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)
|
October
31, 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, October 31, 2006 the Company disseminated a press release, attached
as
Exhibit A, announcing the Company’s operational results for the period September
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 September 30, 2006 and
September 30, 2005 and the Nine Months ended September 30, 2006 and September
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 October 31, 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
|
October
31, 2006
|
3400
North Wolf Road
Franklin
Park, Illinois 60131
(847)
455-7111
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,
OCTOBER 31, 2006
A.
M. CASTLE & CO. ANNOUNCES CONTINUED STRONG
SALES
AND EARNINGS PERFORMANCE
Declares
a Quarterly Cash Dividend
FRANKLIN
PARK, IL, OCTOBER 31st—
A. M. Castle & Co. (AMEX: CAS),
a global
distributor of specialty metal and plastic products and services announced
today
continued strong customer demand and record sales and earnings performance
for
the quarter ended September 30, 2006.
Consolidated
net sales for the third quarter ended September 30, 2006 were $300.8 million,
an
increase of $66.3 million, or 28.2% from the third quarter of 2005. Year-to-date
consolidated net sales were $855.6 million, an increase of $123.9 million,
or
16.9% from the same period of 2005.
“We
continue to experience strong demand for our products and services,” stated
Michael Goldberg, President and CEO of A. M. Castle. “Of the 28% increase in our
third quarter revenues, 8% was attributable to volume, 12% to price increases
and 8% to our acquisition of Transtar. Sales of nickel alloy products were
particularly robust, with tonnage in that product family growing 60% compared
to
the third quarter of last year, reflecting the strong oil and gas market.
Year-to-date revenues were 17% ahead of last year, of which 7% was attributable
to volume, 7% to price and 3% to Transtar,” Goldberg continued.
On
September 5, 2006 the Company announced its acquisition of Transtar Metals,
a
leading distributor of high-performance alloys to the aerospace and defense
industries world-wide.
Under
the terms of the agreement signed August 12, 2006, the closing purchase price
was $173.3 million subject to final adjustments, including the assumption of
$1.0 million of foreign debt and $0.6 million of capital leases. The purchase
was funded with approximately $30.0 million of available cash and $142.0 million
of debt financing.
Transtar
Metals has eight operations strategically located in aerospace hubs in the
U.S.,
the United Kingdom and France. Additionally, Transtar maintains a sales presence
throughout Europe and the Far East. International sales are over one-third
of
Transtar’s total revenue stream. “We are very pleased with our acquisition of
Transtar and our people are working together extremely well. The aerospace
business continues to be strong,” commented Goldberg.
Net
income applicable to common stock for the third quarter was $15.3 million,
or
$0.82 per diluted share, compared to $10.1 million, or $0.56 per diluted share
in the third quarter of 2005. Year-to-date net income applicable to common
stock
was $45.2 million, or $2.45 per diluted share, compared to $34.9 million, or
$1.93 per diluted share for the same period of 2005.
In
its
Metals segment the Company reported 30% sales growth for the third quarter
and
18% on a year-to-date basis. The Transtar acquisition contributed 8% of that
growth for the third quarter and 3% year-to-date. Increased volume was 9% and
8%
for the third quarter and year-to-date, respectively. Material price increases
accounted for the remainder of the sales growth.
Plastic
segment sales increased 11% compared to the third quarter of 2005, and 9% on
a
year-to-date basis. Sales growth, excluding material price increases in this
segment was 9% and 3% for the third quarter and year-to-date comparable periods,
respectively.
“We
will
continue to look to invest in certain markets which we believe have higher
growth potential and where we can leverage our expertise in specialty products,”
stated Goldberg. “Our acquisition of Transtar Metals is the cornerstone of our
long-term strategic growth initiative in this regard. Including Transtar, we
have about 30% of our total Company revenues aligned with the global aerospace
and defense industry. It is our intent to invest in other industries that are
in
line with our strategic goals over the next few years, but we are very mindful
of our balance sheet,” concluded Goldberg.
