A. M. Castle & Co. Reports Third Quarter 2014 Results

OAK BROOK, Ill., Oct. 28, 2014 /PRNewswire/ -- A. M. Castle & Co. (NYSE: CAS) ("the Company"), a global distributor of specialty metal and plastic products, value-added services and supply chain solutions, today reported financial results for the third quarter ended September 30, 2014.

Consolidated net sales were $245.5 million for the three months ended September 30, 2014, compared to $253.7 million in the third quarter of 2013 and $249.5 million in the second quarter of 2014.  The Company reported a third quarter 2014 net loss of $7.3 million, or a loss of $0.31 per diluted share.  Third quarter 2013 net loss was $6.9 million, or $0.30 per diluted share, and second quarter of 2014 net loss was $72.3 million, or $3.10 per diluted share, which included a $56.2 million non-cash goodwill impairment charge.  Adjusted non-GAAP net loss for third quarter of 2014 was $12.9 million compared to adjusted non-GAAP net loss of $6.9 million in the third quarter of 2013.  The Company reported third quarter 2014 EBITDA of $6.5 million, driven by a $5.5 million gain on the sale of fixed assets in Houston that was included in restructuring activity, compared to EBITDA of $5.4 million in the third quarter of 2013.  Third quarter 2014 adjusted EBITDA was $0.8 million compared to adjusted EBITDA of $5.4 million in the third quarter of 2013.

"While we did not achieve the top-line growth that we had anticipated during the third quarter, we are encouraged that sales remained relatively constant for the first three quarters of 2014, and we saw sequential improvement in daily revenue and sales volumes during the third quarter. Our customer base remains stable and is benefiting from our hard work, which can be seen by the fact that our on-time delivery is trending to the highest level since the Oracle implementation was completed in 2007," said Scott Dolan, CEO of A. M. Castle. "Earlier in the third quarter, sales volumes were negatively impacted by branch consolidation execution issues in our plate and oil and gas businesses.  Those issues have been remediated.  Our team made significant progress during the third quarter toward completing our inventory deployment initiative to better align inventory across our organization, and we have started to realize improved sales results from the markets that were in the first phase.  We expect to realize the full benefits of our inventory investment and deployment strategy in 2015."

Net sales from the Metals segment during the third quarter of 2014 were $210.7 million, which was 4.2% lower than the third quarter of 2013 and 1.6% lower than the second quarter of 2014.  Pricing was down 2.5% and sales volumes declined 1.4% compared to the third quarter of 2013.  The decline in net sales of the Metals segment from the second quarter of 2014 was primarily driven by lower volumes, which was partially offset by favorable pricing.

In the Plastics segment, third quarter 2014 net sales were $34.8 million which was 3.2% higher than the third quarter of 2013.  The automotive and home goods markets drove solid performance in our Plastics segment in third quarter 2014.

Gross material margins were 24.9% in the third quarter of 2014, compared to 26.4% in the third quarter of 2013 and 23.2% in the second quarter of 2014.  Gross material margins included a $0.4 million LIFO charge in the third quarter of 2014 compared to LIFO income of $2.4 million in the third quarter of 2013.  The second quarter of 2014 gross material margin included no LIFO adjustments and $4.4 million of unfavorable inventory adjustments.

Excluding restructuring activity, operating expenses were $66.0 million in the third quarter of 2014 compared to $69.1 million in the third quarter of 2013.  Second quarter 2014 operating expenses were $72.8 million excluding restructuring activity and goodwill impairment charges.

Net cash used in operations was $12.3 million during the third quarter of 2014 as $33.0 million of cash was used for additional investments in inventory.  The Company had $27.0 million of borrowings under its revolving credit facility at September 30, 2014 and $88.1 million of additional borrowing capacity available.  There were no borrowings under the revolving credit facility at December 31, 2013 and $22.9 million at June 30, 2014.  The Company's net debt-to-capital ratio was 53.9% at September 30, 2014 compared to 38.7% at December 31, 2013 and 51.3% at June 30, 2014.  Total debt outstanding, net of unamortized discount, was $276.9 million at September 30, 2014, $246.0 million at December 31, 2013 and $270.9 million at June 30, 2014.  Refer to the 'Total Debt' table below for details related to the Company's outstanding debt obligations.

