A. M. Castle & Co. (NYSE:CAS) (the “Company”
or “Castle”), a global distributor of specialty metal and
supply chain solutions, today reported financial results for the
second quarter ended June 30, 2016.
Highlights:
- Gross material margin improved year-over-year, sequentially and
each month of the quarter;
- Excluding closed Houston and Edmonton branches, sales tons per
day increased by 5% from the first quarter 2016 and roughly 1% from
the second quarter 2015;
- Operating expenses were $44.3 million in the second quarter
2016, compared to $70.2 million in the second quarter 2015 and
$57.0 million in the first quarter 2016. Excluding restructuring
expenses, operating expenses decreased to $42.3 million in the
second quarter 2016, compared to $54.6 million in the second
quarter 2015 (a decrease in cash operating expenses of 24.1% on a
per ton basis) and $45.2 million in the first quarter 2016;
- Announced sale of 50% equity ownership in Kreher Steel Company,
LLC ("Kreher") to joint venture partner;
- Made early payment of $5.5 million in settlement of the
remaining principal balance of Senior Secured Notes due December
15, 2016.
President and CEO Steve Scheinkman commented, "The second
quarter marked the completion of our strategic restructuring plan
announced in April of last year. The financial performance recorded
in the second quarter demonstrates the emergence of a leaner, more
focused A.M. Castle that built momentum during each month of the
quarter. In the period, we realized both year-over-year and
sequential quarter improvement in key financial performance
metrics, including tons sold per day and operating expenses, both
in absolute terms and cost per ton. Excluding tons sold by our
Houston and Edmonton facilities, which we closed in February 2016
as a result of our strategic decision to reduce our exposure to the
oil and gas market, tons sold per day increased by 5% compared to
the first quarter of this year and roughly 1% compared to second
quarter 2015."
Scheinkman continued, "According to leading
industry publications, the service center industry experienced an
increase in tons shipped per day from the first quarter of 2016 of
less than 1% and a decline in tons shipped per day of approximately
5% compared to the prior year second quarter. Even without
improvement in market demand and replacement cost of the majority
of our products, we achieved sequential and year-over-year growth
in sales tons and gross material margins as a result of the
aggressive organizational actions we have taken over the last year
to restructure our branch network costs, better align our sales
force with customers' needs, increase our transactional business,
and improve our capital structure. We believe these results bode
well for our ability to further improve our financial performance
as market demand and pricing improves."
Second Quarter 2016 Results
Net sales in the second quarter 2016 were $130.7
million, a decrease of $35.6 million, or 21.4%, compared to the
second quarter 2015. The decrease in net sales was mainly
attributable to a 6.4% decrease in tons sold per day compared to
the same period last year, coupled with a 13.9% decrease in average
selling prices. Impacting the decrease in net tons sold per day
were sales attributable to the Company's Houston and Edmonton
operations, which were closed in February 2016. Excluding the tons
sold from the Houston and Edmonton operations in the second quarter
2015, tons sold per day increased roughly 1% in the second quarter
2016 compared to the second quarter 2015.
Loss from continuing operations in the second
quarter 2016 was $21.3 million, or a loss from continuing
operations of $0.77 per diluted common share, compared to a loss
from continuing operations of $47.1 million, or a loss from
continuing operations of $2.00 per diluted common share, in the
second quarter 2015 and $44.8 million, or a loss from continuing
operations of $1.90 per diluted common share, in the first quarter
2016. Adjusted non-GAAP loss from continuing operations for
the second quarter 2016 was $17.7 million compared to adjusted
non-GAAP loss from continuing operations of $11.5 million in the
second quarter 2015. Adjusted non-GAAP loss from continuing
operations was $26.1 million in the first quarter 2016.
Negative EBITDA from continuing operations in the second quarter
2016 was $6.9 million, compared to negative EBITDA from continuing
operations of $45.7 million in the second quarter 2015 and $30.4
million in the first quarter 2016. The Company had negative
adjusted EBITDA from continuing operations of $3.4 million in the
second quarter 2016 compared with negative adjusted EBITDA from
continuing operations of $10.1 million in the second quarter 2015
and $11.6 million in the first quarter 2016.
Total restructuring activity recorded during the
second quarter 2016 resulted in expense of $2.0 million compared to
expense from restructuring activity of $15.6 million in the prior
year period. Restructuring activity in the second quarter 2016
consisted mainly of moving costs associated with plant
consolidations related to the April 2015 strategic restructuring
plan and lease termination costs associated with the closure of the
Houston and Edmonton facilities.
