UNITEDSTATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) | May 10, 2005 |
A. M. Castle & Co. |
(Exact name of registrant as specified in its charter) |
Maryland | 1-5415 | 36-0879160 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No. |
3400 N. Wolf Road, Franklin Park, Illinois | 60131 |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number including area code | 847/455-7111 |
(Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13 e-4(c) under the Exchange Act (17 CFR 240.13 e-4(c))
Item 2.02 Results of Operations and Financial Condition
On Tuesday, May 10, 2005 the Company disseminated a press release, attached as Exhibit A, announcing the Company’s operational results for the First Quarter ending March 31, 2005.
As part of the press release there is a bridge of the non-GAAP financial measurement of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to reported net income. It is shown below the disclosure of the GAAP figures for Operating income, Net income and Diluted earnings per share. This reconciliation of EBITDA to Net income is for the Three Months Ended March 31, 2005 and March 31, 2004.
The Company believes, however, that EBITDA is an important term and concept because of its use by the professional investment community, including the Company’s primary lenders. The Company believes the use of this Term is necessary to a proper understanding of the changes in the Company’s earnings.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
A. M. Castle & Co. |
/s/ Lawrence A. Boik |
Vice President and Chief Financial Officer |
Date | May 10, 2005 |
A. M. CASTLE & CO.
3400 North Wolf Road
Fraknlin Park, Illinois 60131
(847) 455-7111
(847) 455-6930 (Fax)
For Further Information:
AT THE COMPANY | AT FINANCIAL RELATIONS BOARD | |
G. Thomas McKane | Analyst Contacts: | General Information: |
Chairman & CEO | John McNamara | George Zagoudis (312) 640-6663 |
(847) 349-2502 | (212) 827-3771 | Email:gzagoudis@financialrelationsboard.com |
Email: tmckane@amcastle.com | Email: jmcnamara@financialrelationsboard.com |
Traded: AMEX, CSE (CAS)
Member: S&P SmallCap 600 Index
FOR IMMEDIATE RELEASE
TUESDAY, MAY 10, 2005
A. M. CASTLE & CO. ANNOUNCES RECORD
FIRST QUARTER 2005 RESULTS
FRANKLIN PARK, ILLINOIS, MAY 10, 2005 —A.M. CASTLE & CO. (AMEX: CAS) announced today record sales and earnings performance for the first quarter ended March 31, 2005. Consolidated net sales increased 40% to $246.2 million, up $70.6 million from $175.6 million in the same period of 2004. Net income applicable to common stock totalled $11.9 million, or $0.75 per share (basic), compared to net income applicable to common stock of $2.1 million, or $0.13 per share (basic), in the prior year.
In making the announcement, G. Thomas McKane, Chairman and CEO, noted that the Company’s primary customer markets within the producer durable goods equipment manufacturing of North America, remain strong. "The aerospace, oil and gas, mining and construction equipment, along with heavy truck and railroad equipment sectors are showing particular strength." McKane added, "Additionally, the average metal pricing for our primary products has risen modestly since the end of 2004, mostly in our nickel alloy, stainless steel and aluminum product lines. The Company estimates real volume growth in its metal segment at approximately 5% with average metal prices up 37% versus the first quarter last year. Plastic segment net sales increased 25% versus the first quarter of 2004, comprised of an estimated favorable 16% material price impact and 9% real growth."
The Company’s incremental operating income of 22% on incremental sales growth during the quarter reflected continued strong operating expense leverage. "One of our key objectives for 2005 is the replacement of our existing receivables purchase facility with a more traditional revolving credit line," McKane commented, "Our continued strong operating performance allows us greater flexibility in pursuing refinancing options that will reduce debt service expense over the long-term."
In closing, Mr. McKane invited interested parties to listen to its conference call scheduled for 11:00 a.m. (EST) today, Tuesday, May 10, 2005. Connection is available at www.amcastle.com and will be available for 14 days following the call.
Founded in 1890, A. M. Castle & Co. is a specialty metals and plastics distribution company serving the North American market, principally within the producer durable equipment sector. Its customer base includes many Fortune 500 companies as well as thousands of medium and smaller-sized firms spread across a wide spectrum of industries. Within its core metals business, it specializes in the distribution of carbon, alloy and stainless steels; nickel alloy; aluminum; copper and brass. Through its subsidiary, Total Plastics, Inc., the Company also distributes a broad range of value-added industrial plastics. Together, Castle operates over 50 locations throughout North America. Its common stock is traded on the American and Chicago Stock Exchange under the ticker symbol "CAS".
