Unassociated Document

________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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) August 3, 2004



A. M. Castle & Co.
(Exact name of registrant as specified in its chapter)



                  Maryland
          1-5415
36-0879160
        (State of jurisdiction
(Commission
      (IRS Employer
          or incorporation)
File Number)
     Identification Number)

 
                               3400 North Wolf Road, Franklin Park, IL
                  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)



________________________________________________________________
 
 
     
 


Item 12. Results of Operations and Financial Condition

On Tuesday, August 3, 2004 the Company disseminated a press release, Attached as Exhibit A, announcing the Company’s operational results for the Second Quarter and the Six-Month Period ending June 30, 2004.

As part of the press release there is a discussion of a non-GAAP financial term EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). That term is also shown on the Comparative Statements of Operations. It is below the disclosure of the GAAP figures for Operating income, Net income and Diluted earnings per share.   There is also a reconciliation of EBITDA to Net income for the Three Months Ended June 30 , and for Six Months Ended June 30 at the bottom of the page.
 
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
Lawrence A. Boik
Vice President. Controller/Treasurer



Date: August 3, 2004

 
     
 
 
A. M. CASTLE & CO.
3400 N. Wolf Road
Franklin Park, Illinois 60131
(847) 455-7111
(847) 455-6930 (Fax)

For Further Information:

----------AT THE COMPANY-----------
-------------------AT FINANCIAL RELATIONS BOARD---------------
Edward Culliton
Analyst Contacts:
General Information:
VP, Finance & Chief Financial Officer
John McNamara
George Zagoudis (312) 640-6663
(847) 349-2508
(212) 445-8435
Email: elliton@amcastle.comcu
Email: jmcnamara@financialrelationsboard.com

Traded: AMEX, CSE (CAS)
Member: S&P SmallCap 600 Index   

FOR IMMEDIATE RELEASE
TUESDAY, AUGUST 3, 2004


A. M. Castle & Co. Announces Significantly
Improved Results for Second Quarter and First Half of 2004

Franklin Park, Illinois, August 3, 2004 — A. M. Castle & Co. (AMEX:CAS), a North American distributor of highly engineered metals and plastics, announced today significantly improved sales and earnings for the three and six month periods ending June 30, 2004. For the quarter ended June 30, 2004, Castle sales totalled $188.2 million, up 41% from $133.9 million a year ago. Net income applicable to common stock totalled $5.8 million, or 36 cents per share, compared with a loss of $9.3 million, or 59 cents per share, in the second quarter of 2003. Results for both the second quarter and first half of 2003 include $10.3 million of pre-tax costs for impairments and special charges which, net of their tax benefits, increased prior period losses by $6.3 million, or 40 cents per share. Excluding the impact of those charges, the net loss for second quarter of last year totalled $3.0 million, or 19 cents per share.
 
    For the first six months of 2004, Castle reported sales of $363.9 million, a 32% increase over prior year sales of $275.6 million, and net income of $7.8 million, or 50 cents per share, compared with a loss of $10.9 million, or 69 cents per share in 2003. Excluding impairment and special charges, the net loss for the first half of last year was $4.6 million, or 29 cents per share.
 
    In making the announcement, G. Thomas McKane, Chairman and CEO, cited stronger demand from its customers, higher material price levels and improved operating efficiency as the key factors driving the Company’s results. “In the metals portion of our business,” said Mr. McKane, “year-over-year tons sold were up 13% and 15% in the second quarter and first half,


 
     
 
 

A. M. Castle & Co.
Add One


respectively. This increase was driven by strong demand from virtually all the markets that Castle serves. The aerospace and the gas and oil markets, which started the year slowly, began to show improvement towards the end of the second quarter. In response to improved market demand for metals, coupled with raw material shortages, mill prices have increased sharply. On a year-over-year basis, average metal prices rose 22% for the quarter and 15% for the first six months of the year with wide variations among our various product groups.”
 
Volumes also increased significantly in the Company’s plastics business which accounts for approximately 12% of its sales. With virtually no price increases, sales were up 35% for the quarter and 33% for the first six months of the year. “Both our metals and plastics business are making strong contributions to our success,” said McKane.
 
