Unassociated Document


UNITED STATES

SECURITIESANDEXCHANGECOMMISSION

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)
November 2, 2004


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 13e-4(c) underthe Exchange Act (17 CFR 240.13e-4(c))
________________________________________________________________





 
     
 



Item 2.02 Results of Operations and Financial Condition

On Tuesday, November 2, 2004 the Company disseminated a press release, Attached as Exhibit A, announcing the Company’s operational results for the Third Quarter and the Nine-Month Period ending September 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 September 30, and for Nine Months Months Ended September 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: November 2, 2004




 
     
 


A. M. CASTLE & CO.
3400 N. Wolf Road
Franklin Park, Illinois 60131
(847) 455-7111
(847) 455-9360
 
For Further Information:

----------AT THE COMPANY-----------
-------------------AT FINANCIAL RELATIONS BOARD---------------
Edward Culliton
Analyst Contacts:
General Information:
Vice President
John McNamara
George Zagoudis (312) 640-6663
(847) 349-2508
(212) 445-8435
Email:gzagoudis@financialrelationsboard.com
Email: eculliton@amcastle.com
Email: jmcnamara@financialrelationsboard.com


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


FOR IMMEDIATE RELEASE
TUESDAY, NOVEMBER 2, 2004


A. M. CASTLE & CO. ANNOUNCES RECORD
THIRD QUARTER 2004 RESULTS

FRANKLIN PARK, ILLINOIS, NOVEMBER 2, 2004 — A. M. Castle & Co. (AMEX:CAS), a North American distributor of highly engineered metals and plastics, today announced record sales and earnings for the three months ending September 30, 2004. Sales in the current quarter rose 48% to $199.3 million, up $64.4 million compared with $134.9 million in the same period a year ago. Net income applicable to common stock totalled $5.8 million, or 37 cents per share, compared with a loss of $2.6 million, or 16 cents per share, in the third quarter of 2003.

      For the first nine months of 2004, sales rose $152.7 million to $563.2 million, a 37% increase over prior year sales of $410.5 million. Net income totalled $13.7 million, or 87 cents per share, compared with a loss of $13.5 million, or 86 cents per share in 2003. The results for 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 the first nine months of last year was $7.2 million, or 45 cents per share.

     In making the announcement, G. Thomas McKane, Chairman and CEO, cited continued strong demand from Castle’s customers, higher material ls and improved operating efficiency as the key factors driving the Company’s results. “In the metals portion of our business,” said Mr. McKane, “constant dollar sales were up 18% and 17% for the third quarter and first nine months, respectively. The increases were driven by strong demand from virtually all the markets that Castle serves. The aerospace and the gas and oil markets started to rebound in the third quarter after remaining relatively flat during the first half of the year. In an environment of worldwide raw material shortages and improved domestic demand for metals, mill prices have increased significantly. Average metal prices were up 31% for the quarter and 20% for the first nine months of the year compared with prior period levels”.


 
     
 A. M. Castle & Co. Add One

In the Company’s plastics business, which accounts for approximately 12% of total revenue, sales also rose sharply. With small material cost increases beginning in the mid-third quarter, sales were up 41% for the three month period and 36% for the first nine months of the year.

On the metals side of the business, the value of each order we handle has increased significantly due to both larger order quantities and higher mill prices. Since our direct operating costs are driven by order volume rather than tons sold, our operating expenses have risen much more slowly than have our revenues and gross material margins. This generates significant earnings leverage for Castle. “The key measure of this leverage,” Mr. McKane stated, “is earnings before interest, taxes, depreciation and amortization (EBITDA). For the third quarter of 2004, EBITDA totalled a record $14.7 million, up from $0.9 million in the same period last year. This represents a return on incremental sales volume of 21%. For the first nine months, EBITDA totalled $38.2 million, compared with $4.2 million (exclusive of impairments and special charges) in the first nine months of 2003, for a 22% return on the increase in total sales. As we have pointed out throughout the year, 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.”

Looking toward the final quarter of the year, Mr. McKane noted that business continued the strong pace of September all the way through October but cautioned that the industry traditionally experiences a seasonal slowdown during the fourth quarter during the Thanksgiving and Christmas holiday periods. “Our current expectation,” McKane said, “is that this year the slowdown will not be nearly as extensive as it has been in recent years.”

 

 
     
 A. M. Castle & Co. Add Two



Mr. McKane also noted that in spite of the fact that the raw materials required for metal production are in short supply worldwide and mill lead times remain extended, the Company has been able to rebuild its inventories which rose $16 million in real (non-inflationary terms) during the quarter. “At September 30th,” McKane said, “inventories equaled 115 days of sales which is right in line with our long our long-term target turn rates. Mill pricing continues to be strong and, while there could be some softening in 2005, we do not expect a significant downward move as has been forecast by some industry analysts for commodity products such as carbon-flat rolled steels.”