Dolan concluded, "Operating costs for the quarter were in line with our target of $65 million to $67 million.  Frictional costs incurred during the first half of 2014 have been largely managed out of the business.  Going forward, our near-term operating cost target remains at approximately $65 million per quarter.  We remain committed to enhancing our continuous improvement culture, and we will continue to focus on controlling our costs.  Now that we are nearing completion of the inventory deployment initiative, we expect the freight cost impact on cost of materials to decrease and gross material margins to return to our more normal historical range of 25% to 26%.  We are focused on driving revenue growth through transactional sales with proper inventory alignment and contractual business with improved strategic account relationships."

Webcast Information
Management will hold a conference call at 11:00 a.m. ET today to review the Company's results for the third quarter and discuss business conditions and outlook.  The call can be accessed via the internet live or as a replay.  Those who would like to listen to the call may access the webcast through a link on the investor relations page of the Company's website at http://www.amcastle.com/investors/default.aspx or by calling (888) 517-2513 or (847) 619-6533 and citing code 9042 182#.  A supplemental presentation accompanying the webcast can also be accessed at the link provided at the investor relations page of the Company's website.

An archived version of the conference call webcast will be available for replay at the link above approximately three hours following its conclusion, and will remain available until the next earnings conference call.

About A. M. Castle & Co.
Founded in 1890, A. M. Castle & Co. is a global distributor of specialty metal and plastic products and supply chain services, principally serving the producer durable equipment, oil and gas, commercial aircraft, heavy equipment, industrial goods, construction equipment, retail, marine and automotive sectors of the global economy.  Its customer base includes many Fortune 500 companies as well as thousands of medium and smaller-sized firms spread across a variety of industries.  Within its metals business, it specializes in the distribution of alloy and stainless steels; nickel alloys; aluminum and carbon.  Through its wholly-owned subsidiary, Total Plastics, Inc., the Company also distributes a broad range of value-added industrial plastics. Together, Castle and its affiliated companies operate out of 46 service centers located throughout North America, Europe and Asia.  Its common stock is traded on the New York Stock Exchange under the ticker symbol "CAS".

Regulation G Disclosure
This release and the financial statements included in this release include non-GAAP financial measures.  The non-GAAP financial information should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.  However, we believe that non-GAAP reporting, giving effect to the adjustments shown in the reconciliation contained in this release and in the attached financial statements, provides meaningful information and therefore we use it to supplement our GAAP reporting and guidance.  Management often uses this information to assess and measure the performance of our business.  We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the reconciliations and to assist with period-over-period comparisons of such operations.   The exclusion of the charges indicated herein from the non-GAAP financial measures presented does not indicate an expectation by the Company that similar charges will not be incurred in subsequent periods.

In addition, the Company believes that the use and presentation of EBITDA, which is defined by the Company as income before provision for income taxes plus depreciation and amortization, and interest expense, less interest income, is widely used by the investment community for evaluation purposes and provides investors, analysts and other interested parties with additional information in analyzing the Company's operating results.  Adjusted non-GAAP net income and adjusted EBITDA, which are defined as reported net income and EBITDA adjusted for non-cash items and items which are not considered by management to be indicative of the underlying results,  are presented as the Company believes the information is important to provide investors, analysts and other interested parties additional information about the Company's financial performance.  Management uses EBITDA, adjusted non-GAAP net income and adjusted EBITDA to evaluate the performance of the business.

Cautionary Statement on Risks Associated with Forward Looking Statements
Information provided and statements contained in this release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements only speak as of the date of this release and the Company assumes no obligation to update the information included in this release.  Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy.  These statements often include words such as "believe," "expect," "anticipate," "intend," "predict," "plan," "should," or similar expressions.  These statements are not guarantees of performance or results, and they involve risks, uncertainties, and assumptions.  Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements, including those risk factors identified in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.  All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above.  Except as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future, to reflect the occurrence of unanticipated events or for any other reason.

SOURCE A. M. Castle & Co.

Related Links

http://www.amcastle.com