Larry
Boik, Vice President and CFO of the Company commented, “Our balance sheet and
cash position allowed us to move forward with the strategic acquisition of
Transtar. The future cash earnings of the business will be used to reduce our
debt and to provide similar flexibility
to fund future strategic growth opportunities as they arise. We will remain
diligent in managing the balance sheet through the business cycles as we execute
our growth strategy.”
On
October
26, 2006 the Company’s Board of Directors approved a quarterly cash dividend of
6 cents per share, payable on November 27, 2006 to shareholders of record at
the
close of business on November 10, 2006.
About
A. M. Castle & Co.
Founded
in 1890, A. M. Castle & Co. is a specialty metal and plastic products and
services distributor, principally serving the producer durable equipment sector
of the 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 core metals business, it specializes in the distribution
of alloy and stainless steels; nickel alloys; aluminum and carbon. Through
its
subsidiary, Total Plastics, Inc., the Company also distributes a broad range
of
value-added industrial plastics. Together, Castle operates over 65 locations
throughout North America and Europe. 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 Nine
|
|||||||||||
|
(Dollars
in thousands, except per share data)
|
Months
Ended
|
Months
Ended
|
|||||||||||
|
Unaudited
|
Sept
30,
|
Sept
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
Net
sales
|
$
|
300,809
|
$
|
234,551
|
$
|
855,610
|
$
|
731,721
|
|||||
|
Cost
of material sold
|
214,792
|
163,956
|
606,136
|
512,705
|
|||||||||
|
Gross
material
margin
|
86,017
|
70,595
|
249,474
|
219,016
|
|||||||||
|
Plant
and delivery expense
|
30,117
|
27,920
|
88,720
|
81,635
|
|||||||||
|
Sales,
general, and administrative expense
|
26,847
|
23,405
|
76,805
|
69,509
|
|||||||||
|
Depreciation
and amortization expense
|
3,225
|
2,205
|
8,323
|
6,752
|
|||||||||
|
Total
operating expense
|
60,189
|
53,530
|
173,848
|
157,896
|
|||||||||
|
Operating
income
|
25,828
|
17,065
|
75,626
|
61,120
|
|||||||||
|
Interest
expense, net
|
(1,903
|
)
|
(1,765
|
)
|
(3,949
|
)
|
(5,875
|
)
|
|||||
|
Discount
on sale of accounts receivable
|
-
|
(127
|
)
|
-
|
(1,127
|
)
|
|||||||
|
Income
before income taxes and equity earnings of joint venture
|
23,925
|
15,173
|
71,677
|
54,118
|
|||||||||
|
Income
taxes
|
(9,470
|
)
|
(5,673
|
)
|
(29,110
|
)
|
(21,888
|
)
|
|||||
|
Income
before equity in earnings of joint venture
|
14,455
|
9,500
|
42,567
|
32,230
|
|||||||||
|
Equity
in earnings of joint venture
|
1,037
|
817
|
3,332
|
3,342
|
|||||||||
|
Net
income
|
15,492
|
10,317
|
45,899
|
35,572
|
|||||||||
|
Preferred
dividends
|
(235
|
)
|
(240
|
)
|
(720
|
)
|
(720
|
)
|
|||||
|
Net
income applicable to common stock
|
$
|
15,257
|
$
|
10,077
|
$
|
45,179
|
$
|
34,852
|
|||||
|
Diluted
earnings per share
|
$
|
0.82
|
$
|
0.56
|
$
|
2.45
|
$
|
