August 2006 8K
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)
June 30, 2006


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, August 1, 2006 the Company disseminated a press release, attached as Exhibit A, announcing the Company’s operational results for the period ending June 30, 2006.

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 June 30, 2006 and June 30, 2005 and the Six Months ended June 30, 2006 and June 30, 2005.

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.

Item 9.01. Financial Statements and Exhibits

99.1 Press Release August 1, 2006



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
August 1, 2006


 
 
 

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



For Further Information:

 
—————AT THE COMPANY—————
 
————AT ASHTON PARTNERS————
Larry A. Boik
Analyst Contacts:
Vice President-Finance & CFO
Katie Pyra
(847) 349-2576
(312) 553-6717
Email: lboik@amcastle.com
Email: kpyra@ashtonpartners.com

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


FOR IMMEDIATE RELEASE
TUESDAY, AUGUST 1, 2006


A. M. CASTLE & CO. ANNOUNCES CONTINUED STRONG SALES AND EARNINGS PERFORMANCE AND DECLARES A QUARTERLY CASH DIVIDEND



FRANKLIN PARK, ILLINOIS, AUGUST 1ST - A. M. CASTLE & CO. (AMEX: CAS) a leading North American distributor of highly engineered metals and plastics, announced today continued strong demand and record sales and earnings performance for the second quarter and first-half of 2006.
 
Consolidated net sales for the second quarter ended June 30, 2006 were $275.6 million, an increase of $25.6 million or 9.8% from the second quarter of 2005. For the first half of 2006, net sales totaled $554.8 million, a $57.6 million or 11.6% increase from the same period of 2005.
 
“Excluding material price increases, we achieved 5% sales growth in the second quarter and 7% sales growth for the first half of the year,” stated Michael Goldberg, President and CEO of A. M. Castle & Co.
 
Net income applicable to common stock for the second quarter was $14.1 million, or $0.76 per diluted share, compared to $13.2 million, or $0.73 per diluted share, in the second quarter of 2005. For the first half of 2006, net income applicable to common stock, was $29.9 million, or $1.62 per diluted share, compared to $24.8 million, or $1.37 per diluted share for the first half of 2005.


 
 
 
 
“We continue to experience strong demand in the markets we serve, particularly aerospace, oil and gas, and mining and heavy industrial equipment sectors. Also contributing to our record results was a moderate increase in metals prices during the second quarter,” added Goldberg. “We remain optimistic about customer demand requirements for the second half of 2006. However, we want to remind our shareholders that typical seasonal patterns would suggest that second half sales will generally fall below those of the first half, assuming no further movement in material prices,” Goldberg concluded.
 
The Company reported 10% sales growth in its Metals business for the second quarter and 12% sales growth on a year-to-date basis. Metals prices for the Company’s current product mix were 5% higher than both the second quarter of 2005 and the comparative six-months.
 
Plastics sales increased 7% compared to the second quarter of last year and increased 8% year-to-date. Plastics prices were 5% higher than the second quarter of 2005 and 7% higher than the first half of last year.
 
“We continue to explore various growth opportunities in both our Metals and Plastics segments,” stated Goldberg. “Our excellent balance sheet has us well-positioned for both organic growth and potential strategic acquisitions that complement and enhance our existing product offerings, as well as expand our geographic reach,” added Goldberg. The Company’s debt to capital ratio, at quarter end was 27.3%.
 
Larry Boik, Vice President and CFO of the Company commented, “Our new Alabama facility shipped its first customer orders in early July.” The Birmingham facility was announced previously as part of the Company’s planned expansion of its Metals business into the Southern U.S. manufacturing region. “Our business systems replacement initiative is also progressing well. We completed the conversion of our financial systems during the second quarter and have started work on our core business applications. The project remains on track to be completed in late 2007 to early 2008 at a total cost of $4.0 million to $6.0 million,” added Boik. “Our capital expenditures through June reflect the purchase of the Alabama facility and our investment in new technology as we expand our business market reach and capabilities for the future,” Boik concluded.
 
On July 27, 2006 the Company’s Board of Directors approved a quarterly cash dividend of 6 cents per share, payable on August 28, 2006 to shareholders of record at the close of business on August 11th.
 
In closing, Mr. Goldberg invites interested parties to listen to its conference call scheduled for 11:00 a.m. (EST) today, Tuesday, August 1, 2006. A rebroadcast of the call will be available for 14 days following the call on the Company’s web site at www.amcastle.com.


