Commonwealth Industries Reports an Improved Second Quarter as Aluminum Shipments Rise; Company Also Records Goodwill Impairment as of January 1, 2002, Under SFAS No. 142.Business Editors LOUISVILLE Louisville (l  `ēvĭl), city (1990 pop. 269,063), seat of Jefferson co., NW Ky., at the Falls of the Ohio; inc. 1780. , Ky.--(BUSINESS WIRE)--July 19, 2002Commonwealth Industries, Inc. (Nasdaq/NM:CMIN Cmin Trough serum concentration, see there ) today announced results for the second quarter and six-month period ended June June: see month. 30, 2002. The Company's results reflected an ongoing improvement in its aluminum business unit, which experienced higher year-over-year shipment volume for the second consecutive quarter following a downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. that began in the second quarter of 2000 and extended throughout 2001. The positive impact of this increased volume, combined with lower depreciation and amortization charges, more than offset the impact of lower material margins versus the year-earlier quarter, helping to increase the profitability of this unit relative to both the second quarter last year and the first quarter of 2002. Operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. in the Company's electrical products business, Alflex, also remained steady during the second quarter despite lower shipment volume. Primarily as a result of improved operating profitability in the Company's aluminum business, Commonwealth returned to profitability in the second quarter of 2002. 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 for the second quarter of 2002 increased 7% to $251.7 million from $235.5 million in the same period last year. Commonwealth's gross profit for the quarter increased 39% to $15.7 million compared with $11.3 million for the year-earlier period. Depreciation and amortization charges were $4.1 million lower than in the prior-year period. Net income for the second quarter of 2002 totaled $1.1 million or $0.07 per share versus a net loss of $4.9 million or $0.30 per share in the prior-year period. During the quarter, Commonwealth completed its previously announced transitional test of goodwill as called for under Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. " ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 142"). Pursuant to this test, the Company recorded a charge of $25.3 million or $1.58 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 (before and after tax), as a cumulative effect of a change in accounting principle, to reflect the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill on the balance sheet as of January January: see month. 1, 2002. The Company's restated net loss for the first quarter of 2002, giving effect to the change in accounting principle, was $29.8 million or $1.86 per diluted share. For the first six months of 2002, net sales increased 2% to $473.6 million compared with $465.7 million in the year-earlier period. Gross profit for the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. period rose 18% to $26.2 million versus $22.2 million for the same period last year. Depreciation and amortization charges were $8.2 million lower than in the year-earlier period. The Company's net loss for the first half of 2002, before the cumulative effect of a change in accounting principle, was $3.4 million or $0.21 per share compared with a net loss of $11.0 million or $0.67 per share in the first six months of 2001. The net loss for the first half of 2002 after the cumulative effect of the change in accounting principle was $28.7 million or $1.79 per diluted share. Commenting on the results, Mark V. Kaminski, President and Chief Executive Officer, said, "We are encouraged by the improvements we are seeing in our aluminum business, which we have now sustained for two consecutive quarters. Clearly, the economy remains uncertain and many customers continue to be cautious in their purchasing and inventory decisions. Nevertheless, we believe that fundamental conditions are strengthening in this business even though material margins have declined somewhat in 2002 as scrap spreads remain unusually low. Overall, we are pleased with the way our aluminum business unit has continued its progress this year." Kaminski noted that aluminum material margins declined to $0.300 in the second quarter of 2002 from $0.327 in the year-earlier period, but the Company was successful in continuing its efforts to hold down manufacturing costs and improve gross profits. "In our electrical products business, conditions remain competitive and we have seen a decline in commercial construction activity. With this in mind, we have continued to emphasize margin improvement and the removal of costs from the business, which have helped offset the impact of lower sales revenue and allowed us to maintain profitability," he added. Concluding, Kaminski remarked, "As we move into the second half of the year, we remain cautiously cau·tious adj. 1. Showing or practicing caution; careful. 