EX-99.1 2 ctam-ex991x063019.htm EXHIBIT 99.1 Exhibit
EXHIBIT 99.1

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A.M. CASTLE & CO.
1420 Kensington Road
Suite 220
Oak Brook, IL 60523
P: (847) 455-7111
F: (847) 241-8171
 
For Further Information:

Ed Quinn
+1 (847) 455-7111
Email: Inquiries@amcastle.com

FOR IMMEDIATE RELEASE
WEDNESDAY AUGUST 14, 2019

 A. M. CASTLE & CO. REPORTS SECOND QUARTER RESULTS
Company maintains favorable margins and improved profitability despite tightening of market conditions
OAK BROOK, IL, August 14, 2019 - A. M. Castle & Co. (OTCQX: CTAM) (the "Company" or "Castle"), a global distributor of specialty metal and supply chain solutions, today reported its second quarter 2019 financial results.
Second Quarter 2019 Financial Results Summary:
•
Generated net sales of $147.9 million, a 1.7% year-over-year decrease compared to $150.4 million in the second quarter of 2018, which had one more sales day, with sales per day flat year-over-year.
•
Reported an operating loss of $1.2 million, flat compared to the second quarter of 2018.
•
Reported a net loss of $8.3 million, which included $9.9 million of interest expense, of which $6.8 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 $8.5 million for the second quarter of 2018, which included $8.1 million of interest expense, of which $5.2 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 EBITDA of $3.5 million and adjusted EBITDA of $3.2 million in the second quarter of 2019 compared to EBITDA of $0.5 million and adjusted EBITDA of $2.2 million in the second quarter of 2018.
•
Maintained a stable gross material margin of 25.7% compared to 25.8% in the first quarter of 2019 and 26.2% in the second quarter of 2018.
Chairman and CEO Steve Scheinkman commented, "In light of the deteriorating market conditions in both demand and pricing experienced in the second quarter in many of the sectors we service, we are pleased by the resiliency of our efforts to continue to improve profitability. While our industrial-focused product lines faced head-winds, our aerospace business continued to remain strong."
President Marec Edgar added, "We continue to focus on selectively pursuing sales that are highly accretive, particularly those including our value-added service offerings. We believe this strategy will enable us to maintain a stable gross material margin and continue to achieve EBITDA in excess of cash interest expense during even downward pricing environments, such as we experienced this quarter. Coupled with the progress we have made in working capital management through the first half of 2019, we believe we are well positioned to generate positive cash flow to invest in our business and reduce debt in the remainder of 2019."
Mr. Edgar commented further, "We began to fully realize the impact of our new global supply organization in the second quarter. This included consistent reductions of aged inventory, improved overall stock levels, and real-time facilitation of our branches in moving higher cost inventory as certain markets softened, allowing us to avoid an overstocked position relative to the market and restock at lower replacement costs. Our focus for the second half of 2019 will be on continuing to improve the quality of our inventory and generating cash from even more efficient working capital utilization."
Executive Vice President of Finance and Administration Pat Anderson commented, "Our ongoing commitment to working capital efficiency is favorably impacting our cash flows from operations, which will allow us to continue to invest in the business and

EX-1-

decrease our debt burden. In fact, we have already started making principal payments against our revolving A credit facility during the third quarter of 2019." 
Mr. Edgar concluded, "We believe the end markets we serve will remain extremely competitive for the remainder of 2019. Given that, we are focused on building upon the operational foundation we demonstrated in the first half of 2019 and continuing our momentum towards improved profitability."
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 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. 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 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 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.

EX-2-

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
 
Three Months Ended
 
Six Months Ended
(Dollars in thousands, except per share data)
June 30,
 
June 30,
Unaudited
2019
 
2018
 
2019
 
2018
Net sales
$
147,930

 
$
150,414

 
$
297,457

 
$
296,287

Costs and expenses:
 
 
 
 
 
 
 
Cost of materials (exclusive of depreciation)
109,941

 
111,061

 
220,899

 
220,965

Warehouse, processing and delivery expense
20,541

 
21,165

 
40,818

 
41,520

Sales, general and administrative expense
16,477

 
16,974

 
32,979

 
33,522

Depreciation expense
2,130

 
2,362

 
4,251

 
4,738

Total costs and expenses
149,089

 
151,562

 
298,947

 
300,745

Operating loss
(1,159
)
 
(1,148
)
 
(1,490
)
 
(4,458
)
Interest expense, net
9,850

 
8,129

 
19,299

 
15,255

Other (income) expense, net
(2,480
)
 