Gross material margin, calculated as net sales
less cost of materials (exclusive of depreciation and amortization)
divided by net sales, was 25.3% in the second quarter 2016 compared
to 8.5% in the second quarter 2015. The gross material margin in
the second quarter 2015 was negatively impacted by $22.3 million of
inventory scrapping expenses associated with restructuring activity
in that quarter. Excluding those expenses recognized in cost of
material, adjusted gross material margin in the second quarter 2015
was 21.9%. Gross material margin in the first quarter 2016
was 18.4% and adjusted gross material margin, which excludes the
$27.1 million sale of inventory at the Company's Houston and
Edmonton facilities and a $0.5 million charge to cost of material
for inventory scrapped related to restructuring activities, was
22.3%.
Along with the lower cost structure implemented
by the Company through its April 2015 strategic restructuring plan,
the closure of its Houston and Edmonton facilities had a favorable
impact on operating expenses in the second quarter 2016. Operating
expenses were $44.3 million in the second quarter 2016, compared to
$70.2 million in the second quarter 2015 and $57.0 million in the
first quarter 2016. Excluding restructuring expenses, operating
expenses were $42.3 million in the second quarter 2016, compared to
$54.6 million in the second quarter 2015 and $45.2 million in the
first quarter 2016.
Executive Vice President and CFO, Pat Anderson,
commented, "The lower cost structure we envisioned when announcing
our strategic restructuring activities in April of last year has
now largely been achieved as evidenced by the substantial decrease
in year-over-year operating expenses, as well as improved gross
material margin. We believe this, along with our improved capital
structure resulting from our refinancing efforts, has positioned us
well for profitable growth in the coming years."
Net cash used in operating activities of
continuing operations was $19.2 million during the six months ended
June 30, 2016, compared to $19.8 million during the six months
ended June 30, 2015. Net cash from investing activities of $54.5
million during the six months ended June 30, 2016 is attributable
to cash proceeds from the sale of Total Plastics Inc. ("TPI") in
the first quarter 2016. The proceeds from the sale of TPI were used
to pay down the Company's long-term debt, which, along with the
$8.7 million payment of debt restructuring costs, resulted in net
cash used in financing activities of $29.2 million during the first
six months of 2016. The Company had $46.0 million of borrowings
outstanding under its revolving credit facility at June 30,
2016, and $14.0 million of additional unrestricted borrowing
capacity available under its revolving credit facility. The Company
had $66.1 million in borrowings under the revolving credit facility
at December 31, 2015. The Company’s net debt-to-capital ratio
was 94.6% at June 30, 2016, compared to 84.1% at
December 31, 2015. Total long-term debt outstanding, net
of unamortized discount, unamortized debt issuance costs and the
derivative liability for the embedded conversion feature of the
Company's convertible notes, was $280.4 million at June 30,
2016 and $317.6 million at December 31, 2015. Refer to the
"Total Long-Term Debt" table below for details related to the
Company’s outstanding debt obligations.
On August 8, 2016, the Company announced it has
entered into an agreement for the sale of its 50% equity interest
in Kreher to its joint venture partner for proceeds of
approximately $31.6 million, subject to formal corporate approval
by both joint venture partners' boards of directors. "We intend to
use the proceeds from the sale of Kreher to further pay down our
long-term debt. We also recently made an early payment of $5.5
million to settle the remaining principal balance of our 12.75%
Senior Secured Notes due December 15, 2016," said Anderson.
Scheinkman concluded, “While we are pleased with
the improvement in our financial performance in the quarter, we
know we still have more work to do and we continue to aggressively
pursue opportunities for further improvement. Although the third
quarter is historically one of our slower periods due to normal
seasonality in the summer months, we enter the second half of the
year more confident that the positive financial trends we saw in
the second quarter will position us well to expand our customer
base and grow our business over the long term."
Webcast Information
Management will hold a conference call at 11:00
a.m. ET today to review the Company's results for the second
quarter ended June 30, 2016 and discuss market conditions and
business outlook. The call can be accessed via the internet live or
as a replay. Those who would like to listen to the call may access
the webcast through a link on the investor relations page of the
Company’s website at http://www.castlemetals.com/investors or by
calling (800) 708-4540 or (847) 619-6397 and citing code 4301
9550#.
An archived version of the conference call
webcast will be available for replay at the link above
approximately three hours following its conclusion, and will remain
available until the next earnings conference call.
About A. M. Castle &
Co.
Founded in 1890, A. M. Castle & Co. is a
global distributor of specialty metal and supply chain services,
principally serving the producer durable equipment, commercial
aircraft, heavy equipment, industrial goods, construction
equipment, and retail 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. It specializes in the distribution of alloy and
stainless steels; nickel alloys; aluminum and
carbon. Together, Castle and its affiliated companies operate
out of 21 metals service centers located throughout North America,
Europe and Asia. Its common stock is traded on the New York
Stock Exchange under the ticker symbol "CAS".