2. Tentative or restrained; guarded: felt a cautious optimism that the offer would be accepted. optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that the general improvements we have seen in our business will continue, in particular the increasing volume for our aluminum products over the comparable periods last year. This outlook, of course, depends greatly on a resilient See resiliency. economy that continues to rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective from the significant downturn of the past two years. Assuming the broader economy remains on this positive course, and we can continue to exert control over our manufacturing and general expenses, we believe the Company will remain profitable in both the third and fourth quarters of 2002 and will be modestly profitable for the year as a whole, exclusive of the $25.3 million goodwill impairment charge taken as a result of the application of SFAS No. 142 in the first quarter of 2002." Commonwealth's aluminum shipments increased 20% to 237.9 million pounds in the second quarter of 2002 compared with 198.3 million pounds in the year-earlier period, while shipments of electrical conduit An electrical conduit is a purpose-designed electrical piping system used for protection and routing of electrical wiring. Electrical conduit may be made of metal, plastic, fibre, or fired clay. Flexible conduit is available for special purposes. and cable products declined 14% to 118.5 million feet versus 138.2 million feet in the second quarter of 2001. For the year-to-date period, aluminum shipments increased 15% to 447.4 million pounds versus 387.6 million pounds last year, and shipments of electrical conduit and cable products fell 8% to 244.5 million feet from 266.6 million feet in the first six months of 2001. Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Commonwealth's 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. for the second quarter increased to 6.2% compared with 4.8% in the year-earlier period, reflecting product mix improvements in both the aluminum and electrical products business units. Selling, general and administrative expenses totaled 4.4% of net sales in the second quarter of 2002, down from 4.7% in the same period last year. On an absolute basis, selling, general and administrative expenses declined 1% to $11.0 million in the second quarter of 2002 from $11.1 million in the same period last year. At June 30, 2002, Commonwealth had $410.9 million in total assets compared with $642.5 million a year ago, including $48.9 million and $157.9 million, respectively in goodwill. Stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. at June 30, 2002, was $114.0 million versus $317.2 million at the end of the second quarter of 2001. Debt-to-capitalization was 52% at June 30, 2002, compared with 28% this same time last year. All of the foregoing changes reflected asset/goodwill impairment charges of $167.3 million recorded in the fourth quarter of 2001 and the $25.3 million recorded as of January 1, 2002, by restating the first quarter 2002 results during this quarter. 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. end-use 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). . Commonwealth also is a leading manufacturer of innovative electrical products through its Alflex operations in California and North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. . For more information about the Company, visit Commonwealth's website at www.ciionline.com. 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 at www.companyboardroom.com. 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 Time today and a replay of the call will be available beginning at approximately noon Eastern Time and will run for 30 days. 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 Legislation 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 Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. , 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 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 effect of global economic conditions, the effect (including possible increases in the cost of doing business) resulting from war or terrorist activities or political uncertainties, the impact of competitive products and pricing, product development and commercialization, availability and cost of critical raw materials, the rate of technology change, product demand and market acceptance risks, 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.
COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Statement of Operations
(in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Net sales $ 251,728 $ 235,505 $ 473,586 $ 465,696
Cost of
goods sold 236,044 224,197 447,362 443,524
--------- --------- --------- ---------
Gross profit 15,684 11,308 26,224 22,172
Selling, general and
administrative
expenses 10,995 11,086 22,255 22,828
Amortization
of goodwill -- 1,119 -- 2,238
--------- --------- --------- ---------
Operating income
(loss) 4,689 (897) 3,969 (2,894)
Other income
(expense), net 213 118 486 358
Interest expense,
net (3,851) (3,946) (7,702) (8,019)
--------- --------- --------- ---------
Income (loss) before
income taxes and
cumulative effect
of change in
accounting
principle 1,051 (4,725) (3,247) (10,555)
Income tax expense
(benefit) (47) 175 78 400
--------- --------- --------- ---------
Income (loss)
before cumulative
effect of change in
accounting
principle 1,098 (4,900) (3,325) (10,955)
Cumulative effect of
change in accounting
principle -- -- (25,327) --