 
 
 
About A. M. Castle & Co.
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; and aluminum. 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".

Safe Harbor Statement / Regulation G Disclosure
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. 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. EBITDA should not be considered as an alternative to net income or any other item calculated in accordance with U.S. GAAP, or as an indicator of operating performance. Our definition of EBITDA used here may differ from that used by other companies. A reconciliation of EBITDA to net income is provided per U.S. Securities and Exchange Commission requirements.
 
 
 


CONSOLIDATED STATEMENTS OF INCOME
  
For the Three
  
For the Six
  
(Dollars in thousands, except per share data)
  
Months Ended
  
Months Ended
  
Unaudited
  
June 30,
  
June 30,
 
 
 
 
2006
 
 
2005
 
 
2006
 
 
2005
  
Net sales
  
$
275,607
  
$
250,967
  
$
554,800
  
$
497,170
  
Cost of material sold
    
195,244
    
175,449
    
391,343
    
348,749
  
    Gross material margin
    
80,363
    
75,518
    
163,457
    
148,421
  
                           
Plant and delivery expense
    
28,981
    
27,347
    
58,605
    
53,715
  
Sales, general, and administrative expense
    
25,071
    
22,617
    
49,957
    
46,104
  
Depreciation and amortization expense
    
2,654
    
2,274
    
5,097
    
4,547
  
Total operating expense
    
56,706
    
52,238
    
113,659
    
104,366
  
                           
Operating income
   
23,657
    
23,280
    
49,798
    
44,055
  
                           
Interest expense, net
    
(958
)
  
(2,027
)
  
(2,046
)
  
(4,110
)
Discount on sale of accounts receivable
    
-
    
(464
)
  
-
    
(1,000
)
                           
Income before income taxes and equity earnings of joint venture
    
22,699
    
20,789
    
47,752
    
38,945
  
                           
Income taxes
    
(9,397
)
  
(8,320
)
  
(19,639
)
  
(16,215
)
Income before equity in earnings of joint venture
    
13,302
    
12,469
    
28,113
    
22,730
  
                           
Equity in earnings of joint venture
    
1,056
    
1,016
    
2,295
    
2,525
  
Net income
    
14,358
    
13,485
    
30,408
    
25,255
  
                           
Preferred dividends
    
(243
)
  
(240
)
  
(485
)
  
(480
)
Net income applicable to common stock
  
$
14,115
  
$
13,245
  
$
29,923
  
$
24,775
  
                           
Basic earnings per share
 
$
0.83
  
$
0.83
  
$
1.78
  
$
1.56
  
Diluted earnings per share
  
$
0.76
  
$
0.73
  
$
1.62
  
$
1.37
  
                           
EBITDA *
  
$
27,367
  
$
26,570
  
$
57,190
  
$
51,127
  
                           
*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,
     
2006
    
2005
    
2006
    
2005
  
                           
Net income
 
$
14,358
  
$
13,485
  
$
30,408
  
$
25,255
  
Depreciation and amortization
    
2,654
    
2,274
    
5,097
    
4,547
  
Interest, net
    
958
    
2,027
    
2,046
    
4,110
  
Discount on accounts receivable sold
    
-
    
464
    
-
    
1,000
  
Provision from income taxes
    
9,397
    
8,320
    
19,639
    
16,215
  
EBITDA
  
$
27,367
  
$
26,570
  
$
57,190
  
$
51,127
  
 
 
 
 

CONSOLIDATED BALANCE SHEETS
  
As of
  
(Dollars in Thousands)
    
June 30,
   
Dec 31,
 
Unaudited
    
2006
    
2005
  
               
ASSETS
              
Current assets
             
  Cash and cash equivalents
  
$
42,982
  
$
37,392
  
   Accounts receivable, less allowances of $2,040 at June 30, 2006
             
   $1,763 at December 31, 2005
    
128,946
    
107,064
  
   Inventories (principally on last-in, first-out basis)
    
139,604
    
119,306
  
   (latest cost higher by $114,014 at June 30, 2006 and $104,036
 
   at December 31, 2005)
  
