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: [email protected]
Traded: OTCQB (CTAM)