In closing, Mr. McKane invited interested parties to listen to its conference call scheduled for 11:00 a.m. (EST) today, Tuesday, November 2, 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.





m o r e .
     
A.M. Castle & Co. Add Three


COMPARATIVE STATEMENTS OF OPERATIONS
  
For the Three
Months Ended
  
For the Nine
Months Ended
  
(Amounts in thousands, except per share data
Unaudited))
  
   
Sept 30, 
    
Sept 30,
  
     
2004
    
2003
    
2004
    
2003
  
Net sales
  
$
199,341
  
$
134,917
 
$
563,195
 
$
410,510
 
Cost of material sold
    
(142,033
)
  
(95,948
)
  
(398,378
)
  
(287,931
)
Special charges
    
-
    
-
    
-
    
(1,524
)
    Gross material margin
    
57,308
   
38,969
   
164,817
   
121,055
 
                           
Plant and delivery expense
    
(23,665
)
  
(21,300
)
  
(70,667
)
  
(65,913
)
Sales, general, and administrative expense
    
(20,345
)
  
(16,723
)
  
(59,117
)
  
(52,402
)
Depreciation and amortization expense
    
(2,245
)
  
(2,083
)
  
(6,736
)
  
(6,700
)
Impairment and other operating expenses
    
-
   
-
   
-
   
(5,924
)
Total other operating expenses
    
(46,255
)
  
(40,106
)
  
(136,520
)
  
(130,939
)
                           
Operating income (loss)
    
11,053
   
(1,137
)
  
28,297
   
(9,884
)
                           
Equity in earnings (loss) of joint ventures
    
1,458
   
2
   
3,197
   
(79
)
Impairment to joint venture investment and advances
    
-
   
-
   
-
   
(2,830
)
Interest expense, net
    
(2,175
)
  
(2,452
)
  
(6,706
)
  
(7,347
)
Discount on sale of accounts receivable
    
(167
)
  
(295
)
  
(684
)
  
(874
)
                           
Income (loss) before income tax
    
10,169
   
(3,882
)
  
24,104
   
(21,014
)
                           
Income tax (provision) benefit
                          
    Federal
   
(3,250
)
  
1,284
   
(7,720
)
  
6,808
 
    State
    
(832
)
  
261
   
(1,994
)
  
1,431
 
     
(4,082
)
  
1,545
   
(9,714
)
  
8,239
 
Net income (loss)
    
6,087
   
(2,337
)
  
14,390
   
(12,775
)
                           
Preferred Dividends
    
(240
)
  
(242
)
  
(720
)
  
(719
)
Net income (loss) applicable to common stock
  
$
5,847
 
$
(2,579
)
$
13,670
 
$
(13,494
)
                           
Basic earnings (loss) per share
 
$
0.37
 
$
(0.16
)
$
0.87
 
$
(0.86
)
Diluted earnings (loss) per share
  
$
0.36
   
(0.16
)
$
0.87
   
(0.86
)
                           
EBITDA *
  
$
14,756
 
$
948
 
$
38,230
 
$
(6,093
)
*Earnings before interest, discount on sale of accounts receivable, taxes, depreciation and amortization
                          
                           
Reconciliation of EBITDA to net income:
    
For the Three
    
For the Nine
  
   
Months Ended
    
Months Ended
  
   
Sept 30,
    
Sept 30,
2004
2003
2004
2003
  
                           
Net income (loss) from operations
  
$
6,087
 
$
(2,337
)
$
14,390
 
$
(12,775
)
Depreciation and amortization
    
2,245
   
2,083
   
6,736
   
6,700
 
Interest, net
    
2,175
    
2,452
    
6,706
    
7,347
  
Discount on accounts receivable sold
    
167
    
295
    
684
    
874
  
Provision (benefit) from income taxes
    
4,082
    
(1,545
)
  
9,714
   
(8,239
)
EBITDA as reported
    
14,756
   
948
   
38,230
   
(6,093
)
Add back impairment and special charges
    
-
   
-
   
-
   
10,278
 
EBITDA exlcuding impairment and special charges
  
$
14,756
 
$
948
 
$
38,230
 
$
4,185
 




     
A.M. Castle & Co.Add Four



COMPARATIVE BALANCE SHEETS
              
(Amounts in thousands)
              
Unaudited
    
Sep. 30
Dec. 31,
Sep. 30
2004
  
2003
    
2003
  
ASSETS
                    
Current assets
                    
    Cash and equivalents
  
$
5,435
 
$
2,455
 
$
831
 
    Accounts receivable, net
   
99,073
   
54,232
   
51,666
 
    Inventories (principally on last-in first-out basis)
    
