OAK BROOK, Ill., Nov. 13, 2017 (GLOBE NEWSWIRE) -- A. M. Castle & Co. (OTCQB:CTAM) (the "Company" or "Castle"), a global distributor of specialty metal and supply chain solutions, today reported financial results for the one-month period following the emergence from bankruptcy and the two-month period that preceded. The Company emerged from bankruptcy proceedings on August 31, 2017 (the "Effective Date"), having successfully restructured its balance sheet and substantially reduced its debt burden and cash interest costs under its Amended Prepackaged Joint Chapter 11 Plan of Reorganization (the "Plan"). As a result, the key highlights of the Company's performance below are for the period after the Effective Date, September 1, 2017 through September 30, 2017.
September 2017 Highlights:
- Net sales of $41.7 million
- Net loss of $0.8 million, including $1.4 million of interest expense, $1.0 million of which was non-cash, and $2.1 million of other income attributable mainly to foreign currency gains
- Achieved EBITDA of $1.4 million
President and CEO Steve Scheinkman commented, “We are pleased to have completed the Plan set in motion in April, having successfully emerged from bankruptcy on August 31. We are excited about our new and legacy financial partners as Castle is now largely held by a small group of stakeholders holding both convertible debt and equity in the new structure, along with significant representation on the Board. We expect this new structure will serve the Company and its constituents well in the future. Throughout the bankruptcy process, we achieved the timeline we originally set forth while fulfilling all of our commitments, namely maintaining strong relationships with our customer base and paying our vendors on time and in full.”
Executive Vice President and CFO Pat Anderson added, “As a result of the reorganization, our debt and cash interest burden has been significantly reduced, providing increased free cash flow to fund our operations. Our new, more favorable debt structure consists of a $125 million asset based lending facility and $164.9 million second lien long term convertible debt, the majority of which was held by a small group of shareholders as of the Effective Date. Our annual cash interest expense as of the Effective Date was approximately $4 million, which consists only of cash interest on our asset based lending agreement as interest on our convertible debt is paid-in-kind for the first 12 months. This represents a decrease of nearly 90% from approximately $36 million of cash interest expense per year prior to the reorganization.”
Anderson continued, “With this new, improved balance sheet, we will be able to invest further in both organic and strategically acquired revenue growth, capital investments, and innovation for our customers.”
Scheinkman concluded, “During the successful reorganization effort we began in April of this year, our sales volumes have increased compared to the same periods last year while we lowered operating expenses and improved our margins. We are pleased to have achieved positive EBITDA in September during our first month as a reorganized company despite the period only having 19 shipping days and being impacted by the normal end of summer seasonality. While we are cautious heading into the seasonally-slow year end months, where volumes are traditionally lower, we look forward to expanding on the positive operating performance we saw over the last few periods. Lastly, thank you to all of those who have supported Castle through this process, especially our employees, management team, business associates and financial stakeholders.”
Presentation of Predecessor and Successor Financial Results
The Company adopted fresh-start reporting as of the Effective Date, the date the Company's Plan became effective and the Company emerged from its Chapter 11 cases. As a result of the application of fresh-start reporting, the Company’s financial statements for periods prior to the Effective Date are not comparable to those for periods subsequent to the Effective Date. References to “Successor” refer to the Company on or after the Effective Date. References to “Predecessor” refer to the Company prior to the Effective Date. Operating results for the Successor and Predecessor periods are not necessarily indicative of the results to be expected for a full fiscal year. References such as the “Company,” “we,” “our” and “us” refer to A.M. Castle & Co. and its subsidiaries, whether Predecessor and/or Successor, as appropriate.
About A. M. Castle & Co.
Founded in 1890, A. M. Castle & Co. is a global distributor of specialty metal and supply chain services, principally serving the producer durable equipment, commercial aircraft, heavy equipment, industrial goods, construction equipment, and retail 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. It specializes in the distribution of alloy and stainless steels; nickel alloys; aluminum and carbon. Together, Castle and its affiliated companies operate out of 21 metals service centers located throughout North America, Europe and Asia. Its common stock is traded on the OTCQB® Venture Market under the ticker symbol "CTAM".
