharp·en·ing, sharp·ens To make or become sharp or sharper. sharp the focus on our core aluminum sheet business, improve our cost structure, and position the Company for the merger and for future success. We discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: several under-performing projects, closed the tube manufacturing facility and completed, on July July: see month. 30, the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of Alflex. Nevertheless, in the second quarter we were unable to overcome the negative impact of prior pricing agreements, which despite significant shipment volume growth, did not translate (1) To change one language into another; for example, assemblers, compilers and interpreters translate source language into machine language. (2) In computer graphics, to move an image on screen without rotating it. to bottom line profitability. We have begun to correct this and have implemented price increases to improve profitability. We expect continued strong demand and improved margins in the second half. In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile , we will be relentlessly focused on continuous cost improvement in our core business." Second Quarter 2004 Results Commonwealth's aluminum shipments improved 35% from 183.0 million pounds in the second quarter of 2003 to 247.4 million pounds in the second quarter of 2004. Improved volumes reflected stronger customer demand across virtually all product markets. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight , including aluminum sales to Alflex, improved 44% to $279.5 million in the second quarter of 2004 from $194.2 million in the comparable 2003 period. Gross profit declined 46% to $4.9 million from $9.2 million in the 2003 quarter. Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. decreased to 1.8% from 4.8% in the same period last year. The decrease includes the effects of a $4.6 million mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. hedge charge that offsets prior mark-to-market gains, and a $2.2 million cost of sales component of the previously mentioned $5.8 million charge related to closure of the tube manufacturing facility. Material margins decreased to $0.287 per pound from $0.362 per pound in the second quarter of 2003. Excluding effects of the hedge and tube closure charges, second quarter material margins decreased to $0.308 per pound from $0.358 in 2004 and 2003, respectively. Unit manufacturing costs improved to $0.241 per pound ($0.236 per pound exclusive of tube closure charges) from $0.284 per pound in the prior-year quarter due to improved volume. Selling, general and administrative expenses increased 39% to $10.7 million from $7.6 million in the year-earlier quarter principally due to costs related to implementation of the new Commonwealth information system. Finally, the announced sale of the Company's Alflex subsidiary to the Southwire Company was completed on July 30. Proceeds received of $64 million will be used to reduce debt and for other general corporate purposes. The electrical products unit operations Unit operations A structure of logic used for synthesizing and analyzing processing schemes in the chemical and allied industries, in which the basic underlying concept is that all processing schemes can be composed from and decomposed into a series of are reported as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for all periods in the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. financial statements. First Half 2004 Results The recovery in the aluminum industry, which began in the second half of 2003, continued through the first half of 2004. Commonwealth's shipments increased 33% to 494.9 million pounds in the first half of 2004 compared with 371.9 million pounds in the year-earlier period. Improvement in shipments reflected stronger customer demand across virtually all product markets. Gross profit improved 17% to $19.2 million in the first half of 2004 from $16.4 million in the same period of 2003, while gross profit margin decreased to 3.6% in the 2004 period from 4.3% in the 2003 period. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. , inclusive of inclusive of prep. Taking into consideration or account; including. the restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. discussed above, was $15.1 million compared with a loss of $0.6 million in the prior-year period. Net loss inclusive of the special charges resulting from the Company's recent sale of its Alflex unit was $20.2 million, or $1.26 per diluted share, compared with a net loss of $8.4 million, or $0.52 per diluted share, in the prior-year period. Included in first half results is a net loss of $1.6 million, or $0.10 per diluted share, related to certain aluminum hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. transactions discussed previously. Selling, general and administrative cost administrative cost Managed care A cost incurred by the 'business' end of a health care facility or university–eg, staffing and personnel costs, nursing home and hospital administration, insurance, and overhead expenses. Cf Indirect costs. increased to $20.9 million, or 4.0% of net sales, in 2004 from $17.0 million, or 4.5% of net sales, in 2003. The increase was primarily due to professional services and costs related to the continued implementation of the new Commonwealth information system. Proposed Merger with IMCO Commonwealth Industries announced a proposed merger with IMCO Recycling June June: see month. 