A. M. Castle & Co. Reports Fourth Quarter And Year End 2014 Results; Conway MacKenzie Engaged To Improve Cash Flow And Profitability; A. Jeffrey Zappone Of Conway MacKenzie Appointed Interim Chief Operating Officer

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Company to continue profitability improvement activities in 2015

OAK BROOK, Ill., Feb. 27, 2015 /PRNewswire/ -- A. M. Castle & Co. 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 fourth quarter and year ended December 31, 2014.

Consolidated net sales were $231.5 million for fourth quarter 2014 compared to $233.2 million in fourth quarter 2013 and $245.5 million in third quarter 2014.  The Company reported a fourth quarter 2014 net loss of $39.1 million, or a net loss of $1.67 per diluted share.  Fourth quarter 2013 net loss was $12.6 million, or a net loss of $0.54 per diluted share, and third quarter 2014 net loss was $7.3 million, or a net loss of $0.31 per diluted share.  Adjusted non-GAAP net loss for fourth quarter 2014 was $38.5 million compared to adjusted non-GAAP net loss of $13.5 million in fourth quarter 2013.  The Company reported a fourth quarter 2014 EBITDA loss of $14.3 million, compared to EBITDA of $0.3 million in fourth quarter 2013.  Fourth quarter 2014 adjusted EBITDA loss was $13.7 million compared to adjusted EBITDA of $0.4 million in fourth quarter 2013.  Fourth quarter 2014 results were negatively impacted by $8.2 million of provisions for inventory reserves and $2.9 million of other expense related to foreign currency transaction losses.  Fourth quarter 2013 results included $1.6 million of provisions for inventory reserves and $0.5 million of foreign currency transaction losses.

"2014 was a year of significant change for the Company.  We continued our restructuring and cost improvement efforts which included consolidation of certain facilities and strategic de-layering through headcount reductions.  In light of the currently challenging market conditions, especially in the Oil and Gas sector, we have engaged Conway MacKenzie to expand and accelerate these efforts.  Mr. A. Jeffrey Zappone of Conway MacKenzie has been appointed interim Chief Operating Officer of the Company.  Jeff is a Certified Turnaround Professional with extensive experience in improving cash flow and profitability," said Scott Dolan, CEO of A. M. Castle.

Net sales from the Metals segment during fourth quarter 2014 were $197.8 million, which was 1.3% lower than fourth quarter 2013 and 6.1% lower than the third quarter 2014.  Average selling price per ton sold was down 1.2% from both fourth quarter 2013 and third quarter 2014.  Tons sold were up 3.2% compared to fourth quarter 2013 and down 3.5% compared to third quarter 2014.

In the Plastics segment, fourth quarter 2014 net sales were $33.6 million which was 2.7% higher than fourth quarter 2013 and 3.3% lower than third quarter 2014.  The automotive, marine, life science and home goods markets drove solid performance in our Plastics segment in fourth quarter 2014.

Gross margins were 21.4% in fourth quarter 2014 compared to 26.4% in fourth quarter 2013 and 24.9% in third quarter 2014.  Gross margins included LIFO income of $0.3 million in fourth quarter 2014 compared to LIFO income of $3.9 million in fourth quarter 2013 and a $0.4 million LIFO charge in third quarter 2014.  The fourth quarter 2014 included an increase in inventory reserves as certain aged inventory was determined to be excess or obsolete.  The fourth quarter 2014 increase in the inventory reserves had a 3.5% negative impact on gross margins.

Excluding restructuring activity expense of $0.5 million, operating expenses were $68.8 million in fourth quarter 2014 compared to $69.3 million in fourth quarter 2013 and $66.0 million in third quarter 2014 excluding $0.3 million of restructuring activity expense and $5.1 million of net gains from restructuring activity, respectively.