1.93
|
|||||
|
EBITDA
*
|
$
|
30,090
|
$
|
20,087
|
$
|
87,281
|
$
|
71,214
|
|||||
|
*Earnings
before interest, discount on sale of accounts receivable, taxes,
depreciation and amortization
|
|||||||||||||
|
Reconciliation
of EBITDA to net income:
|
For
the Three
|
For
the Nine
|
|||||||||||
|
|
|
Months
Ended
|
Months
Ended
|
||||||||||
|
|
Sept
30,
|
Sept
30,
|
|||||||||||
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Net
income
|
$
|
15,492
|
$
|
10,317
|
$
|
45,899
|
$
|
35,572
|
|||||
|
Depreciation
and amortization
|
3,225
|
2,205
|
8,323
|
6,752
|
|||||||||
|
Interest,
net
|
1,903
|
1,765
|
3,949
|
5,875
|
|||||||||
|
Discount
on accounts receivable sold
|
-
|
127
|
-
|
1,127
|
|||||||||
|
Provision
from income taxes
|
9,470
|
5,673
|
29,110
|
21,888
|
|||||||||
|
EBITDA
|
$
|
30,090
|
$
|
20,087
|
$
|
87,281
|
$
|
71,214
|
|||||
|
CONSOLIDATED
BALANCE SHEETS
|
|||||||
|
(Dollars
in thousands)
|
As
of
|
||||||
|
Unaudited
|
Sept
30,
|
Dec
31
|
|||||
|
2006
|
2005
|
||||||
|
ASSETS
|
|||||||
|
Current
assets
|
|||||||
|
Cash and cash equivalents
|
$
|
9,756
|
$
|
37,392
|
|||
|
Accounts receivable, less allowances of $3,263 at September 30, 2006
|
|||||||
|
and
$1,763 at December 31, 2005
|
182,023
|
107,064
|
|||||
|
Inventories (principally on last-in, first-out basis)
|
216,216
|
119,306
|
|||||
|
(latest cost higher by $121,865 at September 30, 2006 and $104,036
at
December 31, 2005)
|
|||||||
|
Other current assets
|
13,996
|
6,351
|
|||||
|
Total current assets
|
421,991
|
270,113
|
|||||
|
Investment
in joint venture
|
13,000
|
10,850
|
|||||
|
Goodwill
|
99,208
|
32,222
|
|||||
|
Intangible
assets
|
68,520
|
70
|
|||||
|
Prepaid
pension cost
|
39,082
|
41,946
|
|||||
|
Other
assets
|
6,462
|
4,112
|
|||||
|
Property,
plant and equipment, at cost
|
|||||||
|
Land
|
5,224
|
4,772
|
|||||
|
Buildings
|
48,641
|
45,890
|
|||||
|
Machinery and equipment
|
138,458
|
127,048
|
|||||
|
192,323
|
177,710
|
||||||
|
Less - accumulated depreciation
|
(121,080
|
)
|
(113,288
|
)
|
|||
|
71,243
|
64,422
|
||||||
|
Total
assets
|
$
|
719,506
|
$
|
423,735
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current
liabilities
|
|||||||
|
Accounts payable
|
$
|
144,298
|
$
|
103,246
|
|||
|
Accrued liabilities
|
32,972
|
21,535
|
|||||
|
Current and deferred income taxes
|
10,863
|
7,052
|
|||||
|
Short-term debt
|
129,223
|
-
|
|||||
|
Current portion of long-term debt
|
12,527
|
6,233
|
|||||
|
Total current liabilities
|
329,883
|
138,066
|
|||||
|
Long-term
debt, less current portion
|
97,718
|
73,827
|
|||||
|
Deferred
income taxes
|
48,618
|
21,903
|
|||||
|
Deferred
gain on sale of assets
|
5,907
|
5,967
|
|||||
|
Pension
and postretirement benefit obligations
|
9,181
|
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 17,013,371 at September 30, 2006
|
|||||||
|
and
16,605,714 at December 31, 2005
|
170
|
166
|
|||||
|
Additional paid-in capital
|
67,772
|
60,916
|
|||||
|
Retained earnings