The financial statements included in this release contain a non-GAAP disclosure, EBITDA, which consists of income before provision for income taxes plus depreciation and amortization, and interest expense (including discount on accounts receivable sold), less interest income. EBITDA is presented as a supplemental disclosure because this measure is widely used by the investment community for evaluation purposes and provides the reader with additional information in analyzing the Company’s operating results. A reconciliation of EBITDA to net income is provided per Securities Exchange Commission requirements.
This release may contain forward-looking statements relating to future financial results. Actual results may differ materially as a result of factors over which the Company has no control. These risk factors and additional information are included in the Company’s reports on file with the Securities Exchange Commission.
CONSOLIDATED STATEMENTS OF INCOME | For the Three | ||||||
(Dollars in thousands, except per share data) | Months Ended | ||||||
Unaudited | Mar. 31 | ||||||
2005 | 2004 | ||||||
Net sales | $ | 246,203 | $ | 175,634 | |||
Cost of material sold | (173,300 | ) | (124,481 | ) | |||
Gross material margin | 72,903 | 51,153 | |||||
Plant and delivery expense | (26,368 | ) | (23,599 | ) | |||
Sales, general, and administrative expense | (22,955 | ) | (19,454 | ) | |||
Depreciation and amortization expense | (2,273 | ) | (2,247 | ) | |||
Total operating expense | (51,596 | ) | (45,300 | ) | |||
Operating income | 21,307 | 5,853 | |||||
Interest expense, net | (2,083 | ) | (2,314 | ) | |||
Discount on sale of accounts receivable | (536 | ) | (283 | ) | |||
Income before income tax and equity in unconsolidated subsidiaries | 18,688 | 3,256 | |||||
Income taxes | |||||||
Federal | (6,009 | ) | (1,025 | ) | |||
State | (1,476 | ) | (312 | ) | |||
(7,485 | ) | (1,337 | ) | ||||
Net income before equity in unconsolidated subsidiaries | 11,203 | 1,919 | |||||
Equity earnings of joint ventures, net of tax | 915 | 383 | |||||
Net income | 12,118 | 2,302 | |||||
Preferred Dividends | (240 | ) | (240 | ) | |||
Net income applicable to common stock | $ | 11,878 | $ | 2,062 | |||
Basic earnings per share | $ | 0.75 | $ | 0.13 | |||
Diluted earnings per share | $ | 0.70 | $ | 0.13 | |||
EBITDA * | $ | 25,089 | $ | 8,732 | |||
*Earnings before interest, discount on sale of accounts receivable, taxes, depreciation and amortization | |||||||
Reconciliation of EBITDA to net income: | For the Three | ||||||
Months Ended | |||||||
March 31, | |||||||
2005 | 2004 | ||||||
Net income | $ | 12,118 | $ | 2,302 | |||
Depreciation and amortization | 2,273 | 2,247 | |||||
Interest, net | 2,083 | 2,314 | |||||
Discount on sales of accounts receivable | 536 | 283 | |||||
Income taxes | 7,485 | 1,337 | |||||
Tax on equity in unconsolidated subsidiaries | 594 | 249 | |||||
EBITDA | $ | 25,089 | $ | 8,732 | |||
CONSOLIDATED BALANCE SHEETS | ||||||||||
(Dollars in thousands) | Period Ended | |||||||||
Unaudited* | Mar. 31 | Dec. 31 | Mar. 31 | |||||||
2005* | 2004 | 2004* | ||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and equivalents | $ | 4,945 | $ | 3,106 | $ | 4,434 | ||||
Accounts receivable, less allowances of $1,877 in March 2005, | ||||||||||
$1,760 in December 2004 and $526 in March 2004 | 95,194 | 80,323 | 77,348 | |||||||
Inventories (principally on last-in first-out basis) | ||||||||||
(latest cost higher by approximately $95,700 in March 2005, | ||||||||||
$92,500 in December 2004 and $55,600 in March 2004) | 139,219 | 135,588 | 104,040 | |||||||
Income tax receivable | 162 | 169 | 652 | |||||||
Assets held for sale | 995 | 995 | 1,117 | |||||||
Advances to joint ventures and other current assets | 7,624 | 7,325 | 6,599 | |||||||
Total current assets | 248,139 | 227,506 | 194,190 | |||||||
Investment in joint ventures | 9,204 | 8,463 | 5,060 | |||||||