Non-GAAP Financial Measures
This release and the financial statements
included in this release include non-GAAP financial measures. The
non-GAAP financial information should be considered supplemental
to, and not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP. However, we believe that
non-GAAP reporting, giving effect to the adjustments shown in the
reconciliation contained in this release and in the attached
financial statements, provides meaningful information and therefore
we use it to supplement our GAAP reporting and guidance. Management
often uses this information to assess and measure the performance
of our business. We have chosen to provide this supplemental
information to investors, analysts and other interested parties to
enable them to perform additional analysis of operating results, to
illustrate the results of operations giving effect to the non-GAAP
adjustments shown in the reconciliations and to assist with
period-over-period comparisons of such operations. The exclusion of
the charges indicated herein from the non-GAAP financial measures
presented does not indicate an expectation by the Company that
similar charges will not be incurred in subsequent periods.
In addition, the Company believes that the use
and presentation of EBITDA, which is defined by the Company as
income (loss) from continuing operations before provision for
income taxes plus depreciation and amortization, and interest
expense, less interest income, is widely used by the investment
community for evaluation purposes and provides investors, analysts
and other interested parties with additional information in
analyzing the Company’s operating results. Adjusted non-GAAP
net income (loss), adjusted non-GAAP income (loss) from continuing
operations, adjusted EBITDA, and adjusted gross material margin
which are defined as reported net income (loss), reported income
(loss) from continuing operations, EBITDA and gross margin adjusted
for non-cash items and items which are not considered by management
to be indicative of the underlying results, are presented as
the Company believes the information is important to provide
investors, analysts and other interested parties additional
information about the Company’s financial
performance. Operating expenses, excluding restructuring
expense (income), is presented as management believes it provides
useful information to investors, analysts and other interested
parties regarding the ongoing expenses of the Company. Management
uses EBITDA, adjusted non-GAAP net income (loss), adjusted non-GAAP
net income (loss) from continuing operations, adjusted EBITDA,
operating expenses excluding restructuring expense (income) and
adjusted gross material margin to evaluate the performance of the
business.
Cautionary Statement on Risks Associated
with Forward Looking Statements
Information provided and statements contained in
this release that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (“Securities Act”), Section 21E of the
Securities Exchange Act of 1934, as amended (“Exchange Act”), and
the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements only speak as of the date of this
release and the Company assumes no obligation to update the
information included in this release. Such forward-looking
statements include information concerning our possible or assumed
future results of operations, including descriptions of our
business strategy, and the cost savings and other benefits that we
expect to achieve from our facility closures and organizational
changes. These statements often include words such as
“believe,” “expect,” “anticipate,” “intend,” “predict,” “plan,”
"should," or similar expressions. These statements are not
guarantees of performance or results, and they involve risks,
uncertainties, and assumptions. Although we believe that
these forward-looking statements are based on reasonable
assumptions, there are many factors that could affect our actual
financial results or results of operations and could cause actual
results to differ materially from those in the forward-looking
statements, including our ability to effectively manage our
operational initiatives and restructuring activities, the impact of
volatility of metals prices, the cyclical and seasonal aspects of
our business, our ability to effectively manage inventory levels,
our ability to successfully complete the remaining steps in our
strategic refinancing process, and the impact of our substantial
level of indebtedness, as well as including those risk factors
identified in Item 1A “Risk Factors” of our Annual Report on Form
10-K for the fiscal year ended December 31, 2015, as amended
and our Quarterly Report on Form 10-Q, to be filed shortly. All
future written and oral forward-looking statements by us or persons
acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to above. Except as
required by the federal securities laws, we do not have any
obligations or intention to release publicly any revisions to any
forward-looking statements to reflect events or circumstances in
the future, to reflect the occurrence of unanticipated events or
for any other reason.