Non-GAAP Financial Measures
This release and the financial information 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 analysis 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 (loss) 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. EBITDA, adjusted non-GAAP net income (loss) and adjusted EBITDA 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 (loss) 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, and the cost savings and other benefits that we expect to achieve from our restructuring. 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. These factors include our ability to effectively manage our operational initiatives and implemented restructuring activities, the impact of volatility of metals prices, the cyclical and seasonal aspects of our business, our ability to effectively manage inventory levels, and the impact of our substantial level of indebtedness, as well as including those risk factors identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and our Quarterly Reports on Form 10-Q for the second quarter ended June 30, 2017 and the third quarter ended September 30, 2017, which we will file shortly. 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.
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | Successor | Predecessor | ||||||||||
| (Dollars in thousands, except per share data) | September 1, 2017 Through September 30, 2017 | July 1, 2017 Through August 31, 2017 | Three Months Ended September 30, 2016 | |||||||||
| Unaudited | ||||||||||||
| Net sales | $ | 41,725 | $ | 81,518 | $ | 124,893 | ||||||
| Costs and expenses: | ||||||||||||
| Cost of materials (exclusive of depreciation and amortization) | 31,482 | 63,406 | 92,406 | |||||||||
| Warehouse, processing and delivery expense | 5,972 | 12,277 | 19,561 | |||||||||
| Sales, general, and administrative expense | 4,846 | 10,048 | 16,820 | |||||||||
| Restructuring expense | — | 398 | 912 | |||||||||
| Depreciation and amortization expense | 502 | 2,391 | 3,845 | |||||||||
| Total costs and expenses | 42,802 | 88,520 | 133,544 | |||||||||
| Operating loss | (1,077 | ) | (7,002 | ) | (8,651 | ) | ||||||
| Interest expense, net | 1,408 | 2,602 | 8,743 | |||||||||
| Financial restructuring expense | — | 424 | — | |||||||||
| Unrealized gain on embedded debt conversion option | — | — | (6,285 | ) | ||||||||
| Other (income) expense, net | (2,078 | ) | (823 | ) | 6,250 | |||||||
| Reorganization items, net | 128 | (80,033 | ) | — | ||||||||
| (Loss) income from continuing operations before income taxes and equity in losses of joint venture | (535 | ) | 70,828 | (17,359 | ) | |||||||
| Income tax expense (benefit) | 286 | (1,395 | ) | 903 | ||||||||
| (Loss) income from continuing operations before equity in losses of joint venture | (821 | ) | 72,223 | (18,262 | ) | |||||||
| Equity in losses of joint venture | — | — | (36 | ) | ||||||||
| (Loss) income from continuing operations | (821 | ) | 72,223 | (18,298 | ) | |||||||
| Loss from discontinued operations, net of income taxes | — | — | (1,688 | ) | ||||||||
| Net (loss) income | $ | (821 | ) | $ | 72,223 | $ | (19,986 | ) | ||||
| Basic and diluted (loss) earnings per common share: | ||||||||||||
| Continuing operations | $ | (0.41 | ) | $ | 2.27 | $ | (0.57 | ) | ||||
| Discontinued operations | — | — | (0.05 | ) | ||||||||
| Net basic and diluted (loss) earnings per common share | $ | (0.41 | ) | $ | 2.27 | $ | (0.62 | ) | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS CONTINUED | Successor | Predecessor | ||||||||||
| (Dollars in thousands, except per share data) | September 1, 2017 Through September 30, 2017 | January 1, 2017 Through August 31, 2017 | Nine Months Ended September 30, 2016 | |||||||||
| Unaudited | ||||||||||||
| Net sales | $ | 41,725 | $ | 353,926 | $ | 419,433 | ||||||
| Costs and expenses: | ||||||||||||
| Cost of materials (exclusive of depreciation and amortization) | 31,482 | 266,495 | 323,808 | |||||||||