Goodwill | 32,196 | 32,201 | 31,935 | |||||||
Pension assets | 41,933 | 42,262 | 42,122 | |||||||
Advances to joint ventures and other assets | 6,967 | 7,586 | 8,265 | |||||||
Property, plant and equipment, at cost | ||||||||||
Land | 4,770 | 4,771 | 4,767 | |||||||
Building | 45,495 | 45,514 | 46,975 | |||||||
Machinery and equipment | 125,339 | 124,641 | 119,253 | |||||||
175,604 | 174,926 | 170,995 | ||||||||
Less - accumulated depreciation | (111,931 | ) | (109,928 | ) | (103,079 | ) | ||||
63,673 | 64,998 | 67,916 | ||||||||
Total assets | $ | 402,112 | $ | 383,016 | $ | 349,488 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 96,595 | $ | 93,342 | $ | 77,056 | ||||
Accrued liabilities and deferred gains | 22,695 | 23,016 | 18,665 | |||||||
Current and deferred income taxes | 10,235 | 4,349 | 4,656 | |||||||
Current portion of long-term debt | 16,390 | 11,607 | 8,308 | |||||||
Total current liabilities | 145,915 | 132,314 | 108,685 | |||||||
Long-term debt, less current portion | 82,706 | 89,771 | 98,409 | |||||||
Deferred income taxes | 20,462 | 19,668 | 15,670 | |||||||
Deferred gain on sale of assets | 6,251 | 6,465 | 7,095 | |||||||
Minority interest | 1,653 | 1,644 | 1,261 | |||||||
Post retirement benefits obligations | 2,901 | 2,905 | 2,765 | |||||||
Stockholders' equity | ||||||||||
Preferred stock, no par value - 10,000,000 shares | ||||||||||
authorized; 12,000 shares issued and outstanding | 11,239 | 11,239 | 11,239 | |||||||
Common stock, $0.01 par value - authorized 30,000,000 | ||||||||||
shares; issued and outstanding 15,823,079 at March 2005, | ||||||||||
15,806,366 at December 2004 and 15,788,442 at March 2004 | 159 | 159 | 159 | |||||||
Additional paid in capital | 35,150 | 35,082 | 35,009 | |||||||
Earnings reinvested in the business | 94,278 | 82,400 | 68,542 | |||||||
Accumulated other comprehensive income | 1,643 | 1,616 | 928 | |||||||
Other - deferred compensation | - | (2 | ) | (29 | ) | |||||
Treasury stock, at cost - 63,331 shares at March 2005, 62,065 | ||||||||||
shares at December 2004 and 57,019 shares at March 2004 | (245 | ) | (245 | ) | (245 | ) | ||||
Total stockholders' equity | 142,224 | 130,249 | 115,603 | |||||||
Total liabilities and stockholders' equity | $ | 402,112 | $ | 383,016 | $ | 349,488 |
CONDENSED STATEMENTS OF CASH FLOWS | |||
(Dollars in thousands) | For the Three Months | ||
Ended Mar. 31, | |||
2005 | 2004 | ||
Cash flows from operating activities: | |||
Net income | $12,118 | $2,302 | |
Adjustments to reconcile net income to net cash from operating activities: | |||
Depreciation | 2,273 | 2,247 | |
Amortization of deferred gain | (214) | (209) | |
Equity in (earnings) from joint ventures | (1,509) | (632) | |
Deferred taxes and income tax receivable | 807 | 1,666 | |
Non-cash pension loss and post-retirement benefits | 562 | 105 | |
Other | 383 | 93 | |
Cash from operating activities before working capital changes | 14,420 | 5,572 | |
Increase (decrease) from changes in: | |||
Accounts receivable sold | 13,500 | 5,000 | |
Accounts receivable | (28,429) | (26,883) | |
Inventory | (3,718) | 14,962 | |
Accounts payable and accrued liabilities | 3,075 | 8,212 | |
Other current assets | (300) | 240 | |
Income tax payable | 5,885 | (143) | |
Net cash from operating activities | 4,433 | 6,959 | |
Cash flows from investing activities: | |||
Investments and acquisitions | - | (1,744) | |
Cash from joint ventures | 767 | - | |
Capital expenditures | (989) | (1,430) | |
Net cash from investing activities | (222) | (3,174) | |
Cash flows from financing activities: | |||
Repayment of long-term debt | (2,217) | (1,479) | |
Preferred stock dividend | (240) | (240) | |
Other | 68 | 17 | |
Net cash from financing activities | (2,389) | (1,702) | |
Effect of exchange rate changes on cash | 17 | (104) | |
Net increase in cash | 1,839 | 1,979 | |
Cash - beginning of year | 3,106 | 2,455 | |
Cash - end of period | $4,945 | $4,434 |