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
|
| (Dollars
in thousands, except per share data) |
Three
Months Ended |
|
|
Six Months Ended |
|
|
Unaudited |
June
30, |
|
|
June
30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
| Net
sales |
$ |
130,692 |
|
|
$ |
166,328 |
|
|
$ |
294,540 |
|
|
$ |
354,868 |
|
| Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
| Cost of materials
(exclusive of depreciation and amortization) |
97,644 |
|
|
152,179 |
|
|
231,402 |
|
|
296,534 |
|
| Warehouse, processing
and delivery expense |
20,808 |
|
|
27,342 |
|
|
44,211 |
|
|
50,933 |
|
| Sales, general, and
administrative expense |
17,229 |
|
|
21,347 |
|
|
34,666 |
|
|
42,315 |
|
| Restructuring
expense |
2,044 |
|
|
15,618 |
|
|
13,762 |
|
|
16,449 |
|
| Depreciation and
amortization expense |
4,260 |
|
|
5,887 |
|
|
8,653 |
|
|
11,781 |
|
| Total
costs and expenses |
141,985 |
|
|
222,373 |
|
|
332,694 |
|
|
418,012 |
|
| Operating
loss |
(11,293 |
) |
|
(56,045 |
) |
|
(38,154 |
) |
|
(63,144 |
) |
| Interest
expense, net |
9,599 |
|
|
10,025 |
|
|
19,968 |
|
|
20,189 |
|
| Unrealized
gain on embedded debt conversion option |
(1,284 |
) |
|
— |
|
|
(1,284 |
) |
|
— |
|
| Debt
restructuring (gain) loss, net |
(513 |
) |
|
— |
|
|
6,562 |
|
|
— |
|
| Other
(income) expense, net |
(2,808 |
) |
|
(3,963 |
) |
|
(1,663 |
) |
|
2,262 |
|
| Loss from
continuing operations before income taxes and equity in (losses)
earnings of joint venture |
(16,287 |
) |
|
(62,107 |
) |
|
(61,737 |
) |
|
(85,595 |
) |
| Income tax
expense (benefit) |
531 |
|
|
(14,561 |
) |
|
196 |
|
|
(21,512 |
) |
| Loss from
continuing operations before equity in (losses) earnings of joint
venture |
(16,818 |
) |
|
(47,546 |
) |
|
(61,933 |
) |
|
(64,083 |
) |
| Equity in
(losses) earnings of joint venture |
(4,452 |
) |
|
451 |
|
|
(4,141 |
) |
|
1,326 |
|
| Loss from
continuing operations |
(21,270 |
) |
|
(47,095 |
) |
|
(66,074 |
) |
|
(62,757 |
) |
| Income
from discontinued operations, net of income taxes |
— |
|
|
843 |
|
|
7,934 |
|
|
1,378 |
|
| Net
loss |
$ |
(21,270 |
) |
|
$ |
(46,252 |
) |
|
$ |
(58,140 |
) |
|
$ |
(61,379 |
) |
|
|
|
|
|
|
|
|
|
| Basic
(loss) earnings per common share: |
|
|
|
|
|
|
|
| Continuing
operations |
$ |
(0.77 |
) |
|
$ |
(2.00 |
) |
|
$ |
(2.57 |
) |
|
$ |
(2.67 |
) |
| Discontinued
operations |
— |
|
|
0.04 |
|
|
0.31 |
|
|
0.06 |
|
| Net basic
loss per common share |
$ |
(0.77 |
) |
|
$ |
(1.96 |
) |
|
$ |
(2.26 |
) |
|
$ |
(2.61 |
) |
|
|
|
|
|
|
|
|
|
| Diluted
(loss) earnings per common share: |
|
|
|
|
|
|
|
| Continuing
operations |
$ |
(0.77 |
) |
|
$ |
(2.00 |
) |
|
$ |
(2.57 |
) |
|
$ |
(2.67 |
) |
| Discontinued
operations |
— |
|
|
0.04 |
|
|
0.31 |
|
|
0.06 |
|
| Net
diluted loss per common share |
$ |
(0.77 |
) |
|
$ |
(1.96 |
) |
|
$ |
(2.26 |
) |
|
$ |
(2.61 |
) |
|
|
|
|
|
|
|
|
|
| Negative
EBITDA from continuing operations (a) |
$ |
(6,880 |
) |
|
$ |
(45,744 |
) |
|
$ |
(37,257 |
) |
|
$ |
(52,299 |
) |
| Adjusted negative EBITDA from continuing operations(b) |
$ |
(3,359 |
) |
|
$ |
(10,143 |
) |
|
$ |
(14,988 |
) |
|
$ |
(17,092 |
) |
| |
|
|
|
|
|
|
|
| (a) A non-GAAP financial measure, which represents earnings
(loss) from continuing operations before interest, taxes, and
depreciation and amortization. See reconciliation to loss from
continuing operations below. |
| (b) A non-GAAP financial measure, which represents negative
EBITDA as defined above, adjusted for certain non-GAAP
adjustments. Refer to "Reconciliation of Adjusted Non-GAAP
Net Loss to Reported Net Loss" table for additional details on
