FORM 8-K |
Date of Report: December 31, 2015 |
(Date of earliest event reported) |
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.) |
1420 Kensington Road, Suite 220 Oak Brook, IL 60523 |
(Address of principal executive offices) |
Registrant's telephone number including area code: (847) 455-7111 |
Not Applicable |
(Former name or former address if changed since last report.) |
Exhibit Number | Description | |
99.1 | Press Release, dated March 14, 2016. | |
99.2 | Slide Presentation for Fourth Quarter and Full Year 2015 Financial Results webcast to beheld on March 14, 2016. |
A.M. CASTLE & CO. | ||||
By: | /s/ Marec E. Edgar | |||
March 14, 2016 | Marec E. Edgar | |||
Executive Vice President, General Counsel, Secretary & Chief Administrative Officer | ||||
Exhibit No. | Description | Page No. | ||
99.1 | Press Release, dated March 14, 2016. | EX-1- | ||
99.2 | Slide Presentation for Fourth Quarter and Full Year 2015 Financial Results webcast to be held on March 14, 2016. | EX-10- |
A.M. CASTLE & CO. | 1420 Kensington Road Suite 220 Oak Brook, IL 60523 P: (847) 455-7111 F: (847) 241-8171 |
• | Completed operational restructuring plan including consolidation of seven facilities, on time and within budget |
• | Reconfigured management structure and philosophy to focus on branch accountability and customer responsiveness |
• | Aligned corporate teams to ensure best practices in purchasing and management of inventory |
• | Refinanced Senior Secured Notes due in December 2016 |
◦ | Overwhelming 97% participation in private exchange offer for new Senior Secured Notes due December 2018 |
◦ | Maintained ability to prepay the new Senior Secured Notes without penalty |
• | Executed Transaction Support Agreements with 89.7% of holders to exchange Convertible Notes due December 2017 |
◦ | Upon completion, provides 30% discount in principal amount and 1.75% reduction in coupon rate |
◦ | New Convertible Notes provide ability, in certain circumstances, for the Company to initiate conversion into equity |
• | Completed sale of vast majority of remaining energy-related inventory and closure of Houston and Edmonton facilities that generated significant operating and non-cash losses in 2015 |
• | Entered into sale agreement for subsidiary, Total Plastics, Inc. which will provide significant additional debt reduction upon closing scheduled for this week |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | For the Three Months Ended | For the Year Ended | |||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Unaudited | December 31, | December 31, | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 164,151 | $ | 231,466 | $ | 770,758 | $ | 979,837 | |||||||
Costs and expenses: | |||||||||||||||
Cost of materials (exclusive of depreciation and amortization) | 191,530 | 185,220 | 674,615 | 750,408 | |||||||||||
Warehouse, processing and delivery expense | 27,394 | 33,991 | 114,734 | 140,559 | |||||||||||
Sales, general, and administrative expense | 21,864 | 28,185 | 95,479 | 112,465 | |||||||||||
Restructuring expense (income) | (8,645 | ) | 541 | 9,008 | (2,960 | ) | |||||||||
Depreciation and amortization expense | 6,193 | 6,655 | 24,854 | 26,044 | |||||||||||
Impairment of intangible assets | 33,742 | — | 33,742 | — | |||||||||||
Impairment of goodwill | — | — | — | 56,160 | |||||||||||
Total costs and expenses | 272,078 | 254,592 | 952,432 | 1,082,676 | |||||||||||
Operating loss | (107,927 | ) | (23,126 | ) | (181,674 | ) | (102,839 | ) | |||||||
Interest expense, net | 10,554 | 10,560 | 41,980 | 40,548 | |||||||||||
Other expense, net | 1,774 | 2,896 | 6,306 | 4,323 | |||||||||||
Loss before income taxes and equity in earnings (losses) of joint venture | (120,255 | ) | (36,582 | ) | (229,960 | ) | (147,710 | ) | |||||||
Income tax benefit | (1,830 | ) | (5,121 | ) | (21,621 | ) | (20,631 | ) | |||||||
Loss before equity in earnings (losses) of joint venture | (118,425 | ) | (31,461 | ) | (208,339 | ) | (127,079 | ) | |||||||
Equity in earnings (losses) of joint venture | (1,292 | ) | 1,777 | (1,426 | ) | 7,691 | |||||||||
