FORM 8-K |
Date of Report: March 13, 2018 |
(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 13, 2018 |
A.M. CASTLE & CO. | ||||
By: | /s/ Marec E. Edgar | |||
March 13, 2018 | Marec E. Edgar | |||
Executive Vice President, General Counsel, Secretary & Chief Administrative Officer | ||||
Exhibit No. | Description | |
99.1 |
A.M. CASTLE & CO. | 1420 Kensington Road Suite 220 Oak Brook, IL 60523 P: (847) 455-7111 F: (847) 241-8171 |
• | Year over year volume increase of 12% |
• | Net sales of $123.2 million |
• | Net loss of $12.5 million, including $6.2 million of interest expense, $4.8 million of which was non-cash |
Consolidated Statements of Operations | ||||||||||||
(Dollars in thousands, except per share data) | Successor | Predecessor | ||||||||||
September 1, 2017 through December 31, 2017 | January 1, 2017 through August 31, 2017 | Year Ended December 31, 2016 | ||||||||||
Net sales | $ | 164,942 | $ | 353,926 | $ | 533,150 | ||||||
Costs and expenses: | ||||||||||||
Cost of materials (exclusive of depreciation and amortization) | 127,828 | 266,495 | 421,290 | |||||||||
Warehouse, processing and delivery expense | 25,353 | 50,314 | 84,555 | |||||||||
Sales, general and administrative expense | 20,464 | 39,139 | 68,273 | |||||||||
Restructuring expense, net | — | 566 | 12,942 | |||||||||
Depreciation and amortization expense | 3,213 | 10,150 | 16,378 | |||||||||
Total costs and expenses | 176,858 | 366,664 | 603,438 | |||||||||
Operating loss | (11,916 | ) | (12,738 | ) | (70,288 | ) | ||||||
Interest expense, net | 7,634 | 23,402 | 36,422 | |||||||||
Financial restructuring expense | — | 7,024 | — | |||||||||
Unrealized (gain) loss on embedded debt conversion option | (2,352 | ) | 146 | (10,450 | ) | |||||||
Debt restructuring loss, net | — | — | 8,617 | |||||||||
Other (income) expense, net | (2,824 | ) | (3,582 | ) | 7,582 | |||||||
Reorganization items, net | 2,141 | (74,531 | ) | — | ||||||||
(Loss) income from continuing operations before income taxes and equity in losses of joint venture | (16,515 | ) | 34,803 | (112,459 | ) | |||||||
Income tax benefit | (3,188 | ) | (1,387 | ) | (2,546 | ) | ||||||
(Loss) income from continuing operations before equity in losses of joint venture | (13,327 | ) | 36,190 | (109,913 | ) | |||||||
Equity in losses of joint venture | — | — | (4,177 | ) | ||||||||
(Loss) income from continuing operations | (13,327 | ) | 36,190 | (114,090 | ) | |||||||
Income from discontinued operations, net of income taxes | — | — | 6,108 | |||||||||
Net (loss) income | $ | (13,327 | ) | $ | 36,190 | $ | (107,982 | ) | ||||
Consolidated Statement of Operations | ||||
(Dollars in thousands, except per share data) | Successor | |||
Unaudited | Three Months Ended December 31, 2017 | |||
Net sales | $ | 123,217 | ||
Costs and expenses: | ||||
Cost of materials (exclusive of depreciation and amortization) | 96,346 | |||
Warehouse, processing and delivery expense | 19,381 | |||
Sales, general and administrative expense | 15,618 | |||
Depreciation and amortization expense | 2,711 | |||
Total costs and expenses | 134,056 | |||
Operating loss | (10,839 | ) | ||
Interest expense, net | 6,226 | |||
Unrealized gain on embedded debt conversion option | (2,352 | ) | ||
Other income, net | (746 | ) | ||
Reorganization items, net | 2,013 | |||
Loss before income taxes | (15,980 | ) | ||