673

 
(4,082
)
 
(4,101
)
Loss before income taxes
(8,529
)
 
(9,950
)
 
(16,707
)
 
(15,612
)
Income tax benefit
(225
)
 
(1,437
)
 
(400
)
 
(1,958
)
Net loss
$
(8,304
)
 
$
(8,513
)
 
$
(16,307
)
 
$
(13,654
)

Reconciliation of Reported Net Loss to EBITDA and Adjusted EBITDA:
 
Three Months Ended
 
Six Months Ended
(Dollars in thousands)
June 30,
 
June 30,
Unaudited
2019
 
2018
 
2019
 
2018
Net loss, as reported
$
(8,304
)
 
$
(8,513
)
 
$
(16,307
)
 
$
(13,654
)
Depreciation expense
2,130

 
2,362

 
4,251

 
4,738

Interest expense, net
9,850

 
8,129

 
19,299

 
15,255

Income tax benefit
(225
)
 
(1,437
)
 
(400
)
 
(1,958
)
EBITDA
3,451

 
541

 
6,843

 
4,381

Non-GAAP adjustments (a)
(238
)
 
1,641

 
258

 
1,309

Adjusted EBITDA
$
3,213

 
$
2,182

 
$
7,101

 
$
5,690

 
 
 
 
 
 
 
 
(a) Refer to "Reconciliation of Reported Net Loss to Adjusted Non-GAAP Net Loss" table for additional details on these amounts.


EX-3-

Reconciliation of Reported Net Loss to Adjusted Non-GAAP Net (Loss) Income:
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
(Dollars in thousands)
June 30,
 
June 30,
Unaudited
2019
 
2018
 
2019
 
2018
Net loss, as reported
$
(8,304
)
 
$
(8,513
)
 
$
(16,307
)
 
$
(13,654
)
Non-GAAP adjustments:
 
 
 
 
 
 
 
Noncash compensation expense
548

 
696

 
1,191

 
1,342

Foreign exchange (gain) loss on intercompany loans
(786
)
 
945

 
(933
)
 
(33
)
Non-GAAP adjustments to arrive at Adjusted EBITDA
(238
)
 
1,641

 
258

 
1,309

Non-cash interest expense(a)
6,765

 
5,232

 
13,182

 
9,766

Total non-GAAP adjustments
6,527

 
6,873

 
13,440

 
11,075

Tax effect of adjustments
—

 
—

 
—

 
—

Adjusted non-GAAP net loss
$
(1,777
)
 
$
(1,640
)
 
$
(2,867
)
 
$
(2,579
)
 
 
 
 
 
 
 
 
(a) Non-cash interest expense for the three months ended June 30, 2019 and June 30, 2018 includes interest paid in kind of $3,936 and $3,184, respectively, and amortization of debt discount of $2,829 and $2,048, respectively. Non-cash interest expense for the six months ended June 30, 2019 and June 30, 2018 includes interest paid in kind of $7,788 and $6,138, respectively, and amortization of debt discount of $5,394 and $3,628, respectively.

EX-4-

CONDENSED CONSOLIDATED BALANCE SHEETS
 
(Dollars in thousands, except par value data)
As of
Unaudited
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
6,534

 
$
8,668

Accounts receivable
93,337

 
79,757

Inventories
157,715

 
160,686

Prepaid expenses and other current assets
10,593

 
14,344

Income tax receivable
1,268

 
1,268

Total current assets
269,447

 
264,723

Goodwill and intangible assets, net
8,176

 
8,176

Prepaid pension cost
2,131

 
1,754

Deferred income taxes
1,268

 
1,261

Right of use assets
32,175

 
—

Other noncurrent assets
867

 
1,278

Property, plant and equipment:
 
 
 
Land
5,579

 
5,577

Buildings
20,936

 
21,218

Machinery and equipment
40,734

 
38,394

Property, plant and equipment, at cost
67,249

 
65,189

Accumulated depreciation
(16,075
)
 
(11,989
)
Property, plant and equipment, net
51,174

 
53,200

Total assets
$
365,238

 
$
330,392

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
48,475

 
$
42,719

Accrued and other current liabilities
13,109

 
16,631

Lease liabilities
6,725

 
—

Income tax payable
1,519

 
1,589

Short-term borrowings
7,979

 
5,498

Current portion of long-term debt
631

 
119

Total current liabilities
78,438

 
66,556

Long-term debt, less current portion
260,527

 
245,966

Deferred income taxes
6,478

 
7,540

Finance leases
8,483

 
61

Build-to-suit liability
—

 
9,975

Other noncurrent liabilities
2,964

 
3,334

Pension and postretirement benefit obligations
6,300

 
6,321

Lease liabilities
25,486

 
—

Commitments and contingencies

 