17. IMCO has filed a Form S-4 with the Securities and Exchange Commission and the pre-merger notifications under the Hart-Scott-Rodino Antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. Improvement Act. Several teams of employees from both companies are engaged in integration planning to provide efficient operation of the combined company the day after the merger is completed. The teams are also analyzing courses of action designed to achieve estimated annual synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. savings of $25 million within 18 to 24 months following the close of the merger. Principal synergies are in the areas of procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. , integration of complementary operations, reductions in SG&A costs and the application of best practices in plant operations. The Company anticipates completion of the merger in the fourth quarter. A public, listen-only simulcast Simulcast is a portmanteau of "simultaneous broadcast", and refers to programs or events broadcast across more than one medium, or more than one service on the same medium, at the same time. and replay of Commonwealth's second quarter conference call may be accessed at the Company's web site or http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker ticker An automated quotation system on which security transactions are reported after they occur on an exchange floor. Even though the newer systems are electronic and no longer actually tick, the name of the old mechanical device has stuck. =CMIN& script (1) A program written in a general-purpose programming language. Such languages are typically interpreted and less comprehensive than full-blown compiled languages. See scripting language and interpreter. =1010&item_id=915796. (Due to the length of this URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. , it may be necessary to copy and paste To copy files from one location to another or to copy text and images from one document to another. All modern operating systems and applications have a copy and paste capability that is typically selected from an Edit menu. See cut and paste and Win Copy between windows. it into your Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the browser's URL address field. You may also need to remove an extra space in the URL if one exists.) The simulcast will begin at approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 10:00 a.m. Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time on Monday Monday: see week. , August 2, and a replay of the webcast will be available beginning at approximately noon Eastern Daylight Time and will run until August 9. Commonwealth Industries is one of North America's leading manufacturers of aluminum sheet for distributors and the transportation, construction, and consumer durables Consumer durables Consumer products that are expected to last three years or more, such as an automobile or a home appliance. consumer durables See durable goods. product markets. The Company has direct-chill casting facilities in Kentucky Kentucky, state, United States Kentucky (kəntŭk`ē, kĭn–), one of the so-called border states of the S central United States. It is bordered by West Virginia and Virginia (E); Tennessee (S); the Mississippi R. and continuous casting Continuous casting is a refinement of the casting process for the continuous, high-volume production of metal sections with a constant cross-section. It allows lower-cost production of metal sections with better quality, due to finer control through automation of the casting mini-mills in Ohio and California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). . For more information about the Company, visit Commonwealth's website at www.ciionline.com. Certain statements set forth above may constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. All statements regarding the consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the closing of the definitive merger agreement of 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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, including synergies that the IMCO merger are expected to produce, 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 CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. 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 Six Months Ended
June 30, June 30,
--------------------- ---------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net sales $273,634 $190,099 $525,888 $377,385
Cost of goods sold 268,704 180,911 506,722 361,020
---------- ---------- ---------- ----------
Gross profit 4,930 9,188 19,166 16,365
Selling, general and
administrative expenses 10,654 7,640 20,911 17,004
Restructuring charges 12,943 -- 13,337 --
---------- ---------- ---------- ----------
Operating income (loss) (18,667) 1,548 (15,082) (639)
Other income (expense),
net 375 414 869 908
Interest expense, net (4,300) (3,919) (8,553) (7,754)
---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before income taxes (22,592) (1,957) (22,766) (7,485)
Income tax expense
(benefit) (18) 4 43 67
---------- ---------- ---------- ----------
Income (loss) from
continuing operations (22,574) (1,961) (22,809) (7,552)
Discontinued operations:
Income (loss) from
operations before income
taxes 2,046 106 5,164 (779)
(Loss) on disposition (1,570) -- (1,570) --
Income tax expense
(benefit) 1,003 16 1,012 33
---------- ---------- ---------- ----------
Income (loss) from
discontinued operations (527) 90 2,582 (812)
---------- ---------- ---------- ----------
Net income (loss) ($23,101) ($1,871) ($20,227) ($8,364)
========== ========== ========== ==========
Basic net income (loss)
per share:
Income (loss) from
continuing operations ($1.40) ($0.12) ($1.42) ($0.47)
Income (loss) from
discontinued operations (0.03) 0.01 0.16 (0.05)
Net income (loss) (1.44) (0.12) (1.26) (0.52)
Diluted net income (loss)
per share:
Income (loss) from
continuing operations ($1.40) ($0.12) ($1.42) ($0.47)
Income (loss) from
discontinued operations (0.03) 0.01 0.16 (0.05)
Net income (loss) (1.44) (0.12) (1.26) (0.52)
Weighted average shares
outstanding
Basic 16,069 16,011 16,045 16,011
Diluted 16,069 16,011 16,045 16,011
Dividends paid per share $0.00 $0.05 $0.00 $0.10
COMMONWEALTH INDUSTRIES, INC.
Operating and Financial Statistics
(dollars in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net sales volume (1) $279,465 $194,238 $537,742 $385,901
Shipment volume
(millions lbs.) (2) 247.4 183.0 494.9 371.9
Production volume
(millions lbs.) 256.7 165.4 506.2 361.8
Gross profit percent 1.8% 4.8% 3.6% 4.3%
Operating profit percent (6.8%) 0.8% (2.9%) (0.2%)
Current ratio 2.1x 3.1x 2.1x 3.1x
Interest coverage ratio
(EBITDA to interest
expense, net) (3.0)x 1.7x (0.4)x 1.2x
Return on average
stockholder's equity
(annualized) (124.4%) (7.5%) (53.5%) (16.3%)
Debt-to-capitalization 68% 56% 68% 56%
EBITDA (3) ($12,905) $6,510 ($3,612) $9,401
Note (1) Includes sales to discontinued electrical products operations
of $5,831 and $4,139, respectively, for the three months
ended June 30, 2004 and 2003, and $11,854 and $8,516,
respectively, for the six months ended June 30, 2004 and
2003.