In this environment, the dollar value of each order handled increases significantly with the result that activity driven expenses do not increase nearly as rapidly as tons, sales and gross profit. This creates strong upside operating leverage in an improving market environment. “The key measure of this leverage,” Mr. McKane stated, “is our earnings before interest, taxes, depreciation and amortization (EBITDA). For the second quarter of 2004, EBITDA totalled a near record $14.7 million, up from $458K (exclusive of impairments and special charges) in the same period last year. This represents a return on incremental sales volume of 26%. For the first half, EBITDA totalled $23.5 million, compared with $3.2 million (exclusive of impairments and special charges) in the first six months of 2003, for a 23% return on the increase in total sales. It is important to point out that there is very little inventory inflation profit in our operating results as a substantial majority of Castle’s inventories are accounted for on a last-in, first-out (LIFO) basis.”
 
In discussing the outlook for the second half of the year, Mr. McKane stated that the industry traditionally experiences a seasonal slowdown during the months of July and August, when many of its customers have annual vacation and maintenance shutdowns, and again late in the fourth quarter during the Thanksgiving and Christmas holiday periods. “Our current expectation,” McKane said, “is that while the number and length of these shutdowns may not be nearly as extensive as they were from 2000 through 2003, we will still see some seasonal slowdown in demand.”



     

 

A. M. Castle & Co.
Add Two

Mr. McKane also noted that the raw materials required for metal production remains in short supply worldwide and that mill lead times continue to be extended. “In this environment,” he said, “material tends to be in short supply indicating that mill pricing is likely to remain strong.” He added that, as an important customer to its major suppliers, Castle is competitively positioned to continue to meet its customers’ material requirements.
 
In closing, Mr. McKane invited interested parties to listen to its conference call scheduled for 11:00 a.m. (EST) today, Tuesday, August 3, 2004. Connection is available at www.amcastle.com and will be available for 14 days following the call.
 
Founded in 1890, A. M. Castle & Co. provides highly engineered materials and value added services to a wide range of companies within the producer durable equipment sector of the economy. 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 60 locations throughout North America. Its common stock is traded on the American and Chicago Stock Exchange under the ticker symbol "CAS".
 
This release contains 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 to provide the reader with additional information in analyzing the Company’s operating results. A reconciliation of EBITDA to net income is provided per SEC 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 and Exchange Commission.



     
A. M. Castle & Co.
Add Three

COMPARATIVE STATEMENTS OF OPERATIONS
  
For the Three
For the Six
(Amounts in thousands, except per share data)
  
Months Ended
Months Ended
(Unaudited)
  
June 30,
June 30,
   
 
    
2004
    
2003
    
2004
    
2003
  
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Net sales
  
$
188,221
 
$
133,947
 
$
363,854
 
$
275,593
 
Cost of material sold
    
(131,865
)
  
(93,539
)
  
(256,346
)
  
(191,983
)
Special charges
    
-
   
(1,524
)
  
-
   
(1,524
)
   
 
 
 
 
Gross material margin
    
56,356
   
38,884
   
107,508
   
82,086
 
 
    
 
    
 
    
 
    
 
  
Plant and delivery expense
    
(23,405
)
  
(22,263
)
  
(47,001
)
  
(44,613
)
Sales, general, and administrative expense
    
(19,315
)
  
(17,643
)
  
(38,771
)
  
(35,679
)
Depreciation and amortization expense
    
(2,244
)
  
(2,313
)
  
(4,491
)
  
(4,617
)
Impairment and other operating expenses
    
-
   
(5,924
)
  
-
   
(5,924
)
   
 
       
 
Total other operating expense
    
(44,964
)
  
(48,143
)
  
(90,263
)
  
(90,833
)
 
    
 
    
 
    
 
    
 
  
Operating income (loss)
    
11,392
   
(9,259
)
  
17,245
   
(8,747
)
 
    
 
    
 
    
 
    
 
  
Equity earnings (loss) of joint ventures
    
1,104
   
(44
)
  
1,739
   
(81
)
Impairment to joint venture investment and advances
    
-
   
(2,830
)
  
-
   
(2,830
)
Interest expense, net
    
(2,218
)
  
(2,452
)
  
(4,532
)
  
(4,895
)
Discount on sale of accounts receivable
    
(234
)
  
(250
)
  
(517
)
  
(579
)
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Income (loss) from continuing operations before income tax
    
10,044
   
(14,835
)
  
13,935
   
(17,132
)
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Income tax (provision) benefit
    
 
    
 
    