Stockholders’ deficit:
 
 
 
Common stock, $0.01 par value—200,000 Class A shares authorized with 3,818 shares issued and 3,650 shares outstanding at June 30, 2019, and 3,803 shares issued and outstanding at December 31, 2018
38

 
38

Additional paid-in capital
58,556

 
55,421

Accumulated deficit
(66,533
)
 
(50,472
)
Accumulated other comprehensive loss
(15,045
)
 
(14,348
)
Treasury stock, at cost — 168 shares at June 30, 2019 and no shares at December 31, 2018
(454
)
 
—

Total stockholders’ deficit
(23,438
)
 
(9,361
)
Total liabilities and stockholders’ deficit
$
365,238

 
$
330,392



EX-5-


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Six Months Ended
(Dollars in thousands)
June 30,
Unaudited
2019
 
2018
Operating activities:
 
 
 
Net loss
$
(16,307
)
 
$
(13,654
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation
4,251

 
4,738

Amortization of deferred financing costs and debt discount
5,394

 
3,628

Noncash interest paid in kind
7,788

 
6,138

(Loss) gain on sale of property, plant & equipment
154

 
(5
)
Unrealized foreign currency gain
(748
)
 
(11
)
Noncash impact of operating leases
476

 
—

Deferred income taxes
(1,836
)
 
—

Non-cash compensation expense
1,191

 
1,342

Other, net
—

 
298

Changes in assets and liabilities:
 
 
 
Accounts receivable
(13,354
)
 
(17,283
)
Inventories
3,213

 
(10,776
)
Prepaid expenses and other current assets
3,764

 
(3,586
)
Other noncurrent assets
(13
)
 
806

Prepaid pension costs
(377
)
 
(1,376
)
Accounts payable
5,573

 
10,663

Income tax payable and receivable
(770
)
 
(2,288
)
Accrued and other current liabilities
(3,546
)
 
964

Lease liabilities
(62
)
 
—

Postretirement benefit obligations and other noncurrent liabilities
(89
)
 
(195
)
Net cash used in operating activities
(5,298
)
 
(20,597
)
Investing activities:
 
 
 
Capital expenditures
(2,627
)
 
(3,379
)
Proceeds from sale of property, plant and equipment
21

 
5

Net cash used in investing activities
(2,606
)
 
(3,374
)
Financing activities:
 
 
 
Proceeds from long-term debt including credit facilities
3,500

 
39,461

Repayments of long-term debt including credit facilities
—

 
(17,570
)
Proceeds from (repayments of) short-term borrowings, net
2,528

 
(852
)
Principal paid on finance leases
(301
)
 
—

Payments of debt issue costs
—

 
(482
)
Payments of build-to-suit liability
—

 
(897
)
Net cash from financing activities
5,727

 
19,660

Effect of exchange rate changes on cash and cash equivalents
43

 
(157
)
Net change in cash and cash equivalents
(2,134
)
 
(4,468
)
Cash and cash equivalents—beginning of year
8,668

 
11,104

Cash and cash equivalents—end of period
$
6,534

 
$
6,636



EX-6-

LONG-TERM DEBT
 
 
 
(Dollars in thousands)
As of
Unaudited
June 30,
2019
 
December 31,
2018
 
 
 
 
5.00% / 7.00% Second Lien Notes due August 31, 2022(a)
$
187,048

 
$
180,894

Floating rate Revolving A Credit Facility due February 28, 2022
111,988

 
108,488

12.00% Revolving B Credit Facility due February 28, 2022(b)
24,276

 
22,875

Less: unvested restricted Second Lien Notes due August 31, 2022
(826
)
 
(1,378
)
Less: unamortized discount
(61,604
)
 
(64,491
)
Less: unamortized debt issuance costs
(355
)
 
(422
)
Total long-term debt
260,527

 
245,966

Less: current portion of long-term debt
—

 
—

Total long-term portion
$
260,527

 
$
245,966

(a) Included in balance is interest paid in kind of $18,604 as of June 30, 2019 and $12,217 as of December 31, 2018.
(b) Included in balance is interest paid in kind of $2,776 as of June 30, 2019 and $1,375 as of December 31, 2018.



EX-7-