| Warehouse, processing and delivery expense | 5,972 | 50,314 | 63,772 | |||||||||
| Sales, general, and administrative expense | 4,846 | 39,139 | 51,486 | |||||||||
| Restructuring expense | — | 566 | 14,674 | |||||||||
| Depreciation and amortization expense | 502 | 10,150 | 12,498 | |||||||||
| Total costs and expenses | 42,802 | 366,664 | 466,238 | |||||||||
| Operating loss | (1,077 | ) | (12,738 | ) | (46,805 | ) | ||||||
| Interest expense, net | 1,408 | 23,402 | 28,711 | |||||||||
| Financial restructuring expense | — | 7,024 | — | |||||||||
| Unrealized loss (gain) on embedded debt conversion option | — | 146 | (7,569 | ) | ||||||||
| Debt restructuring loss, net | — | — | 6,562 | |||||||||
| Other (income) expense, net | (2,078 | ) | (3,582 | ) | 4,587 | |||||||
| Reorganization items, net | 128 | (74,531 | ) | — | ||||||||
| (Loss) gain from continuing operations before income taxes and equity in losses of joint venture | (535 | ) | 34,803 | (79,096 | ) | |||||||
| Income tax expense (benefit) | 286 | (1,387 | ) | 1,099 | ||||||||
| (Loss) income from continuing operations before equity in losses of joint venture | (821 | ) | 36,190 | (80,195 | ) | |||||||
| Equity in losses of joint venture | — | — | (4,177 | ) | ||||||||
| (Loss) income from continuing operations | (821 | ) | 36,190 | (84,372 | ) | |||||||
| Income from discontinued operations, net of income taxes | — | — | 6,246 | |||||||||
| Net (loss) income | $ | (821 | ) | $ | 36,190 | $ | (78,126 | ) | ||||
| Basic and diluted (loss) earnings per common share: | ||||||||||||
| Continuing operations | $ | (0.41 | ) | $ | 1.12 | $ | (3.02 | ) | ||||
| Discontinued operations | — | — | 0.22 | |||||||||
| Net basic and diluted (loss) earnings per common share | $ | (0.41 | ) | $ | 1.12 | $ | (2.80 | ) | ||||
| Reconciliation of EBITDA and of Adjusted EBITDA to Reported Net Loss: | Successor | ||||
| September 1, 2017 Through September 30, 2017 | |||||
| (Dollars in thousands) | |||||
| Unaudited | |||||
| Net loss, as reported | $ | (821 | ) | ||
| Depreciation and amortization expense | 502 | ||||
| Interest expense, net | 1,408 | ||||
| Income tax expense benefit | 286 | ||||
| EBITDA | 1,375 | ||||
| Non-GAAP adjustments (a) | (964 | ) | |||
| Adjusted EBITDA | $ | 411 | |||
| (a) Refer to "Reconciliation of Adjusted Non-GAAP Net Loss to Reported Net Loss" table for additional details on these amounts. | |||||
| Reconciliation of Adjusted Non-GAAP Net Loss to Reported Net Loss: | Successor | |||
| (Dollars in thousands) | September 1, 2017 Through September 30, 2017 | |||
| Unaudited | ||||
| Net loss, as reported | $ | (821 | ) | |
| Non-GAAP adjustments: | ||||
| Reorganization items, net(a) | 128 | |||
| Share-based compensation expense | 215 | |||
| Foreign exchange gain on intercompany loans | (1,307 | ) | ||
| Non-GAAP adjustments to arrive at Adjusted EBITDA | (964 | ) | ||
| Non-cash interest expense | 1,024 | |||
| Total non-GAAP adjustments | 60 | |||
| Tax effect of adjustments | — | |||
| Adjusted non-GAAP loss | $ | (761 | ) | |
| (a) Reorganization items, net includes expenses and income directly associated with the chapter 11 proceedings, as well as adjustments to reflect the carrying value of liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments are determined. For the period September 1, 2017 through September 30, 2017, amount was comprised of legal and other professional fees. | ||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | Successor | Predecessor | ||||||
| (In thousands, except par value data) | September 30, 2017 | December 31, 2016 | ||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 11,116 | $ | 35,624 | ||||
| Accounts receivable, less allowances of $422 and $1,945, respectively | 76,802 | 64,385 | ||||||
| Inventories | 154,321 | 146,603 | ||||||
| Prepaid expenses and other current assets | 16,223 | 10,141 | ||||||
| Income tax receivable | 388 | 433 | ||||||
| Total current assets | 258,850 | 257,186 | ||||||