Net loss | $ | (119,717 | ) | $ | (29,684 | ) | $ | (209,765 | ) | $ | (119,388 | ) | |||
Basic loss per common share | $ | (5.08 | ) | $ | (1.27 | ) | $ | (8.91 | ) | $ | (5.11 | ) | |||
Diluted loss per common share | $ | (5.08 | ) | $ | (1.27 | ) | $ | (8.91 | ) | $ | (5.11 | ) | |||
EBITDA (a) | $ | (104,800 | ) | $ | (17,590 | ) | $ | (164,552 | ) | $ | (73,427 | ) | |||
(a) Earnings (loss) before interest, taxes, and depreciation and amortization. See reconciliation to net loss below. |
Reconciliation of EBITDA and of Adjusted EBITDA to Net Loss: | |||||||||||||||
For the Three Months Ended | For the Year Ended | ||||||||||||||
(Dollars in thousands) | |||||||||||||||
Unaudited | December 31, | December 31, | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net loss | $ | (119,717 | ) | $ | (29,684 | ) | $ | (209,765 | ) | $ | (119,388 | ) | |||
Depreciation and amortization expense | 6,193 | 6,655 | 24,854 | 26,044 | |||||||||||
Interest expense, net | 10,554 | 10,560 | 41,980 | 40,548 | |||||||||||
Income tax expense (benefit) | (1,830 | ) | (5,121 | ) | (21,621 | ) | (20,631 | ) | |||||||
Negative EBITDA | (104,800 | ) | (17,590 | ) | (164,552 | ) | (73,427 | ) | |||||||
Non-GAAP adjustments (a) | 91,810 | 619 | 131,770 | 51,944 | |||||||||||
Adjusted negative EBITDA | $ | (12,990 | ) | $ | (16,971 | ) | $ | (32,782 | ) | $ | (21,483 | ) | |||
(a) Refer to 'Reconciliation of Adjusted Non-GAAP Net Loss to Reported Net Loss' table for additional details on these amounts. Unrealized foreign exchange losses on intercompany loans were not included in Adjusted EBITDA in the prior year period presented; had losses been included, Adjusted EBITDA would have been $(14,764) and $(17,945), respectively, for the three-months and year ended December 31, 2014. |
Reconciliation of Adjusted Non-GAAP Net Loss to Reported Net Loss: | |||||||||||||||
(Dollars in thousands, except per share data) | For the Three Months Ended | For the Year Ended | |||||||||||||
Unaudited | |||||||||||||||
December 31, | December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net loss, as reported | $ | (119,717 | ) | $ | (29,684 | ) | $ | (209,765 | ) | $ | (119,388 | ) | |||
Non-GAAP adjustments: | |||||||||||||||
Restructuring activity (a) | (5,324 | ) | 541 | 34,664 | (2,960 | ) | |||||||||
Non-cash write-down of inventory(b) | 61,472 | 61,472 | — | ||||||||||||
Foreign exchange losses on intercompany loans(c) | 1,242 | — | 5,385 | — | |||||||||||
Foreign exchange losses on intercompany loans of joint venture | 966 | — | 966 | — | |||||||||||
Impairment of intangible assets | 33,742 | — | 33,742 | — | |||||||||||
Impairment of goodwill | — | — | — | 56,160 | |||||||||||
Impairment of goodwill of equity investment joint venture(d) | — | — | 1,763 | — | |||||||||||
Unrealized (gains) losses on commodity hedges | (288 | ) | 78 | (600 | ) | (1,256 | ) | ||||||||
Gain on sale of property, plant and equipment | — | — | (5,622 | ) | — | ||||||||||
Non-GAAP adjustments | $ | 91,810 | $ | 619 | $ | 131,770 | $ | 51,944 | |||||||
Tax effect of adjustments | (16 | ) | (244 | ) | (42 | ) | (3,770 | ) | |||||||
Adjusted non-GAAP net loss | $ | (27,923 | ) | $ | (29,309 | ) | $ | (78,037 | ) | $ | (71,214 | ) | |||
Adjusted non-GAAP basic loss per share | $ | (1.18 | ) | $ | (1.25 | ) | $ | (3.31 | ) | $ | (3.05 | ) | |||
Adjusted non-GAAP diluted loss per share | $ | (1.18 | ) | $ | (1.25 | ) | $ | (3.31 | ) | $ | (3.05 | ) | |||
(a) Restructuring activity includes amounts recorded to restructuring expense (income). For the three months and year ended December 31, 2015, amount include $3,321 and $25,656 in inventory write-down charges, respectively, recorded to cost of materials in the Condensed Consolidated Statements of Operations. | |||||||||||||||
(b) Amount relates to the non-cash write-down of inventory and purchase commitments of the Company's Houston and Edmonton locations which served the oil and gas industries. The write-down was recorded in conjunction with the Company's decision to market the inventory at this location and reduces the carrying value of the inventory to its market value. In February 2016, the Company announced the sale of all of the Houston and Edmonton inventory and the planned closure of those facilities. | |||||||||||||||