 
    
 
  
Federal
   
(3,238
)
  
4,761
   
(4,470
)
  
5,524
 
State
    
(808
)
  
1,043
   
(1,162
)
  
1,170
 
   
 
 
 
 
 
    
(4,046
)
  
5,804
   
(5,632
)
  
6,694
 
   
 
 
 
 
Net income (loss) from continuing operations
    
5,998
   
(9,031
)
  
8,303
   
(10,438
)
 
    
 
    
 
    
 
    
 
  
Preferred dividends
    
(240
)
  
(240
)
  
(480
)
  
(477
)
   
 
 
 
 
Net income (loss) applicable to common stock
  
$
5,758
 
$
(9,271
)
$
7,823
 
$
(10,915
)
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Basic earnings (loss) per share
 
$
0.36
 
$
(0.59
)
$
0.50
 
$
(0.69
)
   
 
 
 
 
Diluted earnings (loss) per share
  
$
0.35
   
(0.59
)
$
0.47
   
(0.69
)
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
  
EBITDA*
  
$
14,740
 
$
(9,820
)
$
23,475
 
$
(7,041
)
  
 
 
 
 
*Earnings before interest, discount on sale of accounts receivable, taxes, depreciation and amortization
  
 
    
 
  
 
  
 
 
Reconciliation of EBITDA to Net Income:
    
For the Three
    
For the Six
  
   
Months Ended 
    
Months Ended
  
   
June 30,
    
June 30,
  
 
    
2004

 

 
2003

 

 
2004

 

 
2003
  
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Net income (loss) from operations
  
$
5,998
 
$
(9,031
)
$
8,303
 
$
(10,438
)
Depreciation and amortization
    
2,244
   
2,313
   
4,491
   
4,617
 
Interest, net
    
2,218
   
2,452
   
4,532
   
4,895
 
Discount on accounts receivable sold
    
234
   
250
   
517
   
579
 
Provision (benefit) from income taxes
    
4,046
   
(5,804
)
  
5,632
   
(6,694
)
   
 
 
 
 
EBITDA
  
$
14,740
 
$
(9,820
)
$
23,475
 
$
(7,041
)
   
 
 
 
 


     

 

A. M. Castle & Co.
Add Four

COMPARATIVE BALANCE SHEETS
  
 
 
 
(Amounts in thousands except per share data)
  
 
 
 
UNAUDITED
    
Jun. 30

 

 
Dec. 31

 

 
Jun. 30

 

 

 

 
2004

 

 
2003

 

 
2003
  
   
 
 
 
ASSETS
    
 
    
 
    
 
  
                    
Current assets
   
 
    
 
    
 
  
Cash and equivalents
  
$
4,503
 
$
2,455
 
$
1,672
 
Accounts receivable, net
   
91,714
   
54,232
   
42,219
 
Inventories (principally on last-in first-out basis)
    
105,224
   
117,270
   
127,658
 
Income tax receivable
    
408
   
660
   
-
 
Assets held for sale
    
1,059
   
1,067
   
-
 
Other current assets
   
8,658
   
7,184
   
7,800
 
Total current assets
    
211,566
   
182,868
   
179,349
 
Investment in joint ventures
    
5,973
   
5,492
   
7,224
 
Goodwill
    
31,925
   
31,643
   
31,720
 
Pension assets
    
42,169
   
42,075
   
41,109
 
Advances to joint ventures and other assets
    
7,464
   
8,688
   
5,534
 
Property, plant and equipment, at cost
   
 
    
 
    
 
  
Land
    
4,767
   
4,767
   
6,031
 
Building
   
47,130
   
45,346
   
51,826
 
Machinery and equipment
    
119,883
   
118,447
   
119,302
 
   
 
 
 
 
    
171,780
   
168,560
   
177,159
 
Less - accumulated depreciation
    
(105,133
)
  
(100,386
)
  
(102,062
)
   
 
 
 
 
    
66,647
   
68,174
   
75,097
 
   
 
 
 
Total assets
  
$
365,744
 
$
338,940
 
$
340,033
 
   
 
 
 
 
    
 
    
 
    
 
  
LIABILITIES AND STOCKHOLDER'S EQUITY
    
 
    
 
    
 
  
                    
Current liabilities
    
 
    
 
    
 
  