| Goodwill and intangible assets, net | 8,175 | 4,101 | ||||||
| Prepaid pension cost | 9,518 | 8,501 | ||||||
| Deferred income taxes | — | 381 | ||||||
| Other noncurrent assets | 823 | 9,449 | ||||||
| Property, plant and equipment: | ||||||||
| Land | 5,940 | 2,070 | ||||||
| Buildings | 22,017 | 37,341 | ||||||
| Machinery and equipment | 29,693 | 125,836 | ||||||
| Property, plant and equipment, at cost | 57,650 | 165,247 | ||||||
| Accumulated depreciation | (502 | ) | (115,537 | ) | ||||
| Property, plant and equipment, net | 57,148 | 49,710 | ||||||
| Total assets | $ | 334,514 | $ | 329,328 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 47,170 | $ | 33,083 | ||||
| Accrued and other current liabilities | 14,586 | 19,854 | ||||||
| Income tax payable | — | 209 | ||||||
| Short-term borrowings | 3,581 | — | ||||||
| Current portion of long-term debt | 118 | 137 | ||||||
| Total current liabilities | 65,455 | 53,283 | ||||||
| Long-term debt, less current portion | 244,347 | 286,459 | ||||||
| Deferred income taxes | 1,785 | — | ||||||
| Build-to-suit liability | 9,973 | 12,305 | ||||||
| Other noncurrent liabilities | 3,931 | 5,978 | ||||||
| Pension and postretirement benefit obligations | 6,395 | 6,430 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Predecessor preferred stock, $0.01 par value—9,988 shares authorized (including 400 Series B Junior Preferred, $0.00 par value); no shares issued and outstanding at December 31, 2016 | — | — | ||||||
| Predecessor common stock, $0.01 par value—60,000 shares authorized; 32,768 shares issued and 32,566 outstanding at December 31, 2016 | — | 327 | ||||||
| Successor common stock, $0.01 par value—200,000 Class A shares authorized with 3,734 shares issued and 2,000 outstanding at September 30, 2017 | 20 | — | ||||||
| Predecessor additional paid-in capital | — | 244,825 | ||||||
| Successor additional paid-in capital | 5,791 | — | ||||||
| Accumulated deficit | (821 | ) | (253,291 | ) | ||||
| Accumulated other comprehensive loss | (2,362 | ) | (25,939 | ) | ||||
| Treasury stock, at cost—no shares at September 30, 2017 and 202 shares at December 31, 2016 | — | (1,049 | ) | |||||
| Total stockholders’ equity (deficit) | 2,628 | (35,127 | ) | |||||
| Total liabilities and stockholders’ equity (deficit) | $ | 334,514 | $ | 329,328 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | Successor | Predecessor | ||||||||||
| (Dollars in thousands) | September 1, 2017 Through September 30, 2017 | January 1, 2017 Through August 31, 2017 | Nine Months Ended September 30, 2016 | |||||||||
| Unaudited | ||||||||||||
| Operating activities: | ||||||||||||
| Net (loss) income | $ | (821 | ) | $ | 36,190 | $ | (78,126 | ) | ||||
| Less: Income from discontinued operations, net of income taxes | — | — | 6,246 | |||||||||
| (Loss) income from continuing operations | (821 | ) | 36,190 | (84,372 | ) | |||||||
| Adjustments to reconcile (loss) income from continuing operations to net cash (used in) from operating activities of continuing operations: | ||||||||||||
| Depreciation and amortization | 502 | 10,150 | 12,498 | |||||||||
| Amortization of deferred gain | (9 | ) | (56 | ) | (92 | ) | ||||||
| Amortization of deferred financing costs and debt discount | 73 | 3,810 | 4,258 | |||||||||
| Debt restructuring loss, net | — | — | 6,562 | |||||||||
| Loss from lease termination | — | — | 4,452 | |||||||||
| Unrealized loss (gain) on embedded debt conversion option | — | 146 | (7,569 | ) | ||||||||
| Non-cash reorganization items, net | — | (87,107 | ) | — | ||||||||
| Loss on sale of property, plant and equipment | — | 7 | 1,720 | |||||||||
| Unrealized gain on commodity hedges | — | — | (813 | ) | ||||||||
| Unrealized foreign currency transaction (gain) loss | (1,292 | ) | (4,439 | ) | 2,484 | |||||||
| Equity in losses of joint venture | — | — | 4,141 | |||||||||
| Noncash interest paid in kind | 951 | — | — | |||||||||
| Deferred income taxes | — | (953 | ) | 113 | ||||||||
