A.M. Castle Reports Quarterly Results
08/06/2013 - As it reported its second quarter earnings results, A. M. Castle & Co. said its outlook for the second half of the year is comparable to what was seen in the first six months of the year.
A. M. Castle & Co., a global distributor of specialty metal and plastic products, value-added services and supply chain solutions, reported financial results for the second quarter ended 30 June 2013.
Consolidated net sales were US$273.4 million for the three months ended 30 June 2013, compared toUS$329.4 million in the second quarter of 2012. Reported net loss for the quarter was US$3.8 million compared to a net loss of US$3.0 million in the prior year quarter. Adjusted non-GAAP net income for the second quarter of 2013, as reconciled in the financial statement table below, was US$0.4 million compared to US$2.6 million in the second quarter of last year. The company's EBITDA, as defined and reconciled in the financial statement table below, wasUS$5.1 million, or 1.9% of net sales, in the second quarter of 2013, compared to US$17.1 million, or 5.2% of net sales, in the second quarter of 2012. Adjusted EBITDA, as reconciled in the financial statement table below, was US$11.6 million, or 4.2% of net sales, in the second quarter of 2013, compared to US$18.9 million, or 5.7% of net sales, in the second quarter of 2012 and US$8.8 million, or 3.0% of net sales in the first quarter of this year. Net cash generated from operations was US$23.5 million for the quarter and US$56.1 million for the first half of 2013.
"While our top-line performance trailed industry benchmarks due to the late cycle nature of our business, I am pleased with our execution during the quarter, in particular the continuation of our strong cash flow generation, the completion of our announced restructuring activities on schedule and within budget, and improvements in our customer service," said Scott Dolan, CEO of A.M. Castle& Co. "We achieved the structural cost improvements contemplated for the first half of this year, and we started to see those cost improvements benefit our financial results later in the second quarter in-line with our expectations. In addition, we achieved the US$25 million replacement cost basis inventory reduction that we had targeted for the second quarter."
In the Metals segment, second quarter 2013 net sales of US$239.5 million were 20.7% lower, on a per-day basis, than the second quarter of last year and 10.2% lower, on a per-day basis, than the first quarter of 2013, primarily due to lower volumes. Metals segment tons sold per day for the second quarter of 2013 were down 20.1% from the second quarter of 2012 and down 6.7% compared to the first quarter of 2013.
In the Plastics segment, second quarter 2013 net sales of US$34.0 million were US$1.8 million, or 5.6% higher than the prior year period and US$0.4 million, or 1.1% lower than the first quarter of 2013. The net sales growth compared to the prior year was primarily driven by strength in the automotive business.
Gross material margins were 26.3% in the second quarter, compared to 25.0% in the first quarter this year and 26.9% in the same quarter last year. Reported gross material margins included LIFO income of US$3.0 million for the second quarter of 2013 and LIFO expense of US$0.7 million in the first quarter of this year and US$1.5 million in the same quarter last year.
Operating expenses, including US$5.6 million of restructuring charges, were US$75.7 million in the second quarter of 2013 compared to US$79.2 million a year ago and US$74.3 million, including restructuring charges of US$2.2 million, in the first quarter of this year. As previously communicated, the company has targeted US$33 million of annual operating income improvement as part of the restructuring plan. During the second quarter, the company completed its anticipated restructuring activities including the consolidation of five warehouse facilities and the realignment of targeted corporate functions. TheUS$6.1 million of pre-tax restructuring charges recorded in the second quarter were primarily related to lease termination costs and shutdown costs for the five consolidated facilities. Cumulative restructuring charges through 30 June 2013 were US$9.1 million compared to the company's estimate of US$10.0 million, the remainder of which will be incurred during the second half of 2013.
Equity in earnings of the company's joint venture was US$1.5 million in the second quarter of 2013, which was US$0.2 million less than the same period last year and comparable to the first quarter of 2013.
Dolan concluded, "With our announced restructuring activities now complete, we are focused on continuous improvement while transforming A.M. Castle into a more profitable enterprise. In terms of market demand, our outlook for the second half of 2013 is comparable to what we have seen in the first six months of this year. Continuing to evolve our commercial and sales execution is a critical component of our growth strategy and thus, I was very excited to introduce Steve Letnich as our new chief commercial officer earlier this month. With Steve's extensive experience and expertise in the metals industry, I am confident in his ability to lead A.M. Castle's sales force initiatives while focusing our efforts on revenue generation and market penetration."
Founded in 1890, A. M. Castle & Co. is a global distributor of specialty metal and plastic products and supply chain services, principally serving the producer durable equipment, oil and gas, commercial aircraft, heavy equipment, industrial goods, construction equipment, retail, marine and automotive sectors of the global economy. Its customer base includes many Fortune 500 companies as well as thousands of medium and smaller-sized firms spread across a variety of industries. Within its metals business, it specializes in the distribution of alloy and stainless steels; nickel alloys; aluminum and carbon. Through its wholly-owned subsidiary, Total Plastics, Inc., the company also distributes a broad range of value-added industrial plastics. Together, Castle and its affiliated companies operate out of more than 50 locations throughout North America, Europe and Asia.