(c) Unrealized foreign exchange losses on intercompany loans were not included in the prior year period presented as an adjustment to GAAP results as the amount was not significant. Had the losses been included, adjusted non-GAAP net loss, adjusted non-GAAP loss per share and adjusted non-GAAP diluted loss per share would have been $(27,102), $(1.16), and $(1.16), respectively, for the three-month period ended December 31, 2014. Adjusted non-GAAP net loss, adjusted non-GAAP loss per share and adjusted non-GAAP diluted loss per share would have been $(67,675), $(2.90), and $(2.90), respectively, for the year ended December 31, 2014. | |||||||||||||||
(d) The Company's 50% joint venture has determined that its goodwill balance of $3,525 was impaired as of September 30, 2015. The Company has recorded a charge of $1,763 in equity in earnings (losses) of joint venture in the Condensed Consolidated Statements of Operations to reflect its share of the goodwill impairment. |
CONDENSED CONSOLIDATED BALANCE SHEETS | As of | ||||||
(In thousands, except par value data) | December 31, | December 31, | |||||
Unaudited | 2015 | 2014 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 11,100 | $ | 8,454 | |||
Accounts receivable, less allowances of $3,440 and $3,375, respectively | 89,879 | 131,003 | |||||
Inventories | 235,443 | 359,630 | |||||
Prepaid expenses and other current assets | 11,523 | 9,458 | |||||
Income tax receivable | 346 | 2,886 | |||||
Total current assets | 348,291 | 511,431 | |||||
Investment in joint venture | 35,690 | 37,443 | |||||
Goodwill | 12,973 | 12,973 | |||||
Intangible assets, net | 10,250 | 56,555 | |||||
Prepaid pension cost | 8,422 | 7,092 | |||||
Deferred income taxes | 378 | 685 | |||||
Other non-current assets | 10,256 | 11,660 | |||||
Property, plant and equipment: | |||||||
Land | 2,869 | 4,466 | |||||
Buildings | 42,559 | 52,821 | |||||
Machinery and equipment | 177,803 | 183,923 | |||||
Property, plant and equipment, at cost | 223,231 | 241,210 | |||||
Accumulated depreciation | (151,838 | ) | (168,375 | ) | |||
Property, plant and equipment, net | 71,393 | 72,835 | |||||
Total assets | $ | 497,653 | $ | 710,674 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 56,272 | $ | 68,782 | |||
Accrued payroll and employee benefits | 11,246 | 9,332 | |||||
Accrued and other current liabilities | 17,324 | 18,338 | |||||
Income tax payable | 33 | 328 | |||||
Current portion of long-term debt | 7,012 | 737 | |||||
Total current liabilities | 91,887 | 97,517 | |||||
Long-term debt, less current portion | 314,761 | 309,377 | |||||
Deferred income taxes | 4,169 | 28,729 | |||||
Build-to-suit liability | 13,237 | — | |||||
Other non-current liabilities | 7,935 | 3,655 | |||||
Pension and postretirement benefit obligations | 18,676 | 18,747 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Preferred stock, $0.01 par value—9,988 shares authorized (including 400 Series B Junior Preferred $0.00 par value shares); no shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively | — | — | |||||
Common stock, $0.01 par value—60,000 shares authorized and 23,888 shares issued and 23,794 outstanding at December 31, 2015 and 23,630 shares issued and 23,559 outstanding at December 31, 2014 | 238 | 236 | |||||
Additional paid-in capital | 226,844 | 225,953 | |||||
(Accumulated deficit) retained earnings | (145,309 | ) | 64,456 | ||||
Accumulated other comprehensive loss | (33,821 | ) | (37,116 | ) | |||
Treasury stock, at cost—94 shares at December 31, 2015 and 71 shares at December 31, 2014 | (964 | ) | (880 | ) | |||
Total stockholders' equity | 46,988 | 252,649 | |||||
Total liabilities and stockholders' equity | $ | 497,653 | $ | 710,674 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | For the Year Ended | ||||||
(Dollars in thousands) | December 31, | ||||||