| Share-based compensation expense | 215 | 630 | 916 | |||||||||
| Other, net | 75 | 593 | 679 | |||||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | (3,658 | ) | (6,061 | ) | (5,128 | ) | ||||||
| Inventories | (784 | ) | (2,703 | ) | 34,780 | |||||||
| Prepaid expenses and other current assets | (3,050 | ) | (3,100 | ) | (301 | ) | ||||||
| Other noncurrent assets | 567 | 1,664 | (302 | ) | ||||||||
| Prepaid pension costs | (168 | ) | (849 | ) | (406 | ) | ||||||
| Accounts payable | 235 | 8,602 | 6,026 | |||||||||
| Income tax payable and receivable | 174 | (340 | ) | 198 | ||||||||
| Accrued and other current liabilities | 523 | (6,002 | ) | 8,604 | ||||||||
| Pension and postretirement benefit obligations and other noncurrent liabilities | (93 | ) | (471 | ) | 865 | |||||||
| Net cash used in operating activities of continuing operations | (6,560 | ) | (50,289 | ) | (10,687 | ) | ||||||
| Net cash used in operating activities of discontinued operations | — | — | (6,907 | ) | ||||||||
| Net cash used in operating activities | (6,560 | ) | (50,289 | ) | (17,594 | ) | ||||||
| Investing activities: | ||||||||||||
| Proceeds from sale of investment in joint venture | — | — | 31,550 | |||||||||
| Capital expenditures | (924 | ) | (2,850 | ) | (2,431 | ) | ||||||
| Proceeds from sale of property, plant and equipment | 5 | 619 | 2,829 | |||||||||
| Change in cash collateralization of letters of credit | — | 7,492 | — | |||||||||
| Net cash (used in) from investing activities of continuing operations | (919 | ) | 5,261 | 31,948 | ||||||||
| Net cash from investing activities of discontinued operations | — | — | 53,570 | |||||||||
| Net cash (used in) from investing activities | (919 | ) | 5,261 | 85,518 | ||||||||
| Financing activities: | ||||||||||||
| Proceeds from long-term debt including credit facilities | 8,677 | 195,026 | 581,052 | |||||||||
| Repayments of long-term debt including credit facilities | (25 | ) | (175,414 | ) | (640,415 | ) | ||||||
| Short-term (repayments) borrowings, net | (216 | ) | 3,797 | — | ||||||||
| Payments of debt restructuring costs | — | — | (8,677 | ) | ||||||||
| Payments of debt issue costs | — | (1,831 | ) | — | ||||||||
| Payments of build-to-suit liability | — | (3,000 | ) | (687 | ) | |||||||
| Net cash from (used in) financing activities | 8,436 | 18,578 | (68,727 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | 95 | 890 | (292 | ) | ||||||||
| Net change in cash and cash equivalents | 1,052 | (25,560 | ) | (1,095 | ) | |||||||
| Cash and cash equivalents—beginning of period | 10,064 | 35,624 | 11,100 | |||||||||
| Cash and cash equivalents—end of period | $ | 11,116 | $ | 10,064 | $ | 10,005 | ||||||
| LONG-TERM DEBT | ||||||||
| (Dollars In Thousands) | Successor | Predecessor | ||||||
| (Unaudited) | September 30, 2017 | December 31, 2016 | ||||||
| 7.0% Convertible Notes due December 15, 2017 | $ | — | $ | 41 | ||||
| 11.0% Senior Secured Term Loan Credit Facilities due September 14, 2018 | — | 99,500 | ||||||
| 12.75% Senior Secured Notes due December 15, 2018 | — | 177,019 | ||||||
| 5.25% Convertible Notes due December 30, 2019 | — | 22,323 | ||||||
| 5.00% / 7.00% Convertible Notes due August 31, 2022 | 165,896 | — | ||||||
| Floating rate ABL Credit Facility due February 28, 2022 | 87,297 | — | ||||||
| Other, primarily capital leases | 316 | 96 | ||||||
| Plus: derivative liability for embedded conversion feature | 61,608 | 403 | ||||||
| Less: unvested restricted 5.00% / 7.00% Convertible Notes due August 31, 2022 | (2,334 | ) | — | |||||
| Less: unamortized discount | (68,318 | ) | (7,587 | ) | ||||
| Less: unamortized debt issuance costs | — | (5,199 | ) | |||||
| Total long-term debt | 244,465 | 286,596 | ||||||
| Less: current portion | 118 | 137 | ||||||
| Total long-term portion | $ | 244,347 | $ | 286,459 | ||||
For Further Information:
-At ALPHA IR-
Analyst Contact
Chris Hodges or Chris Donovan
(312) 445-2870
Email: CTAM@alpha-ir.com
Traded: OTCQB (CTAM)