Income tax benefit | (3,474 | ) | ||
Net loss | $ | (12,506 | ) | |
Basic and diluted loss per common share | $ | (6.25 | ) |
Reconciliation of EBITDA and of Adjusted EBITDA to Reported Net Loss: | Successor | |||
(Dollars in thousands) | Three Months Ended December 31, 2017 | |||
Unaudited | ||||
Net loss, as reported | $ | (12,506 | ) | |
Depreciation and amortization expense | 2,711 | |||
Interest expense, net | 6,226 | |||
Income tax benefit | (3,474 | ) | ||
EBITDA | (7,043 | ) | ||
Non-GAAP adjustments (a) | (48 | ) | ||
Adjusted EBITDA | $ | (7,091 | ) | |
(a) Refer to "Reconciliation of Adjusted Non-GAAP Net Loss to Reported Net Loss" table for additional details on these amounts. |
Reconciliation of Adjusted Non-GAAP Net Loss to Reported Net Loss: | Successor | |||
(Dollars in thousands) | Three Months Ended December 31, 2017 | |||
Unaudited | ||||
Net loss, as reported | $ | (12,506 | ) | |
Non-GAAP adjustments: | ||||
Reorganization items, net(a) | 2,013 | |||
Noncash compensation expense | 651 | |||
Foreign exchange gain on intercompany loans | (360 | ) | ||
Unrealized gain on embedded debt conversion option | (2,352 | ) | ||
Non-GAAP adjustments to arrive at Adjusted EBITDA | (48 | ) | ||
Non-cash interest expense | 4,799 | |||
Total non-GAAP adjustments | 4,751 | |||
Tax effect of adjustments | — | |||
Adjusted non-GAAP loss | $ | (7,755 | ) | |
(a) Reorganization items, net includes expenses incurred after the pendency of the Company's chapter 11 cases. For the period September 1, 2017 through December 31, 2017, the amount was comprised of legal and other professional fees. |
CONSOLIDATED BALANCE SHEETS | Successor | Predecessor | ||||||
(In thousands, except par value data) | December 31, 2017 | December 31, 2016 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 11,104 | $ | 35,624 | ||||
Accounts receivable, less allowances of $1,586 and $1,945, respectively | 74,370 | 64,385 | ||||||
Inventories | 154,491 | 146,603 | ||||||
Prepaid expenses and other current assets | 12,274 | 10,141 | ||||||
Income tax receivable | 1,576 | 433 | ||||||
Total current assets | 253,815 | 257,186 | ||||||
Goodwill and intangible assets, net | 8,176 | 4,101 | ||||||
Prepaid pension cost | 10,745 | 8,501 | ||||||
Deferred income taxes | 1,278 | 381 | ||||||
Other noncurrent assets | 1,344 | 9,449 | ||||||
Property, plant and equipment: | ||||||||
Land | 5,581 | 2,070 | ||||||
Buildings | 21,296 | 37,341 | ||||||
Machinery and equipment | 33,011 | 125,836 | ||||||
Property, plant and equipment, at cost | 59,888 | 165,247 | ||||||
Accumulated depreciation | (2,961 | ) | (115,537 | ) | ||||
Property, plant and equipment, net | 56,927 | 49,710 | ||||||
Total assets | $ | 332,285 | $ | 329,328 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 41,757 | $ | 33,083 | ||||
Accrued and other current liabilities | 13,931 | 19,854 | ||||||
Income tax payable | 262 | 209 | ||||||
Short-term borrowings | 5,854 | — | ||||||
Current portion of long-term debt | 118 | 137 | ||||||
Total current liabilities | 61,922 | 53,283 | ||||||
Long-term debt, less current portion | 199,903 | 286,459 | ||||||
Deferred income taxes | 16,166 | — | ||||||
Build-to-suit liability | 10,148 | 12,305 | ||||||
Other noncurrent liabilities | 3,784 | 5,978 | ||||||