these non-GAAP adjustments. |
| |
| Reconciliation
of EBITDA and of Adjusted EBITDA to Reported Net
Loss: |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| (Dollars in
thousands) |
Three Months
Ended |
|
Three Months
Ended |
Six Months
Ended |
| Unaudited |
June
30, |
|
March
31, |
|
June
30, |
| |
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Net loss, as
reported |
$ |
(21,270 |
) |
|
$ |
(46,252 |
) |
|
$ |
(36,870 |
) |
|
$ |
(58,140 |
) |
|
$ |
(61,379 |
) |
| Less: Income from
discontinued operations, net of taxes |
|
— |
|
|
|
843 |
|
|
|
7,934 |
|
|
|
7,934 |
|
|
|
1,378 |
|
| Loss from continuing
operations |
|
(21,270 |
) |
|
|
(47,095 |
) |
|
|
(44,804 |
) |
|
|
(66,074 |
) |
|
|
(62,757 |
) |
| Depreciation and
amortization expense |
|
4,260 |
|
|
|
5,887 |
|
|
|
4,393 |
|
|
|
8,653 |
|
|
|
11,781 |
|
| Interest expense,
net |
|
9,599 |
|
|
|
10,025 |
|
|
|
10,369 |
|
|
|
19,968 |
|
|
|
20,189 |
|
| Income tax expense
(benefit) |
|
531 |
|
|
|
(14,561 |
) |
|
|
(335 |
) |
|
|
196 |
|
|
|
(21,512 |
) |
| Negative EBITDA from continuing
operations |
|
(6,880 |
) |
|
|
(45,744 |
) |
|
|
(30,377 |
) |
|
|
(37,257 |
) |
|
|
(52,299 |
) |
| Non-GAAP adjustments
(a) |
|
3,521 |
|
|
|
35,601 |
|
|
|
18,728 |
|
|
|
22,269 |
|
|
|
35,207 |
|
| Adjusted negative EBITDA from
continuing operations |
$ |
(3,359 |
) |
|
$ |
(10,143 |
) |
|
$ |
(11,649 |
) |
|
$ |
(14,988 |
) |
|
$ |
(17,092 |
) |
|
|
|
|
|
| (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: |
|
|
|
|
|
|
|
| (Dollars in thousands,
except per share data) |
|
|
|
|
|
|
|
| Unaudited |
Three Months
Ended |
|
Three Months
Ended |
Six Months
Ended |
| |
June
30, |
|
March
31, |
|
June
30, |
| |
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Net loss, as
reported |
$ |
(21,270 |
) |
|
$ |
(46,252 |
) |
|
$ |
(36,870 |
) |
|
$ |
(58,140 |
) |
|
$ |
(61,379 |
) |
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Restructuring activity (a) |
|
2,044 |
|
|
|
37,953 |
|
|
|
12,170 |
|
|
|
14,214 |
|
|
|
38,784 |
|
| Debt restructuring (gain) loss |
|
(513 |
) |
|
|
— |
|
|
|
7,075 |
|
|
|
6,562 |
|
|
|
— |
|
| Foreign exchange (gain) loss on
intercompany loans |
|
(1,024 |
) |
|
|
(2,389 |
) |
|
|
(62 |
) |
|
|
(1,086 |
) |
|
|
1,434 |
|
| Foreign exchange (gain) loss on
intercompany loans of joint venture |
|
(4 |
) |
|
|
108 |
|
|
|
(192 |
) |
|
|
(175 |
) |
|
|
783 |
|
| Impairment of equity investment in
joint venture(b) |
|
4,636 |
|
|
|
— |
|
|
|
— |
|
|
|
4,636 |
|
|
|
— |
|
| Unrealized gain on commodity
hedges |
|
(334 |
) |
|
|
(71 |
) |
|
|
(263 |
) |
|
|
(598 |
) |
|
|
(172 |
) |
| Gain on sale of property, plant and
equipment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,622 |
) |
| Unrealized gain on embedded debt
conversion option |
|
(1,284 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,284 |
) |
|
|
— |
|
| Non-GAAP
adjustments |
|
3,521 |
|
|
|
35,601 |
|
|
|
18,728 |
|
|
|
22,269 |
|
|
|
35,207 |
|
| Tax effect of
adjustments |
|
— |
|
|
|
36 |
|
|
|
— |
|
|
|
— |
|
|
|
36 |
|
| Adjusted non-GAAP net
loss |
$ |
(17,749 |
) |
|
$ |
(10,615 |
) |
|
$ |
(18,142 |
) |
|
$ |
(35,871 |
) |
|
$ |
(26,136 |
) |
| Less: Income from
discontinued operations, net of taxes |
|
— |
|
|
|
843 |
|
|
|
7,934 |
|
|
|
7,934 |
|
|
|
1,378 |
|
| Adjusted non-GAAP loss
from continuing operations |
$ |
(17,749 |
) |
|
$ |
(11,458 |
) |
|
$ |
(26,076 |
) |
|
$ |
(43,805 |
) |
|
$ |
(27,514 |
) |
|
|
| (a)
Restructuring activity includes amounts recorded to restructuring
expense. For the six months ended June 30, 2016, amount includes
$452 in inventory write-down charges recorded to cost of materials