121,297
   
117,270
   
119,730
 
    Income tax receivable
    
310
   
660
   
-
 
    Assets held for sale
    
995
   
1,067
   
-
 
    Other current assets
   
7,926
   
7,184
   
5,546
 
        Total current assets
    
235,036
   
182,868
   
177,773
 
Investment in joint ventures
    
7,024
   
5,492
   
5,317
 
Goodwill
    
31,959
   
31,643
   
31,619
 
Pension assets
    
42,216
   
42,075
   
41,823
 
Advances to joint ventures and other assets
    
7,517
   
8,688
   
8,875
 
Property, plant and equipment, at cost
                   
    Land
    
4,767
   
4,767
   
5,020
 
    Building
   
47,255
   
45,346
   
48,885
 
    Machinery and equipment
    
121,093
   
118,447
   
118,741
 
     
173,115
   
168,560
   
172,646
 
    Less - accumulated depreciation
    
(107,528
)
  
(100,386
)
  
(101,763
)
     
65,587
   
68,174
   
70,883
 
Total assets
  
$
389,339
 
$
338,940
 
$
336,290
 
                     
LIABILITIES AND STOCKHOLDER'S EQUITY
                    
Current liabilities
                    
    Accounts payable
  
$
102,893
 
$
67,601
 
$
60,422
 
    Accrued liabilities and deferred gains
    
23,990
   
19,145
   
19,259
 
    Current and deferred income taxes
   
2,954
   
4,852
   
4,183
 
    Current portion of long-term debt
   
11,676
   
8,248
   
7,980
 
        Total current liabilities
    
141,513
   
99,846
   
91,844
 
Long-term debt, less current portion
   
89,450
   
00,034
   
98,786
 
Deferred income taxes
   
19,942
   
13,963
   
16,018
 
Deferred gain on sale of assets
   
6,673
   
7,304
   
6,997
 
Minority interest
    
1,268
   
1,456
   
1,441
 
Post retirement benefits obligations
    
2,834
   
2,683
   
2,352
 
Stockholders' equity
                   
    Preferred stock
   
11,239
   
11,239
   
11,239
 
    Common stock
    
159
   
159
   
159
 
    Additional paid in capital
    
35,025
   
35,009
   
35,017
 
    Earnings reinvested in the business
    
80,147
   
66,480
   
72,002
 
    Accumulated other comprehensive income
    
1,350
   
1,042
   
727
 
    Other - deferred compensation
   
(16
)
  
(30
)
  
(62
)
    Treasury stock, at cost
   
(245
)
  
(245
)
  
(230
)
        Total stockholders' equity
   
127,659
   
113,654
   
118,852
 
Total liabilities and stockholders' equity
  
$
389,339
 
$
338,940
 
$
336,290
 




     
A.M. Castle & Co.Add Five




CONDENSED STATEMENT OF CASH FLOWS
          
(Dollars in thousands)
  
For the Nine Months
  
(Unaudited)
  
Sept. 30,
 
     
2004
    
2003
  
               
Cash flows from operating activities:
              
    Net income/(loss)
  
$
14,390
  
$
(12,775
)
    Depreciation
   
6,736
    
6,700
 
    Amortization of deferred gain
    
(631
)
  
(150
)
    Equity in (earnings) loss from joint ventures
    
(3,197
)
  
79
 
    Deferred taxes and income tax receivable
    
6,315
    
4,732
 
    Non-cash pension income (loss) and post-retirement benefits
    
315
    
(1,053
)
    Other
    
1,267
    
(3,257
)
        Cash from operating activities before working capital changes
    
25,195
   
(5,724
)
    Asset impairment and special charges
    
-
   
10,278
 
    Net change in accounts receivable sold
    
(8,000
)
  
(5,866
)
    Other increase in working capital
    
(1,076
)
  
(61
)
Net cash from operating activities
    
16,119
   
(1,373
)
               
Cash flows from investing activities:
              
    Investments and acquisitions
    
(1,744
)
  
-
 
    Advances to joint ventures
    
-
   
(199
)
    Capital expenditures
    
(3,419
)
  
(2,183
)
    Proceeds from sale of assets
    
-
   
10,538
 
Net cash from investing activities
   
(5,163
)
  
8,156
 
               
Cash flows from financing activities
              
    Payments on long-term debt
    
(7,337
)
  
(6,453
)
    Effect of exchange rate changes on cash
    
166
   
302
 
    Preferred dividends paid
    
(720
)
  
(719
)
    Other
    
(85
)
  
-
 
Net cash from financing activities
   
(7,976
)
  
(6,870
)
               
Net increase (decrease) in cash
    
2,980
   
(87
)
               
    Cash - beginning of year
    
2,455
   
918
 
    Cash - end of period
  
$
5,435
 
$
831
 






- 30 -