Full year 2014 consolidated net sales were $979.8 million compared to $1,053.1 million in 2013.  The Company reported a net loss of $134.7 million in 2014, or a loss of $5.77 per diluted share, which included a $56.2 million non-cash goodwill impairment charge.  Net loss in 2013 was $34.0 million, or $1.46 per diluted share.  Adjusted non-GAAP net loss for 2014 was $86.4 million compared to adjusted non-GAAP net loss of $28.1 million in 2013.  The Company reported a 2014 EBITDA loss of $69.5 million, which included a $56.2 million non-cash goodwill impairment charge, compared to EBITDA of $15.6 million in 2013.  Adjusted EBITDA loss for 2014 was $17.5 million compared to adjusted EBITDA of $26.2 million in 2013.  Full year 2014 results were negatively impacted by $8.7 million of provisions for inventory reserves and $4.3 million of other expense related to foreign currency transaction losses compared to $2.8 million of inventory reserve provisions and $1.9 million of foreign currency transaction losses in 2013.  Foreign currency transaction losses included $3.5 million of non-cash charges in 2014 and $1.5 million of non-cash charges in 2013.

Net cash used in operations was $75.1 million during 2014 as $26.9 million of cash was used for additional investments in inventory, compared to net cash from operations of $74.4 million during 2013.  The Company had $59.2 million of borrowings under its revolving credit facility at December 31, 2014 and $41.2 million of additional unrestricted borrowing capacity available under the terms of the revolving credit facility.  There were no borrowings under the revolving credit facility at December 31, 2013.  The Company's net debt-to-capital ratio was 65.5% at December 31, 2014 compared to 38.7% at December 31, 2013.  Total debt outstanding, net of unamortized discount, was $310.1 million at December 31, 2014 and $246.0 million at December 31, 2013.  Refer to the 'Total Debt' table below for details related to the Company's outstanding debt obligations.

Dolan concluded, "We enter 2015 with a renewed focus on our turnaround efforts and look forward to improving our operating performance this year."

Webcast Information

Management will hold a conference call at 11:00 a.m. ET today to review the Company's results for the fourth quarter and year ended December 31, 2014 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 (800) 774-6070 or (630) 691-2753 and citing code 7608 998#.  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 47 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".

Conway MacKenzie

Conway MacKenzie is a leading consulting and advisory firm that provides custom solutions to businesses in virtually every industry.  They proactively work with clients to identify issues, develop solutions, and implement industry-specific action plans to achieve the optimal results for clients.  Their professionals work collaboratively, bringing to bear insights gleaned from years of experience working in various industries as executives and owners, as well as in the consulting world.  Their mandate is simple and direct: improve results and restore value to the company and its stakeholders.

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.

For Further Information:

- At ALPHA IR -
Analyst Contact:
Chris Hodges
(312) 445-2870
Email: CAS@alpha-ir.com

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended


For the Year Ended


(Dollars in thousands, except per share data)



Unaudited

December 31,


December 31,



2014



2013



2014



2013



Net sales

$

231,466



$

233,229



$

979,837



$

1,053,066



Costs, expenses and (gains):













Cost of materials (exclusive of depreciation and amortization)

181,930



171,558



746,443



779,208



Warehouse, processing and delivery expense

33,991



34,722



140,559



140,934



Sales, general, and administrative expense

28,185



27,977



112,465



113,405



Restructuring activity, net

541



300



(2,960)



9,003



Depreciation and amortization expense

6,655



6,584



26,044



26,188



Impairment of goodwill





56,160





Operating loss

(19,836)



(7,912)



(98,874)



(15,672)



Interest expense, net

(10,560)



(10,087)



(40,548)



(40,542)



Loss on extinguishment of debt



(2,606)





(2,606)



Other expense, net

(2,896)



(536)



(4,323)



(1,924)



Loss before income taxes and equity in earnings of joint venture

(33,292)



(21,141)



(143,745)



(60,744)



Income taxes

(7,565)



6,340



1,353



19,795



Loss before equity in earnings of joint venture

(40,857)



(14,801)



(142,392)



(40,949)



Equity in earnings of joint venture

1,777



2,171



7,691



6,987



Net loss

$

(39,080)



$

(12,630)



$

(134,701)



$

(33,962)



Basic loss per share

$

(1.67)



$

(0.54)



$

(5.77)



$

(1.46)



Diluted loss per share

$

(1.67)



$

(0.54)



$

(5.77)



$

(1.46)



EBITDA (a)

$

(14,300)



$

307



$

(69,462)



$

15,579



(a) Earnings (loss) before interest, taxes, and depreciation and amortization. See reconciliation to net loss below.




