in the Condensed Consolidated Statements of Operations. For the
three and six months ended June 30, 2015, amount includes $22,335
for both periods presented in inventory write-down charges,
recorded to cost of materials in the Condensed Consolidated
Statements of Operations. The three months ended March 31, 2016
includes $452 in inventory write-down charges, recorded to cost of
materials in the Condensed Consolidated Statements of
Operations. |
| (b) The
Company has determined that its 50% investment in its Kreher joint
venture was impaired as of June 30, 2016. The Company has recorded
a charge of $4,636 in equity in earnings (losses) of joint venture
in the Condensed Consolidated Statements of Operations to reflect
the loss associated with the write-down of the asset to its
estimated fair value. |
| |
|
|
|
|
|
|
|
| Reconciliation
of Gross Material Margin and Adjusted Gross Material
Margin: |
|
|
|
|
|
|
|
|
|
|
|
| (Dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
| Unaudited |
|
Three Months
Ended |
|
Three Months
Ended |
|
Six Months
Ended |
| |
|
June 30, |
|
March
31, |
|
June
30, |
| |
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Net sales, as
reported |
|
$ |
130,692 |
|
|
$ |
166,328 |
|
|
$ |
163,848 |
|
|
|
$ |
294,540 |
|
|
$ |
354,868 |
|
| Sale of Houston and Edmonton
inventory |
|
|
— |
|
|
|
— |
|
|
|
(27,107 |
) |
|
|
|
(27,107 |
) |
|
|
— |
|
| Adjusted net sales |
|
$ |
130,692 |
|
|
$ |
166,328 |
|
|
$ |
136,741 |
|
|
|
$ |
267,433 |
|
|
$ |
354,868 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Cost of materials, as
reported (exclusive of depreciation and amortization) |
|
$ |
97,644 |
|
|
$ |
152,179 |
|
|
$ |
133,758 |
|
|
|
$ |
231,402 |
|
|
$ |
296,534 |
|
| Sale of Houston and Edmonton
inventory |
|
|
— |
|
|
|
— |
|
|
|
(27,107 |
) |
|
|
|
(27,107 |
) |
|
|
— |
|
| Restructuring activity in cost of
materials |
|
|
— |
|
|
|
(22,335 |
) |
|
|
(452 |
) |
|
|
|
(452 |
) |
|
|
(22,335 |
) |
| Adjusted cost of
materials (exclusive of depreciation and amortization) |
|
$ |
97,644 |
|
|
$ |
129,844 |
|
|
$ |
106,199 |
|
|
|
$ |
203,843 |
|
|
$ |
274,199 |
|
| Gross margin
(calculated as net sales, as reported, less cost of materials, as
reported |
|
$ |
33,048 |
|
|
$ |
14,149 |
|
|
$ |
30,090 |
|
|
|
$ |
63,138 |
|
|
$ |
58,334 |
|
| Gross material margin
(calculated as gross margin divided by net sales, as reported) |
|
|
25.3 |
% |
|
|
8.5 |
% |
|
|
18.4 |
% |
|
|
|
21.4 |
% |
|
|
16.4 |
% |
| Adjusted gross margin
(calculated as adjusted net sales less adjusted cost of
materials) |
|
$ |
33,048 |
|
|
$ |
36,484 |
|
|
$ |
30,542 |
|
|
|
$ |
63,590 |
|
|
$ |
80,669 |
|
| Adjusted gross material
margin (calculated as adjusted gross margin divided by adjusted net
sales) |
|
|
25.3 |
% |
|
|
21.9 |
% |
|
|
22.3 |
% |
|
|
|
23.8 |
% |
|
|
22.7 |
% |
|
|
| CONDENSED
CONSOLIDATED BALANCE SHEETS |
|
As
of |
| (In thousands, except
par value data) |
|
June
30, |
|
December
31, |
| Unaudited |
|
2016 |
|
2015 |
|
ASSETS |
|
|
|
|
| Current assets: |
|
|
|
|
| Cash and cash equivalents |
|
$ |
11,855 |
|
|
$ |
11,100 |
|
| Accounts receivable, less
allowances of $2,575 and $2,380, respectively |
|
79,025 |
|
|
73,191 |
|
| Inventories |
|
189,384 |
|
|
216,090 |
|
| Prepaid expenses and other current
assets |
|
13,353 |
|
|
10,424 |
|
| Income tax receivable |
|
295 |
|
|
346 |
|
| Current assets of discontinued
operations |
|
— |
|
|
37,140 |
|
| Total current assets |
|
293,912 |
|
|
348,291 |
|
| Investment in joint
venture |
|
31,550 |
|
|
35,690 |
|
| Intangible assets,
net |
|
7,179 |