Pension and postretirement benefit obligations | 6,377 | 6,430 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity (deficit): | ||||||||
Predecessor preferred stock, $0.01 par value—9,988 shares authorized (including 400 Series B Junior Preferred, $0.00 par value); no shares issued and outstanding at December 31, 2016 | — | — | ||||||
Predecessor common stock, $0.01 par value—60,000 shares authorized; 32,768 shares issued and 32,566 outstanding at December 31, 2016 | — | 327 | ||||||
Successor common stock, $0.01 par value—200,000 Class A shares authorized with 3,734 shares issued and outstanding at December 31, 2017 | 37 | — | ||||||
Predecessor additional paid-in capital | — | 244,825 | ||||||
Successor additional paid-in capital | 49,944 | — | ||||||
Accumulated deficit | (13,327 | ) | (253,291 | ) | ||||
Accumulated other comprehensive loss | (2,669 | ) | (25,939 | ) | ||||
Predecessor treasury stock, at cost — 202 shares at December 31, 2016 | — | (1,049 | ) | |||||
Total stockholders’ equity (deficit) | 33,985 | (35,127 | ) | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 332,285 | $ | 329,328 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | Successor | Predecessor | ||||||||||
(Dollars in thousands) | September 1, 2017 Through December 31, 2017 | January 1, 2017 Through August 31, 2017 | Nine Months Ended September 30, 2016 | |||||||||
Operating activities: | ||||||||||||
Net (loss) income | $ | (13,327 | ) | $ | 36,190 | $ | (107,982 | ) | ||||
Less: Income from discontinued operations, net of income taxes | — | — | 6,108 | |||||||||
(Loss) income from continuing operations | (13,327 | ) | 36,190 | (114,090 | ) | |||||||
Adjustments to reconcile (loss) income from continuing operations to net cash (used in) from operating activities of continuing operations: | ||||||||||||
Depreciation and amortization | 3,213 | 10,150 | 16,378 | |||||||||
Amortization of deferred financing costs and debt discount | 1,958 | 3,810 | 4,798 | |||||||||
Debt restructuring loss, net | — | — | 8,617 | |||||||||
Loss from lease termination | — | — | 2,200 | |||||||||
Unrealized loss (gain) on embedded debt conversion option | (2,352 | ) | 146 | (10,450 | ) | |||||||
Noncash reorganization items, net | — | (87,107 | ) | — | ||||||||
Loss on sale of property, plant and equipment | 26 | 7 | 1,874 | |||||||||
Unrealized gain on commodity hedges | — | — | (1,015 | ) | ||||||||
Unrealized foreign currency transaction (gain) loss | (1,709 | ) | (4,439 | ) | 4,506 | |||||||
Equity in losses of joint venture | — | — | 4,141 | |||||||||
Noncash interest paid in kind | 3,865 | — | — | |||||||||
Deferred income taxes | (3,437 | ) | (953 | ) | (4,354 | ) | ||||||
Noncash compensation expense | 866 | 630 | 1,154 | |||||||||
Other, net | 634 | 537 | (80 | ) | ||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | (2,205 | ) | (6,061 | ) | 6,100 | |||||||
Inventories | (1,978 | ) | (2,703 | ) | 65,712 | |||||||
Prepaid expenses and other current assets | 752 | (3,100 | ) | 1,358 | ||||||||
Other noncurrent assets | 324 | 1,664 | 1,993 | |||||||||
Prepaid pension costs | (1,395 | ) | (849 | ) | (59 | ) | ||||||
Accounts payable | (4,548 | ) | 8,602 | (8,449 | ) | |||||||
Accrued payroll and employee benefits | 945 | (2,670 | ) | 300 | ||||||||
Income tax payable and receivable | (828 | ) | (340 | ) | (105 | ) | ||||||
Accrued and other current liabilities | (773 | ) | (3,332 | ) | (6,214 | ) | ||||||
