FORM 8-K |
Date of Report: May 7, 2019 |
(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 |
A.M. CASTLE & CO. | ||||
By: | /s/ Marec E. Edgar | |||
May 7, 2019 | Marec E. Edgar | |||
President | ||||
A.M. CASTLE & CO. | 1420 Kensington Road Suite 220 Oak Brook, IL 60523 P: (847) 455-7111 F: (847) 241-8171 |
• | Generated net sales of $149.5 million, a 2.5% year-over-year increase compared to $145.9 million in the first quarter of 2018. |
• | Reported an operating loss of $0.3 million, compared to an operating loss of $3.3 million in the first quarter of 2018. |
• | Reported a net loss of $8.0 million, which included $9.4 million of interest expense, of which $6.4 million was non-cash related to long-term debt held primarily by major shareholders, and $1.3 million was non-cash related to the Company's pension plan, compared to a net loss of $5.1 million for the first quarter of 2018, which included $7.1 million of interest expense, of which $4.5 million was non-cash related to long term-debt held primarily by major shareholders, and $1.2 million was non-cash related to the Company's pension plan. |
• | Reported EBITDA of $3.4 million and adjusted EBITDA of $3.9 million in the first quarter of 2019, which included no significant foreign currency gains or losses, compared to EBITDA of $3.8 million and adjusted EBITDA of $3.5 million, including transactional and intercompany loan foreign currency gains of $2.8 million and a transactional foreign currency gain of $1.8 million, respectively, in the first quarter of 2018. |
• | Improved gross material margin to 25.8% compared to 23.5% in the previous quarter and 24.7% in the first quarter a year ago. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
Three Months Ended | |||||||
(Dollars in thousands, except per share data) | March 31, | ||||||
Unaudited | 2019 | 2018 | |||||
Net sales | $ | 149,527 | $ | 145,873 | |||
Costs and expenses: | |||||||
Cost of materials (exclusive of depreciation) | 110,958 | 109,904 | |||||
Warehouse, processing and delivery expense | 20,277 | 20,355 | |||||
Sales, general and administrative expense | 16,502 | 16,548 | |||||
Depreciation expense | 2,121 | 2,376 | |||||
Total costs and expenses | 149,858 | 149,183 | |||||
Operating loss | (331 | ) | (3,310 | ) | |||
Interest expense, net | 9,449 | 7,126 | |||||
Other (income) expense, net | (1,602 | ) | (4,774 | ) | |||
Loss before income taxes | (8,178 | ) | (5,662 | ) | |||
Income tax benefit | (175 | ) | (521 | ) | |||
Net loss | $ | (8,003 | ) | $ | (5,141 | ) |
Reconciliation of Reported Net Loss to EBITDA and Adjusted EBITDA: | |||||||
Three Months Ended | |||||||
(Dollars in thousands) | March 31, | ||||||
Unaudited | 2019 | 2018 | |||||
Net loss, as reported | $ | (8,003 | ) | $ | (5,141 | ) | |
Depreciation expense | 2,121 | 2,376 | |||||
Interest expense, net | 9,449 | 7,126 | |||||
Income tax benefit | (175 | ) | (521 | ) | |||
EBITDA | 3,392 | 3,840 | |||||
Non-GAAP adjustments (a) | 497 | (332 | ) | ||||
Adjusted EBITDA | $ | 3,889 | $ | 3,508 | |||
(a) Refer to "Reconciliation of Reported Net Loss to Adjusted Non-GAAP Net Loss" table for additional details on these amounts. |
Reconciliation of Reported Net Loss to Adjusted Non-GAAP Net (Loss) Income: | |||||||
Three Months Ended | |||||||
(Dollars in thousands) | March 31, | ||||||
Unaudited | 2019 | 2018 | |||||
Net loss, as reported | $ | (8,003 | ) | $ | (5,141 | ) | |
Non-GAAP adjustments: | |||||||
Noncash compensation expense | 643 | 646 | |||||
Foreign exchange gain on intercompany loans | (146 | ) | (978 | ) | |||
Non-GAAP adjustments to arrive at Adjusted EBITDA | 497 | (332 | ) | ||||
Non-cash interest expense(a) | 6,417 | 4,534 | |||||
Total non-GAAP adjustments | 6,914 | 4,202 | |||||
Tax effect of adjustments | — | — | |||||
Adjusted non-GAAP net loss | $ | (1,089 | ) | $ | (939 | ) | |
(a) Non-cash interest expense for the three months ended March 31, 2019 includes interest paid in kind of $3,852 and amortization of debt discount of $2,565. Non-cash interest expense for the three months ended March 31, 2018 includes interest paid in kind of $2,954 and amortization of debt discount of $1,580. |
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(Dollars in thousands, except par value data) | As of | ||||||
Unaudited | March 31, 2019 | December 31, 2018 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5,842 | $ | 8,668 | |||
Accounts receivable | 92,305 | 79,757 | |||||
Inventories | 164,227 | 160,686 | |||||
Prepaid expenses and other current assets | 13,769 | 14,344 | |||||
Income tax receivable | 1,268 | 1,268 | |||||
Total current assets | 277,411 | 264,723 | |||||
Goodwill and intangible assets, net | 8,176 | 8,176 | |||||
Prepaid pension cost | 1,920 | 1,754 | |||||
Deferred income taxes | 1,266 | 1,261 | |||||
Right of use assets | 33,353 | — | |||||
Other noncurrent assets | 1,245 | 1,278 | |||||