|
|
10,250 |
|
| Prepaid pension
cost |
|
9,722 |
|
|
8,422 |
|
| Deferred income
taxes |
|
470 |
|
|
378 |
|
| Other noncurrent
assets |
|
5,634 |
|
|
6,109 |
|
| Property, plant and
equipment: |
|
|
|
|
| Land |
|
2,072 |
|
|
2,519 |
|
| Buildings |
|
37,459 |
|
|
39,778 |
|
| Machinery and equipment |
|
128,779 |
|
|
153,955 |
|
| Property, plant and equipment, at
cost |
|
168,310 |
|
|
196,252 |
|
| Accumulated depreciation |
|
(114,225 |
) |
|
(131,691 |
) |
| Property, plant and equipment,
net |
|
54,085 |
|
|
64,561 |
|
| Noncurrent assets of
discontinued operations |
|
— |
|
|
19,805 |
|
| Total assets |
|
$ |
402,552 |
|
|
$ |
493,506 |
|
| LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
| Current
liabilities: |
|
|
|
|
| Accounts payable |
|
$ |
47,732 |
|
|
$ |
45,606 |
|
| Accrued and other current
liabilities |
|
30,040 |
|
|
28,078 |
|
| Income tax payable |
|
36 |
|
|
33 |
|
| Current portion of long-term
debt |
|
5,683 |
|
|
7,012 |
|
| Current liabilities of discontinued
operations |
|
— |
|
|
11,158 |
|
| Total current liabilities |
|
83,491 |
|
|
91,887 |
|
| Long-term debt, less
current portion |
|
274,688 |
|
|
310,614 |
|
| Deferred income
taxes |
|
— |
|
|
4,169 |
|
| Build-to-suit
liability |
|
13,000 |
|
|
13,237 |
|
| Other noncurrent
liabilities |
|
9,314 |
|
|
7,935 |
|
| Pension and
postretirement benefit obligations |
|
18,568 |
|
|
18,676 |
|
| 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); no shares issued and outstanding at
June 30, 2016 and December 31, 2015 |
|
— |
|
|
— |
|
| Common stock, $0.01 par
value—60,000 shares authorized; 32,464 shares issued and 32,370
outstanding at June 30, 2016 and 23,888 shares issued and 23,794
outstanding at December 31, 2015 |
|
324 |
|
|
238 |
|
| Additional paid-in capital |
|
243,953 |
|
|
226,844 |
|
| Accumulated deficit |
|
(203,449 |
) |
|
(145,309 |
) |
| Accumulated other comprehensive
loss |
|
(36,373 |
) |
|
(33,821 |
) |
| Treasury stock, at cost—94 shares
at June 30, 2016 and December 31, 2015 |
|
(964 |
) |
|
(964 |
) |
| Total stockholders' equity |
|
3,491 |
|
|
46,988 |
|
| Total liabilities and
stockholders' equity |
|
$ |
402,552 |
|
|
$ |
493,506 |
|
| |
|
|
|
|
|
|
|
|
| CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
Six Months
Ended |
| (Dollars in
thousands) |
|
June
30, |
| Unaudited |
|
|
2016 |
|
|
|
2015 |
|
| Operating
activities: |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(58,140 |
) |
|
$ |
(61,379 |
) |
| Less: Income from discontinued
operations, net of income taxes |
|
7,934 |
|
|
1,378 |
|
| Loss from continuing
operations |
|
(66,074 |
) |
|
(62,757 |
) |
| Adjustments to
reconcile net loss from continuing operations to net cash used in
operating activities of continuing operations: |
|
|
|
|
| Depreciation and amortization |
|
8,653 |
|
|
11,781 |
|
| Amortization of deferred gain |
|
(79 |
) |
|
— |
|
| Amortization of deferred financing
costs and debt discount |
|
3,633 |
|
|
4,242 |
|
| Debt restructuring loss |
|
6,562 |
|
|
— |
|
| Loss from lease termination |
|
4,452 |
|
|
— |
|
| Unrealized gain on embedded debt
conversion option |
|
(1,284 |
) |
|
— |
|
| Loss (gain) on sale of property,
plant and equipment |
|
1,650 |
|
|
(5,681 |
) |
| Unrealized gain on commodity
hedges |
|
(598 |
) |
|
(172 |
) |
| Unrealized foreign currency
transaction (gain) loss |
|
(88 |
) |
|
1,433 |
|
| Equity in losses (earnings) of
joint venture |
|
4,141 |
|
|
(1,326 |
) |
| Dividends from joint venture |
|
— |
|
|
315 |
|
| Pension curtailment |
|
— |
|
|
3,080 |
|
| Deferred income taxes |
|
— |
|
|
(22,276 |
) |