Pension and postretirement benefit obligations and other noncurrent liabilities | (585 | ) | (471 | ) | (3,063 | ) | ||||||
Net cash used in operating activities of continuing operations | (20,554 | ) | (50,289 | ) | (29,048 | ) | ||||||
Net cash used in operating activities of discontinued operations | — | — | (5,914 | ) | ||||||||
Net cash used in operating activities | (20,554 | ) | (50,289 | ) | (34,962 | ) | ||||||
Investing activities: | ||||||||||||
Proceeds from sale of investment in joint venture | — | — | 31,550 | |||||||||
Capital expenditures | (3,742 | ) | (2,850 | ) | (3,499 | ) | ||||||
Proceeds from sale of property, plant and equipment | 31 | 619 | 3,265 | |||||||||
Change in cash collateralization of letters of credit | — | 7,492 | (7,968 | ) | ||||||||
Net cash (used in) from investing activities of continuing operations | (3,711 | ) | 5,261 | 23,348 | ||||||||
Net cash from investing activities of discontinued operations | — | — | 53,570 | |||||||||
Net cash (used in) from investing activities | (3,711 | ) | 5,261 | 76,918 | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | Successor | Predecessor | ||||||||||
(Dollars in thousands) | September 1, 2017 Through December 31, 2017 | January 1, 2017 Through August 31, 2017 | Nine Months Ended September 30, 2016 | |||||||||
Financing activities: | ||||||||||||
Short-term borrowings, net | 1,720 | 3,797 | — | |||||||||
Proceeds from long-term debt including credit facilities | 22,973 | 195,026 | 722,547 | |||||||||
Repayments of long-term debt including credit facilities | (25 | ) | (175,414 | ) | (725,821 | ) | ||||||
Payments of debt restructuring costs | — | — | (9,802 | ) | ||||||||
Payments of debt issue costs | — | (1,831 | ) | (2,472 | ) | |||||||
Payments of build-to-suit liability | — | (3,000 | ) | (932 | ) | |||||||
Net cash from (used in) financing activities | 24,668 | 18,578 | (16,480 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 637 | 890 | (952 | ) | ||||||||
Net change in cash and cash equivalents | 1,040 | (25,560 | ) | 24,524 | ||||||||
Cash and cash equivalents—beginning of period | 10,064 | 35,624 | 11,100 | |||||||||
Cash and cash equivalents—end of period | $ | 11,104 | $ | 10,064 | $ | 35,624 |
LONG-TERM DEBT | ||||||||
(Dollars In Thousands) | Successor | Predecessor | ||||||
December 31, 2017 | December 31, 2016 | |||||||
7.0% Convertible Notes due December 15, 2017 | $ | — | $ | 41 | ||||
11.0% Senior Secured Term Loan Credit Facilities due September 14, 2018 | — | 99,500 | ||||||
12.75% Senior Secured Notes due December 15, 2018 | — | 177,019 | ||||||
5.25% Convertible Notes due December 30, 2019 | — | 22,323 | ||||||
5.00% / 7.00% Convertible Notes due August 31, 2022 | 168,767 | — | ||||||
Floating rate ABL Credit Facility due February 28, 2022 | 101,047 | — | ||||||
Other, primarily capital leases | 288 | 96 | ||||||
Plus: derivative liability for embedded conversion feature | — | 403 | ||||||
Less: unvested restricted 5.00% / 7.00% Convertible Notes due August 31, 2022 | (2,144 | ) | — | |||||
Less: unamortized discount | (67,937 | ) | (7,587 | ) | ||||
Less: unamortized debt issuance costs | — | (5,199 | ) | |||||
Total long-term debt | 200,021 | 286,596 | ||||||
Less: current portion of long-term debt | 118 | 137 | ||||||
Total long-term portion | $ | 199,903 | $ | 286,459 |