Property, plant and equipment: | |||||||
Land | 5,578 | 5,577 | |||||
Buildings | 20,863 | 21,218 | |||||
Machinery and equipment | 39,449 | 38,394 | |||||
Property, plant and equipment, at cost | 65,890 | 65,189 | |||||
Accumulated depreciation | (14,119 | ) | (11,989 | ) | |||
Property, plant and equipment, net | 51,771 | 53,200 | |||||
Total assets | $ | 375,142 | $ | 330,392 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 54,058 | $ | 42,719 | |||
Accrued and other current liabilities | 17,711 | 16,631 | |||||
Lease liabilities | 6,908 | — | |||||
Income tax payable | 2,116 | 1,589 | |||||
Short-term borrowings | 6,801 | 5,498 | |||||
Current portion of long-term debt | 623 | 119 | |||||
Total current liabilities | 88,217 | 66,556 | |||||
Long-term debt, less current portion | 251,344 | 245,966 | |||||
Deferred income taxes | 7,024 | 7,540 | |||||
Finance leases | 8,639 | 61 | |||||
Build-to-suit liability | — | 9,975 | |||||
Other noncurrent liabilities | 2,999 | 3,334 | |||||
Pension and postretirement benefit obligations | 6,310 | 6,321 | |||||
Lease liabilities | 26,796 | — | |||||
Commitments and contingencies | |||||||
Stockholders’ deficit: | |||||||
Common stock, $0.01 par value—200,000 Class A shares authorized with 3,803 shares issued and 3,635 shares outstanding at March 31, 2019, and 3,803 shares issued and outstanding at December 31, 2018 | 38 | 38 | |||||
Additional paid-in capital | 57,247 | 55,421 | |||||
Accumulated deficit | (58,229 | ) | (50,472 | ) | |||
Accumulated other comprehensive loss | (14,789 | ) | (14,348 | ) | |||
Treasury stock, at cost — 168 shares at March 31, 2019 and no shares at December 31, 2018 | (454 | ) | — | ||||
Total stockholders’ deficit | (16,187 | ) | (9,361 | ) | |||
Total liabilities and stockholders’ deficit | $ | 375,142 | $ | 330,392 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Three Months Ended | |||||||
(Dollars in thousands) | March 31, | ||||||
Unaudited | 2019 | 2018 | |||||
Operating activities: | |||||||
Net loss | $ | (8,003 | ) | $ | (5,141 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation | 2,121 | 2,376 | |||||
Amortization of deferred financing costs and debt discount | 2,565 | 1,580 | |||||
Noncash interest paid in kind | 3,852 | 2,954 | |||||
Gain on sale of property, plant & equipment | — | (5 | ) | ||||
Unrealized foreign currency gain | (140 | ) | (991 | ) | |||
Noncash impact of operating leases | 582 | — | |||||
Deferred income taxes | (836 | ) | 127 | ||||
Non-cash compensation expense | 643 | 646 | |||||
Other, net | — | 154 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (12,701 | ) | (17,195 | ) | |||
Inventories | (3,810 | ) | (3,389 | ) | |||
Prepaid expenses and other current assets | (142 | ) | (3,848 | ) | |||
Other noncurrent assets | (111 | ) | 312 | ||||
Prepaid pension costs | (189 | ) | (688 | ) | |||
Accounts payable | 11,088 | 11,095 | |||||
Income tax payable and receivable | 521 | (440 | ) | ||||
Accrued and other current liabilities | 1,084 | 1,304 | |||||
Lease liabilities | 146 | — | |||||
Postretirement benefit obligations and other noncurrent liabilities | (67 | ) | (54 | ) | |||
Net cash used in operating activities | (3,397 | ) | (11,203 | ) | |||
Investing activities: | |||||||
Capital expenditures | (764 | ) | (1,538 | ) | |||
Proceeds from sale of property, plant and equipment | — | 5 | |||||
Net cash used in investing activities | (764 | ) | (1,533 | ) | |||
Financing activities: | |||||||
Proceeds from long-term debt including credit facilities | — | 11,500 | |||||
Proceeds from (repayments of) short-term borrowings, net | 1,471 | (1,191 | ) | ||||
Principal paid on finance leases | (149 | ) | (22 | ) | |||
Payments of build-to-suit liability | — | (897 | ) | ||||
Net cash from financing activities | 1,322 | 9,390 | |||||
Effect of exchange rate changes on cash and cash equivalents | 13 | 20 | |||||
Net change in cash and cash equivalents | (2,826 | ) | (3,326 | ) | |||
Cash and cash equivalents—beginning of year | 8,668 | 11,104 | |||||
Cash and cash equivalents—end of period | $ | 5,842 | $ | 7,778 |
LONG-TERM DEBT | |||||||
(Dollars in thousands) | As of | ||||||
Unaudited | March 31, 2019 | December 31, 2018 | |||||
5.00% / 7.00% Second Lien Notes due August 31, 2022 | $ | 183,827 | $ | 180,894 | |||
Floating rate Revolving A Credit Facility due February 28, 2022 | 108,488 | 108,488 | |||||
12.00% Revolving B Credit Facility due February 28, 2022 | 23,561 | 22,875 | |||||
Less: unvested restricted Second Lien Notes due August 31, 2022 | (978 | ) | (1,378 | ) | |||
Less: unamortized discount | (63,165 | ) | (64,491 | ) | |||
Less: unamortized debt issuance costs | (389 | ) | (422 | ) | |||
Total long-term debt | 251,344 | 245,966 | |||||
Less: current portion of long-term debt | — | — | |||||
Total long-term portion | $ | 251,344 | $ | 245,966 |