Accounts payable
  
$
87,299
 
$
67,601
 
$
61,722
 
Accrued liabilities and deferred gains
    
21,652
   
19,145
   
19,810
 
Current and deferred income taxes
   
2,377
   
4,852
   
4,037
 
Current portion of long-term debt
   
13,057
   
8,248
   
11,230
 
   
 
 
 
Total current liabilities
    
124,385
   
99,846
   
96,799
 
   
 
 
 
Long-term debt, less current portion
   
89,187
   
100,034
   
100,358
 
Deferred income taxes
   
20,147
   
13,963
   
17,753
 
Deferred gain on sale of assets
   
6,902
   
7,304
   
-
 
Minority interest
    
1,262
   
1,456
   
1,404
 
Post retirement benefits obligations
    
2,758
   
2,683
   
2,292
 
Stockholders' equity
   
 
    
 
    
 
  
Preferred stock
   
11,239
   
11,239
   
11,239
 
Common stock
    
159
   
159
   
159
 
Additional paid in capital
    
35,009
   
35,009
   
35,017
 
Earnings reinvested in the business
    
74,300
   
66,480
   
74,581
 
Accumulated other comprehensive income (loss)
   
663
   
1,042
   
732
 
Other - deferred compensation
   
(22
)
  
(30
)
  
(71
)
Treasury stock, at cost
   
(245
)
  
(245
)
  
(230
)
   
 
 
 
Total stockholders' equity
   
121,103
   
113,654
   
121,427
 
   
 
 
 
Total liabilities and stockholders' equity
  
$
365,744
 
$
338,940
 
$
340,033
 
   
 
 
 
 
    
 
    
 
    
 
  
The accompanying notes are an integral part of these financial statements.
  
 
    
 
  




     

 

A. M. Castle & Co.
Add FIve



CONDENSED STATEMENT OF CASH FLOWS
  
 
 
(Dollars in thousands)
    
For the Six Months
  
(Unaudited)
  
June 30,
   
 
    
2004
    
2003
  
   
 
 
 
    
 
    
 
  
Cash flows from operating activities:
    
 
    
 
  
Net income/(loss)
 
$
8,303
 
$
(10,438
)
Depreciation and amortization
   
4,491
   
4,617
 
Amortization of deferred gain on sale of assets
    
(402
)
  
-
 
Equity loss (earnings) from joint ventures
    
(1,739
)
  
81
 
Deferred taxes and income tax receivable
    
6,454
   
6,466
 
Non-cash pension income and post-retirement benefits
    
105
   
(480
)
Other
    
1,010
   
(1,694
)
   
 
 
Cash from operating activities before working capital changes
    
18,222
   
(1,448
)
Asset impairment and special charges
    
-
   
10,278
 
Net change in accounts receivable sold
    
(5,000
)
  
1,800
 
Other; Increase in working capital
    
(688
)
  
(5,822
)
   
 
 
Net cash from operating activities
    
12,534
   
4,808
 
 
    
 
    
 
  
Cash flows from investing activities:
    
 
    
 
  
Investments and acquisitions
    
(1,744
)
  
-
 
Advances to joint ventures
    
-
   
(233
)
Capital expenditures
    
(2,372
)
  
(1,727
)
   
 
 
Net cash from investing activities
   
(4,116
)
  
(1,960
)
 
    
 
    
 
  
Cash flows from financing activities
    
 
    
 
  
Long-term debt reductions
    
(5,826
)
  
(1,737
)
Preferred dividends paid
    
(480
)
  
(477
)
Other
    
(94
)
  
-
 
   
 
 
Net cash from financing activities
   
(6,400
)
  
(2,214
)
 
    
 
    
 
  
Effect of exchange rate changes on cash
    
30
   
120
 
 
    
 
    
 
  
Net increase in cash
    
2,048
   
754
 
   
 
 
 
    
 
    
 
  
Cash - beginning of year
  
$
2,455
 
$
918
 
   
 
 
Cash - end of period
  
$
4,503
 
$
1,672
 
   
 
 
 
    
 
    
 
  
Supplemental cash disclosure - cash (paid) received during the period:
    
 
    
 
  
Interest
    
($4,569
)
  
($4,634
)
   
 
 
Income taxes
   
($1,448
)
$
12,813
 
   
 
 
 
    
 
    
 
  
The accompanying notes are an integral part of these statements.
    
 
    
 
  

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