  Other current assets
    
7,378
    
6,351
  
     Total current assets
    
318,910
    
270,113
  
Investment in joint venture
    
12,358
    
10,850
  
Goodwill
    
32,250
    
32,222
  
Prepaid pension cost
    
40,037
    
41,946
  
Other assets
    
4,923
    
4,182
  
Property, plant and equipment, at cost
             
  Land
    
5,203
    
4,772
  
  Building
   
48,468
    
45,890
  
  Machinery and equipment
    
132,207
    
127,048
  
     
185,878
    
177,710
  
  Less - accumulated depreciation
    
(118,627
)
  
(113,288
)
     
67,251
    
64,422
  
Total assets
  
$
475,729
  
$
423,735
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
  Current liabilities
              
  Accounts payable
  
$
123,397
  
$
103,246
  
  Accrued liabilities
    
22,997
    
21,535
  
  Current and deferred income taxes
   
1,497
    
7,052
  
  Current portion of long-term debt
   
6,233
    
6,233
  
    Total current liabilities
    
154,124
    
138,066
  
Long-term debt, less current portion
   
73,569
    
73,827
  
Deferred income taxes
   
20,784
    
21,903
  
Deferred gain on sale of assets
    
5,672
    
5,967
  
Pension and postretirement benefit obligations
    
8,949
    
8,467
  
Commitments and contingencies
              
Stockholders' equity
             
  Preferred stock, $0.01 par value - 10,000,000 shares
              
   authorized; 12,000 shares issued and outstanding
    
11,239
    
11,239
  
  Common stock, $0.01 par value - authorized 30,000,000
              
   shares; issued and outstanding 16,980,004 at June 30, 2006 and
              
   16,605,714 at December 31, 2005
    
170
    
166
  
  Additional paid-in capital
    
66,000
    
60,916
  
  Retained earnings
    
138,434
    
110,530
  
  Accumulated other comprehensive income
    
3,473
    
2,370
  
  Treasury stock, at cost - 411,235 shares at June 30, 2006 and
              
   546,065 shares at December 31, 2005
    
(6,685
)
  
(9,716
)
     Total stockholders' equity
   
212,631
    
175,505
  
Total liabilities and stockholders' equity
  
$
475,729
  
$
423,735
  

 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
For the Six Months
  
(Dollars in thousands)
  
Ended June 30,
Unaudited
    
2006
    
2005
  
               
Cash flows from operating activities:
              
  Net income
 
$
30,408
  
$
25,255
  
Adjustments to reconcile net income to net cash
              
from operating activities:
              
  Depreciation and amortization
    
5,097
    
4,547
  
  Amortization of deferred gain
    
(295
)
  
(427
)
  Equity in earnings from joint venture
    
(2,295
)
  
(2,525
)
  Stock compensation expense
    
1,945
    
1,497
  
  Deferred tax provision (benefit)
    
(1
)
  
1,586
  
  Excess tax benefits from stock-based payment arrangements
    
(811
)
  
-
  
  Increase (decrease) from changes in:
              
  Accounts receivable
   
(21,644
)
  
(22,121
)
  Inventories
    
(20,089
)
  
5,711
  
  Prepaid pension costs
    
1,909
    
1,124
  
  Other current assets
    
(1,118
)
  
(96
)
  Accounts payable
    
20,210
    
(6,456
)
  Accrued liabilities
    
1,471
    
2,180
  
  Income tax payable
    
(6,588
)
  
4,213
  
  Postretirement benefit obligations and other liabilities
    
(273
)
  
148
  
Net cash from operating activities
    
7,926
    
14,636
  
               
Cash flows from investing activities:
              
  Dividends from joint venture
   
825
    
1,334
  
  Capital expenditures
    
(7,804
)
  
(2,204
)
Net cash from investing activities
   
(6,979
)
  
(870
)
               
Cash flows from financing activities:
              
  Repayments of long-term debt
    
(258
)
  
(11,346
)
  Preferred stock dividend
    
(485
)
  
(480
)
  Dividends paid
    
(2,018
)
  
-
  
  Exercise of stock options and other
    
6,174
    
177
  
  Excess tax benefits from stock-based payment arrangements
    
811
    
-
  
Net cash from financing activities
   
4,224
    
(11,649
)
               
  Effect of exchange rate changes on cash and cash equivalents
    
419
    
42
  
               
Net increase in cash and cash equivalents
    
5,590
    
2,159
  
               
  Cash and cash equivalents - beginning of year
  
$
37,392
  
$
3,106
  
  Cash and cash equivalents - end of period
  
$
42,982
  
$
5,265