(2) Includes shipments to discontinued electrical products
operations of 5.2 and 4.8, respectively, for the three months
ended June 30, 2004 and 2003, and 10.8 and 10.0,
respectively, for the six months ended June 30, 2004 and
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 Six Months Ended
June 30, June 30,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net cash provided by (used in)
continuing operations $401 $9,680 ($1,285) ($641)
Adjustments to reconcile net
cash provided by (used in)
continuing operations to income
(loss) from continuing
operations:
Depreciation (5,301) (4,548) (10,515) (9,132)
Amortization (349) (222) (604) (444)
Loss on disposal of
property, plant and
equipment (557) (28) (578) (40)
Issuance of common stock in
connection with stock awards (116) -- (206) (90)
Change in working capital
and other net assets (16,652) (6,843) (9,621) 2,795
--------- --------- --------- ---------
Income (loss) from continuing
operations (22,574) (1,961) (22,809) (7,552)
Add back depreciation 5,301 4,548 10,515 9,132
Add back amortization (2) 86 -- 86 --
Add back tax expense (18) 4 43 67
Add back interest expense,
net (2) 4,300 3,919 8,553 7,754
--------- --------- --------- ---------
EBITDA ($12,905) $6,510 ($3,612) $9,401
========= ========= ========= =========
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
June 30, 2004 and 2003, of $263 and $222, respectively, and
the six months ended June 30, 2004 and 2003, of $518 and
$444, 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)
Six Months Ended
June 30,
--------------------
2004 2003
--------- ---------
Cash flows from operating activities:
Net income (loss) ($20,227) ($8,364)
(Income) loss from discontinued operations (2,582) 812
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operations:
Depreciation 10,515 9,132
Amortization 604 444
Loss on disposal of property, plant and
equipment 578 40
Issuance of common stock in connection with
stock awards 206 90
Change in working capital and other net assets 9,621 (2,795)
--------- ---------
Net cash (used in) continuing operations (1,285) (641)
Net cash (used in) provided by discontinued
operations (16) 2,294
--------- ---------
Net cash (used in) provided by operating
activities (1,301) 1,653
--------- ---------
Cash flows from investing activities:
Purchases of property, plant and equipment (4,226) (6,823)
Proceeds from sale of property, plant and
equipment 132 155
--------- ---------
Net cash (used in) investing activities (4,094) (6,668)
--------- ---------
Cash flows from financing activities:
(Decrease) in outstanding checks in excess of
deposits (947) --
Proceeds from long-term debt 148,801 60,398
Repayments of long-term debt (140,213) (60,398)
Cash dividends paid -- (1,601)
--------- ---------
Net cash provided by (used in) financing
activities 7,641 (1,601)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 2,246 (6,616)
Cash and cash equivalents at beginning of period -- 13,199
--------- ---------
Cash and cash equivalents at end of period $2,246 $6,583
========= =========
COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(in thousands except share data)
June 30,
--------------------
2004 2003
--------- ---------
Assets
Cash and cash equivalents $2,246 $6,583
Accounts receivable, net 78 69
Inventories 139,158 127,132
Net residual interest in receivables sold 36,306 20,786
Prepayments and other current assets 16,956 7,563
Current assets of discontinued operations 41,707 34,975
--------- ---------
Total current assets 236,451 197,108
Property, plant and equipment, net 120,611 128,534
Other noncurrent assets 8,696 5,644
Noncurrent assets of discontinued operations 33,776 63,952
--------- ---------
Total assets $399,534 $395,238
========= =========
Liabilities
Long-term debt due within one year $8,588 $--
Accounts payable 57,429 33,964
Accrued liabilities 35,826 21,240
Current liabilities of discontinued operations 12,849 8,516
--------- ---------
Total current liabilities 114,692 63,720
Long-term debt 125,000 125,000
Other long-term liabilities 3,297 4,969
Accrued pension benefits 30,108 27,582
Accrued postretirement benefits 61,203 72,837
Noncurrent liabilities of discontinued operations 1,230 1,567
--------- ---------
Total liabilities 335,530 295,675
--------- ---------
Commitments and contingencies -- --
Stockholders' Equity
Common stock, $0.01 par value, 50,000,000 shares
authorized, 16,254,397 and 16,010,971 shares
outstanding at June 30, 2004 and 2003,
respectively 162 160
Additional paid-in capital 407,965 405,703
Accumulated deficit (328,704) (287,907)
Unearned compensation (1,972) --
Accumulated other comprehensive income:
Minimum pension liability adjustment (21,276) (21,391)
Effects of cash flow hedges 7,829 2,998
--------- ---------
Total stockholders' equity 64,004 99,563
--------- ---------
Total liabilities and stockholders' equity $399,534 $395,238
========= =========
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