Reconciliation of EBITDA and of adjusted EBITDA to net loss:

For the Three Months Ended


For the Year Ended    




(Dollars in thousands)

December 31,



December 31,



Unaudited

2014



2013



2014



2013



Net loss

$

(39,080)



$

(12,630)



$

(134,701)



$

(33,962)



Depreciation and amortization expense

6,655



6,584



26,044



26,188



Interest expense, net

10,560



10,087



40,548



40,542



Loss on extinguishment of debt



2,606





2,606



Income taxes

7,565



(6,340)



(1,353)



(19,795)



EBITDA

(14,300)



307



(69,462)



15,579



Non-GAAP net loss adjustments (b)

619



92



51,944



10,597



Adjusted EBITDA

$

(13,681)



$

399



$

(17,518)



$

26,176



(b) Non-GAAP net loss adjustments relate to restructuring activity and unrealized (gains) losses for commodity hedges for all periods presented and impairment of goodwill for the year ended December 31, 2014. Refer to 'Reconciliation of Adjusted Non-GAAP Net Loss to Reported Net Loss' table for additional details on these amounts.


 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

As of

(In thousands, except par value data)

December 31,


December 31,

Unaudited

2014


2013

ASSETS






Current assets






Cash and cash equivalents

$

8,454



$

30,829


Accounts receivable, less allowances of $3,375 and $3,463

131,003



128,544


Inventories, principally on last-in first-out basis (replacement cost higher by $129,779 and $130,854)

236,932



214,900


Prepaid expenses and other current assets

9,458



9,927


Deferred income taxes

685



3,242


Income tax receivable

2,886



3,249


 Total current assets

389,418



390,691


Investment in joint venture

37,443



41,879


Goodwill

12,973



69,289


Intangible assets, net

56,555



69,489


Prepaid pension cost

7,092



16,515


Other assets

11,660



15,265


Property, plant and equipment






Land

4,466



4,917


Buildings

52,821



53,252


Machinery and equipment

183,923



179,632


Property, plant and equipment, at cost

241,210



237,801


Less - accumulated depreciation

(168,375)



(161,107)


Property, plant and equipment, net

72,835



76,694


Total assets

$

587,976



$

679,822


LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities






Accounts payable

$

68,782



$

69,577


Accrued payroll and employee benefits

9,332



9,853


Accrued and other liabilities

18,338



20,154


Income taxes payable

328



1,360


Current portion of long-term debt

737



397


 Total current liabilities

97,517



101,341


Long-term debt, less current portion

309,377



245,599


Deferred income taxes

8,360



10,733


Other non-current liabilities

3,655



5,646


Pension and postretirement benefit obligations

18,747



6,609


Commitments and contingencies






Stockholders' equity






Preferred stock, $0.01 par value—9,988 shares authorized (including 400 Series B Junior Preferred $0.00 par value shares); no shares issued and outstanding at December 31, 2014 and December 31, 2013




Common stock, $0.01 par value—60,000 shares authorized and 23,630 shares issued and 23,559 outstanding at December 31, 2014 and 23,471 shares issued and 23,409 outstanding at December 31, 2013

236



234


Additional paid-in capital

225,953



223,893


(Accumulated deficit) retained earnings

(29,424)



105,277


Accumulated other comprehensive loss

(45,565)



(18,743)


Treasury stock, at cost—71 shares at December 31, 2014 and 62 shares at December 31, 2013

(880)



(767)


Total stockholders' equity

150,320



309,894


Total liabilities and stockholders' equity

$

587,976



$

679,822


 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended

(Dollars in thousands)

December 31,

Unaudited

2014



2013


Operating activities:






Net loss

$

(134,701)



$

(33,962)


Adjustments to reconcile net loss to net cash (used in) from operating activities:






Depreciation and amortization

26,044



26,188


Amortization of deferred gain

(261)



(1,214)


Amortization of deferred financing costs and debt discount

8,064



7,914


Impairment of goodwill

56,160




(Gain) loss on sale of property, plant and equipment

(5,603)



42


Unrealized (gains) losses on commodity hedges

(1,256)



358


Unrealized foreign currency transaction losses

3,540




Equity in earnings of joint venture

(7,691)



(6,987)


Dividends from joint venture

12,127



3,963


Deferred tax expense (benefit)

184



(24,089)