|
152,670
|
110,530
|
|||||
|
Accumulated other comprehensive income
|
3,281
|
2,370
|
|||||
|
Treasury stock, at cost - 411,235 shares at September 30, 2006
|
|||||||
|
and 546,065 shares at December 31, 2005
|
(6,933
|
)
|
(9,716
|
)
|
|||
|
Total stockholders' equity
|
228,199
|
175,505
|
|||||
|
Total
liabilities and stockholders' equity
|
$
|
719,506
|
$
|
423,735
|
|||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|||||||
|
(Dollars
in thousands)
|
For
the Nine Months
|
||||||
|
Unaudited
|
Ended
Sept 30,
|
||||||
|
2006
|
2005
|
||||||
|
Cash
flows from operating activities:
|
|||||||
|
Net income
|
$
|
45,899
|
$
|
35,572
|
|||
|
Adjustments
to reconcile net income to net cash
|
|||||||
|
from operating activities:
|
|||||||
|
Depreciation and amortization
|
8,323
|
6,752
|
|||||
|
Amortization of deferred gain
|
(559
|
)
|
(639
|
)
|
|||
|
Equity in earnings from joint venture
|
(3,332
|
)
|
(3,342
|
)
|
|||
|
Stock compensation expense
|
2,911
|
2,607
|
|||||
|
Deferred tax provision
|
4,730
|
241
|
|||||
|
Excess tax benefits from stock-based payment arrangements
|
(1,210
|
)
|
-
|
||||
|
Increase (decrease) from changes, net of acquisitions, in:
|
|||||||
|
Accounts receivable
|
(40,380
|
)
|
(35,776
|
)
|
|||
|
Inventories
|
(36,020
|
)
|
18,205
|
||||
|
Prepaid pension costs
|
2,865
|
987
|
|||||
|
Other current assets
|
(2,115
|
)
|
316
|
||||
|
Accounts payable
|
20,423
|
(8,182
|
)
|
||||
|
Accrued liabilities
|
3,849
|
4,401
|
|||||
|
Income tax payable
|
(9,946
|
)
|
5,265
|
||||
|
Postretirement benefit obligations and other liabilities
|
(1,585
|
)
|
308
|
||||
|
Net
cash (used in) from operating activities
|
(6,147
|
)
|
26,715
|
||||
|
Cash
flows from investing activities:
|
|||||||
|
Investments and acquisitions, net of cash acquired
|
(175,795
|
)
|
(236
|
)
|
|||
|
Dividends from joint venture
|
1,231
|
1,705
|
|||||
|
Capital expenditures
|
(10,170
|
)
|
(4,784
|
)
|
|||
|
Collection of note receivable
|
-
|
2,639
|
|||||
|
Net
cash used in investing activities
|
(184,734
|
)
|
(676
|
)
|
|||
|
Cash
flows from financing activities:
|
|||||||
|
Proceeds from issuance of short-term debt
|
128,943
|
-
|
|||||
|
Proceeds from issuance of long-term debt
|
30,574
|
4,000
|
|||||
|
Repayments of long-term debt
|
(680
|
)
|
(21,542
|
)
|
|||
|
Preferred stock dividend
|
(720
|
)
|
(720
|
)
|
|||
|
Dividends paid
|
(3,039
|
)
|
-
|
||||
|
Exercise of stock options and other
|
6,525
|
597
|
|||||
|
Excess tax benefits from stock-based payment arrangements
|
1,210
|
-
|
|||||
|
Net
cash from (used in) financing activities
|
162,813
|
(17,665
|
)
|
||||
|
Effect of exchange rate changes on cash and cash
equivalents
|
432
|
476
|
|||||
|
Net
(decrease) increase in cash and cash equivalents
|
(27,636
|
)
|
8,850
|
||||
|
Cash and cash equivalents - beginning of year
|
$
|
37,392
|
$
|
3,106
|
|||
|
Cash and cash equivalents - end of period
|
$
|
9,756
|
$
|
11,956
|
|||
-
30
-