Unaudited | 2015 | 2014 | |||||
Operating activities: | |||||||
Net loss | $ | (209,765 | ) | $ | (119,388 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 24,854 | 26,044 | |||||
Amortization of deferred loss (gain) | 5 | (261 | ) | ||||
Amortization of deferred financing costs and debt discount | 8,355 | 8,064 | |||||
Impairment of intangible assets | 33,742 | — | |||||
Impairment of goodwill | — | 56,160 | |||||
Non-cash write-down of inventory | 53,971 | — | |||||
Gain on sale of property, plant and equipment | (21,568 | ) | (5,603 | ) | |||
Unrealized gains on commodity hedges | (600 | ) | (1,256 | ) | |||
Unrealized foreign currency transaction losses | 5,385 | 3,540 | |||||
Equity in losses (earnings) of joint venture | 1,426 | (7,691 | ) | ||||
Dividends from joint venture | 316 | 12,127 | |||||
Pension curtailment | 2,923 | — | |||||
Pension settlement | 3,915 | — | |||||
Deferred tax (benefit) expense | (23,842 | ) | (19,094 | ) | |||
Share-based compensation expense | 828 | 1,972 | |||||
Excess tax benefits from share-based payment arrangements | — | (76 | ) | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | 37,063 | (5,785 | ) | ||||
Inventories | 63,986 | (22,976 | ) | ||||
Prepaid expenses and other current assets | (7,884 | ) | (60 | ) | |||
Other non-current assets | (520 | ) | 1,686 | ||||
Prepaid pension costs | 2,675 | 387 | |||||
Accounts payable | (4,461 | ) | 2,630 | ||||
Accrued payroll and employee benefits | 6,938 | (230 | ) | ||||
Income tax payable and receivable | 2,083 | (772 | ) | ||||
Accrued and other current liabilities | (196 | ) | (3,493 | ) | |||
Pension and postretirement benefit obligations and other non-current liabilities | (1,762 | ) | (1,002 | ) | |||
Net cash used in operating activities | (22,133 | ) | (75,077 | ) | |||
Investing activities: | |||||||
Capital expenditures | (8,250 | ) | (12,351 | ) | |||
Proceeds from sale of property, plant and equipment | 28,631 | 7,464 | |||||
Net cash from (used in) investing activities | 20,381 | (4,887 | ) | ||||
Financing activities: | |||||||
Proceeds from long-term debt | 967,035 | 462,404 | |||||
Repayments of long-term debt | (960,962 | ) | (403,811 | ) | |||
Payment of debt issue costs | — | (627 | ) | ||||
Exercise of stock options | — | 158 | |||||
Excess tax benefits from share-based payment arrangements | — | 76 | |||||
Payments of build-to-suit liability | (500 | ) | — | ||||
Net cash from (used in) financing activities | 5,573 | 58,200 | |||||
Effect of exchange rate changes on cash and cash equivalents | (1,175 | ) | (611 | ) | |||
Net change in cash and cash equivalents | 2,646 | (22,375 | ) | ||||
Cash and cash equivalents—beginning of year | 8,454 | 30,829 | |||||
Cash and cash equivalents—end of year | $ | 11,100 | $ | 8,454 |
Total Debt: | As of | ||||||
(Dollars in thousands) | December 31, | December 31, | |||||
Unaudited | 2015 | 2014 | |||||
LONG-TERM DEBT | |||||||
12.75% Senior Secured Notes due December 15, 2016(a) | $ | 6,681 | $ | 210,000 | |||
7.0% Convertible Notes due December 15, 2017 | 57,500 | 57,500 | |||||
12.75% Senior Secured Notes due December 15, 2018 | 203,319 | — | |||||
Revolving Credit Facility due December 10, 2019 | 66,100 | 59,200 | |||||
Other, primarily capital leases | 428 | 1,257 | |||||
Less: unamortized discount | (12,255 | ) | (17,843 | ) | |||
Total debt | $ | 321,773 | $ | 310,114 | |||
Less: current portion | (7,012 | ) | (737 | ) | |||
Total long-term portion | $ | 314,761 | $ | 309,377 |
Reconciliation of Total Debt to Net Debt and Net Debt-to-Capital: | As of | ||||||
(Dollars in thousands) | December 31, | December 31, | |||||
Unaudited | 2015 | 2014 | |||||
Total debt | $ | 321,773 | $ | 310,114 | |||
Less: Cash and cash equivalents | (11,100 | ) | (8,454 | ) | |||
NET DEBT | $ | 310,673 | $ | 301,660 | |||
Stockholders' equity | $ | 46,988 | $ | 252,649 | |||
Total debt | 321,773 | 310,114 | |||||
CAPITAL | $ | 368,761 | $ | 562,763 | |||
NET DEBT-TO-CAPITAL | 84.2 | % | 53.6 | % |
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