A. M. Castle & Co. Reports Third Quarter Results
OAK BROOK, Ill., Nov. 12, 2019 (GLOBE NEWSWIRE) — A. M. Castle & Co. (OTCQX: CTAM) (the “Company” or “Castle”), a global distributor of specialty metal and supply chain solutions, today reported its third quarter 2019 financial results.
Third Quarter 2019 Financial Results Summary:Generated net sales of $136.1 million, an 8.1% year-over-year decrease compared to $148.1 million in the third quarter of 2018.Reported an operating loss of $3.8 million, compared to $3.0 million in the third quarter of 2018.Reported a net loss of $12.2 million, which included $10.2 million of interest expense, of which $7.1 million was non-cash related to long-term debt held primarily by major shareholders, and $1.3 million was non-cash related to the Company’s pension plan, compared to a net loss of $6.7 million for the third quarter of 2018, which included $8.7 million of interest expense, of which $5.7 million was non-cash related to long term-debt held primarily by major shareholders, and $1.2 million was non-cash related to the Company’s pension plan. Reported negative EBITDA of $1.0 million, which included a non-recurring non-cash inventory charge of $1.3 million, and adjusted EBITDA of $1.4 million in the third quarter of 2019, compared to EBITDA of $2.3 million and adjusted EBITDA of $2.5 million in the third quarter of 2018.Generated $4.6 million in cash flow from operations during the nine months ended September 30, 2019, driven primarily by improved inventory management, compared to cash flow used in operations of $24.6 million in the nine months ended September 30, 2018. Maintained a stable gross material margin of 25.3%, excluding the non-recurring non-cash inventory charge of $1.3 million, compared to 25.7% in the second quarter of 2019 and 25.1% in the third quarter of 2018.Chairman and CEO Steve Scheinkman commented, “As expected, market conditions continued to deteriorate in the third quarter of 2019, most acutely in our North American industrial end markets, which showed both demand and pricing softness. Tons sold in the quarter decreased substantially compared to the third quarter of last year, primarily due to challenges in the carbon flat roll business in Mexico. Despite this, we are very pleased to have maintained a relatively stable material gross margin in our core specialty products, which we believe is a result of a disciplined focus on highly-accretive sales, particularly those including our value-added service offerings.”President Marec Edgar added, “In keeping with the philosophy to excel in our highly-accretive core product lines to the exclusion of low-margin, working capital intensive opportunities, in the third quarter we made the decision to exit a piece of our carbon flat-roll business in one of our Mexican operations. As we disposed of the processing equipment used in that business in this quarter, we recorded a non-recurring non-cash charge of $60 thousand. Simultaneously, we have also evaluated the on-hand inventory position of the operation and recorded a non-recurring non-cash inventory write-down charge of $1.3 million. To date, we have sold approximately 40% of the inventory to which this write-down was applied, and expect to sell the balance of the inventory by early 2020.”Mr. Edgar continued, “We continue to realize the favorable impacts of our new global supply organization, which has performed exceedingly well in reducing our aged inventories, improving our overall stock levels throughout the business, and providing real-time facilitation of our branches in moving higher cost inventory as certain markets softened. This has allowed us to avoid an overstocked position relative to the market and restock at lower replacement costs. Moreover, although we faced reduced demand and a downward pricing environment in the quarter, we improved our price per ton sold compared to both the second quarter of 2019 and the third quarter of 2018 by utilizing our improved stock profile to capitalize on opportunities in the market and by focusing on our highly-accretive product lines, including our aerospace end markets, which are presently more robust. We will continue to focus on these priorities through the remainder of 2019 and into 2020.” Executive Vice President of Finance and Administration Pat Anderson commented, “We are pleased to have now generated $4.6 million of positive cash flow from operations for the nine months ended September 30, 2019. Our improvements in the management of our inventory greatly contributed to the nearly $30 million change in cash flows from operations year-over-year. With the cash generated, we continue to invest in the business and pay down our revolving credit facility. Since the end of the second quarter of 2019, we have paid down $6.5 million against our revolving credit facility and plan to continue to make repayments through the remainder of 2019.” Mr. Edgar concluded, “As we approach the seasonally-slow year end months, when volumes are traditionally lower, we expect the end markets we serve will remain extremely competitive. That said, we continue to build an operational foundation that is resilient to challenging market conditions and capable of supporting our momentum towards increased profitability and the return of value to our business partners, as shown through our third quarter performance.” 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 OTCQX® Best Market under the ticker symbol “CTAM”.Non-GAAP Financial MeasuresThis 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. Investors should recognize that these non-GAAP financial measures might not be comparative to similarly titled measures of other companies. 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 loss before provision for income taxes plus depreciation and amortization, and interest expense, 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 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 loss and adjusted EBITDA to evaluate the performance of the business.Cautionary Statement on Risks Associated with Forward Looking StatementsInformation 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 benefits that we expect to achieve from our working capital management initiative. 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 impact of imposed tariffs and/or duties, 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, 2018. 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.
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