Share-based compensation expense

1,972



3,062


Excess tax benefits from share-based payment arrangements

(76)



(420)


Increase (decrease) from changes in:






Accounts receivable

(5,785)



9,279


Inventories

(26,941)



87,316


Prepaid expenses and other current assets

(60)



1,402


Other assets

1,686



1,470


Prepaid pension costs

387



3,953


Accounts payable

2,630



(434)


Accrued payroll and employee benefits

(230)



(1,892)


Income taxes payable and receivable

(772)



4,388


Accrued liabilities

(3,493)



(2,854)


Postretirement benefit obligations and other liabilities

(1,002)



(3,098)


Net cash (used in) from operating activities

(75,077)



74,385


Investing activities:






Capital expenditures

(12,351)



(11,604)


Proceeds from sale of property, plant and equipment

7,464



794


Net cash used in investing activities

(4,887)



(10,810)


Financing activities:






Short-term debt repayments



(496)


Proceeds from long-term debt

462,404



115,300


Repayments of long-term debt

(403,811)



(170,345)


Payment of debt issue costs

(627)




Exercise of stock options

158



1,216


Excess tax benefits from share-based payment arrangements

76



420


Net cash from (used in) financing activities

58,200



(53,905)


Effect of exchange rate changes on cash and cash equivalents

(611)



(448)


Net change in cash and cash equivalents

(22,375)



9,222


Cash and cash equivalents—beginning of year

30,829



21,607


Cash and cash equivalents—end of year

$

8,454



$

30,829


 

 

Reconciliation of Adjusted Non-GAAP Net Loss to Reported Net Loss:

For the Three Months Ended


For the Year Ended

(Dollars in thousands, except per share data)


Unaudited

December 31,


December 31,


2014



2013



2014



2013


Net loss, as reported

$

(39,080)



$

(12,630)



$

(134,701)



$

(33,962)


Restructuring activity (a)

541



300



(2,960)



10,239


Impairment of goodwill





56,160




Unrealized (gains) losses on commodity hedges

78



(208)



(1,256)



358


Tax effect of adjustments



(937)



(3,677)



(4,709)


Adjusted non-GAAP net loss

$

(38,461)



$

(13,475)



$

(86,434)



$

(28,074)


Adjusted non-GAAP basic loss per share

$

(1.64)



$

(0.58)



$

(3.70)



$

(1.21)


Adjusted non-GAAP diluted loss per share

$

(1.64)



$

(0.58)



$

(3.70)



$

(1.21)


(a) Restructuring activity includes costs associated with the write-off of inventory included in cost of materials within the condensed consolidated statement of operations for the year ended December 31, 2013 and costs (gains) recorded to the restructuring activity line item within the condensed consolidated statements of operations for all periods presented.

 

Total Debt:

As of

(Dollars in thousands)

December 31,


December 31,

Unaudited

2014



2013


LONG-TERM DEBT






12.75% Senior Secured Notes due December 15, 2016

$

210,000



$

210,000


7.0% Convertible Notes due December 15, 2017

57,500



57,500


Revolving Credit Facility due December 10, 2019

59,200




Other, primarily capital leases

1,257



998


 Total long-term debt

327,957



268,498


Less:  unamortized discount

(17,843)



(22,502)


Less:  current portion

(737)



(397)


Total long-term portion

309,377



245,599


TOTAL DEBT

$

310,114



$

245,996


 

Reconciliation of Total Debt to Net Debt and Net Debt-to-Capital:

As of

(Dollars in thousands)

December 31,


December 31,

Unaudited

2014



2013


Total Debt

$

310,114



$

245,996


Less: Cash and Cash Equivalents

(8,454)



(30,829)


NET DEBT

$

301,660



$

215,167








Stockholders' Equity

$

150,320



$

309,894


Total Debt

310,114



245,996


CAPITAL

$

460,434



$

555,890








NET DEBT-TO-CAPITAL

65.5

%


38.7

%

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/a-m-castle--co-reports-fourth-quarter-and-year-end-2014-results-conway-mackenzie-engaged-to-improve-cash-flow-and-profitability-a-jeffrey-zappone-of-conway-mackenzie-appointed-interim-chief-operating-officer-300042630.html

SOURCE A. M. Castle & Co.

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