--------- --------- --------- ---------
Net income (loss) $ 1,098 $ (4,900) $ (28,652) $ (10,955)
========= ========= ========= =========
Basic and diluted net income (loss) per share:
Income (loss) before
cumulative effect
of change in
accounting
principle $ 0.07 $ (0.30) $ (0.21) $ (0.67)
Cumulative effect
of change in
accounting
principle -- -- (1.58) --
--------- --------- --------- ---------
Net income (loss) $ 0.07 $ (0.30) $ (1.79) $ (0.67)
========= ========= ========= =========
Weighted average shares outstanding:
Basic 15,994 16,458 15,989 16,456
Diluted 16,140 16,458 15,989 16,456
Dividends paid
per share $ 0.05 $ 0.05 $ 0.10 $ 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,
------------------- -------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net sales volume:
Aluminum products $223,999 $203,379 $416,957 $403,224
Electrical products $ 27,729 $ 32,126 $ 56,629 $ 62,472
Shipment volume:
Aluminum products
(millions lbs.) 237.9 198.3 447.4 387.6
Electrical products
(millions ft.) 118.5 138.2 244.5 266.6
Production volume:
Aluminum products
(millions lbs.) 238.2 196.8 452.4 397.6
Electrical products
(millions ft.) 120.2 128.1 244.9 257.5
Gross profit percent:
Aluminum products 4.5% 2.9% 3.6% 2.9%
Electrical products 19.0% 16.9% 18.3% 16.7%
Consolidated Company 6.2% 4.8% 5.5% 4.8%
Operating income percent:
Aluminum products 2.9% 0.4% 1.8% 0.4%
Electrical products 7.1% 5.0% 6.9% 4.3%
Consolidated Company 1.9% (0.4%) 0.8% (0.6%)
EBITDA (excluding
non-cash goodwill
impairment charge
of $25.3 million) $ 10,231 $ 8,562 $ 15,099 $ 16,205
EBITDA (including
non-cash goodwill
impairment charge
of $25.3 million) $ 10,231 $ 8,562 $(10,228) $ 16,205
Current ratio 2.5x 2.3x 2.5x 2.3x
Interest coverage
ratio (EBITDA
excluding non-cash
goodwill impairment
charge of $25.3
million to interest
expense) 2.7x 2.2x 2.0x 2.0x
Interest coverage
ratio (EBITDA
including non-cash
goodwill impairment
charge of $25.3
million to interest
expense) 2.7x 2.2x (1.3x) 2.0x
Return on average
stockholders'
equity (annualized) 3.9% (6.0%) (47.8%) (6.7%)
Debt-to-capitalization 52% 28% 52% 28%
COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Statement of Cash Flows
(in thousands)
Six Months Ended
June 30,
---------------------
2002 2001
--------- ---------
Cash flows from operating activities:
Net income (loss) $(28,652) $(10,955)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operations:
Depreciation and amortization 11,181 19,341
Goodwill impairment charge 25,327 --
Loss on disposal of property, plant
and equipment 81 238
Issuance of common stock in connection
with stock awards 170 106
Change in working capital and other
net assets 25 (17,299)
-------- --------
Net cash provided by (used in) operating
activities 8,132 (8,569)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (3,194) (4,161)
Proceeds from sale of property, plant
and equipment 3 6
-------- --------
Net cash (used in) investing activities (3,191) (4,155)
-------- --------
Cash flows from financing activities:
Increase in outstanding checks in excess
of deposits -- 1,243
Proceeds from long-term debt 45,970 32,000
Repayments of long-term debt (45,970) (32,000)
Repayments of notes receivable from sale of
common stock 1,561 1,613
Cash dividends paid (1,599) (1,646)
-------- --------
Net cash (used in) provided by
financing activities (38) 1,210
-------- --------
Net increase (decrease) in cash and cash
equivalents 4,903 (11,514)
Cash and cash equivalents at beginning
of period 6,393 11,514
-------- --------
Cash and cash equivalents at end of period $ 11,296 $ --
======== ========
COMMONWEALTH INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(in thousands except share data)
June 30,
----------------------
2002 2001
--------- ---------
Assets
Cash and cash equivalents $ 11,296 $ --
Accounts receivable, net 72 805
Inventories 115,630 127,512
Net residual interest in receivables sold 85,115 103,984
Prepayments and other current assets 2,715 3,181
--------- ---------
Total current assets 214,828 235,482
Property, plant and equipment, net 144,603 246,384
Goodwill, net 48,872 157,896
Other noncurrent assets 2,629 2,734
--------- ---------
Total assets $ 410,932 $ 642,496
========= =========
Liabilities
Outstanding checks in excess of deposits $ -- $ 1,243
Accounts payable 53,642 62,720
Accrued liabilities 30,700 40,153
--------- ---------
Total current liabilities 84,342 104,116
Long-term debt 125,000 125,000
Other long-term liabilities 5,816 6,829
Accrued pension benefits 3,939 8,527
Accrued postretirement benefits 77,838 80,780
--------- ---------
Total liabilities 296,935 325,252
--------- ---------
Commitments and contingencies -- --
Stockholders' Equity
Common stock, $0.01 par value, 50,000,000
shares authorized, 15,997,651 and
16,459,468 shares outstanding at
June 30, 2002 and 2001, respectively 160 165
Additional paid-in capital 405,613 408,161
Accumulated deficit (288,783) (74,289)
Notes receivable from sale of common stock -- (6,519)
Accumulated other comprehensive income:
Effects of cash flow hedges (2,993) (10,274)
--------- ---------
Total stockholders' equity 113,997 317,244
--------- ---------
Total liabilities and stockholders'
equity $ 410,932 $ 642,496
========= =========
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