| Share-based compensation
expense |
|
566 |
|
|
(4 |
) |
| Other, net |
|
— |
|
|
(9 |
) |
| Changes in assets and
liabilities: |
|
|
|
|
| Accounts receivable |
|
(6,118 |
) |
|
13,420 |
|
| Inventories |
|
26,729 |
|
|
35,227 |
|
| Prepaid expenses and other current
assets |
|
(1,769 |
) |
|
(2,197 |
) |
| Other noncurrent assets |
|
(3,026 |
) |
|
(1,988 |
) |
| Prepaid pension costs |
|
(264 |
) |
|
1,240 |
|
| Accounts payable |
|
1,937 |
|
|
(8,124 |
) |
| Income tax payable and
receivable |
|
51 |
|
|
113 |
|
| Accrued and other current
liabilities |
|
498 |
|
|
14,151 |
|
| Pension and postretirement benefit
obligations and other noncurrent liabilities |
|
1,201 |
|
|
(315 |
) |
| Net cash used in
operating activities of continuing operations |
|
(19,227 |
) |
|
(19,847 |
) |
| Net cash (used in) from
operating activities of discontinued operations |
|
(5,219 |
) |
|
4,773 |
|
| Net cash used
in operating activities |
|
(24,446 |
) |
|
(15,074 |
) |
| Investing
activities: |
|
|
|
|
| Capital expenditures |
|
(1,912 |
) |
|
(2,550 |
) |
| Proceeds from sale of property,
plant and equipment |
|
2,836 |
|
|
7,644 |
|
| Net cash from investing
activities of continuing operations |
|
924 |
|
|
5,094 |
|
| Net cash from (used in)
investing activities of discontinued operations |
|
53,570 |
|
|
(745 |
) |
| Net cash from
investing activities |
|
54,494 |
|
|
4,349 |
|
| Financing
activities: |
|
|
|
|
| Proceeds from long-term debt |
|
426,861 |
|
|
464,700 |
|
| Repayments of long-term debt |
|
(447,185 |
) |
|
(450,795 |
) |
| Payment of debt restructuring
costs |
|
(8,677 |
) |
|
— |
|
| Payments of build-to-suit
liability |
|
(237 |
) |
|
— |
|
| Net cash (used
in) from financing activities |
|
(29,238 |
) |
|
13,905 |
|
| Effect of exchange rate
changes on cash and cash equivalents |
|
(55 |
) |
|
(138 |
) |
| Net change in cash and
cash equivalents |
|
755 |
|
|
3,042 |
|
| Cash and cash equivalents—beginning
of year |
|
11,100 |
|
|
8,454 |
|
| Cash and cash equivalents—end of
period |
|
$ |
11,855 |
|
|
$ |
11,496 |
|
| |
|
|
|
|
|
|
|
|
| Total Long-Term
Debt: |
|
As
of |
| (Dollars in
thousands) |
|
June
30, |
|
December
31, |
| Unaudited |
|
2016 |
|
2015 |
| LONG-TERM DEBT |
|
|
|
|
| 12.75% Senior Secured Notes due
December 15, 2016 |
|
$ |
5,481 |
|
|
$ |
6,681 |
|
| 7.0% Convertible Notes due December
15, 2017 |
|
|
41 |
|
|
|
57,500 |
|
| 12.75% Senior Secured Notes due
December 15, 2018 |
|
|
204,519 |
|
|
|
203,319 |
|
| Revolving Credit Facility due
December 10, 2019 |
|
|
46,000 |
|
|
|
66,100 |
|
| 5.0% Convertible Notes due December
31, 2019 |
|
|
22,323 |
|
|
|
— |
|
| Other, primarily capital
leases |
|
|
202 |
|
|
|
428 |
|
| Plus: derivative liability for
embedded conversion feature |
|
|
9,569 |
|
|
|
— |
|
| Less: unamortized discount |
|
|
(4,828 |
) |
|
|
(12,255 |
) |
| Less: unamortized debt issuance
costs |
|
|
(2,936 |
) |
|
|
(4,147 |
) |
| Total long-term debt |
|
$ |
280,371 |
|
|
$ |
317,626 |
|
| Less: current portion |
|
|
5,683 |
|
|
|
7,012 |
|
| Total long-term portion |
|
$ |
274,688 |
|
|
$ |
310,614 |
|
|
|
|
|
|
|
| Reconciliation
of Total Long-Term Debt to Net Debt and Net
Debt-to-Capital: |
|
As
of |
| (Dollars in
thousands) |
|
June
30, |
|
December
31, |
| Unaudited |
|
2016 |
|
2015 |
| Total long-term
debt |
|
$ |
280,371 |
|
|
$ |
317,626 |
|
| Less: Cash and cash
equivalents |
|
|
11,855 |
|
|
|
11,100 |
|
| NET DEBT |
|
$ |
268,516 |
|
|
$ |
306,526 |
|
| |
|
|
|
|
| Stockholders'
equity |
|
$ |
3,491 |
|
|
$ |
46,988 |
|
| Total long-term
debt |
|
|
280,371 |
|
|
|
317,626 |
|
| CAPITAL |
|
$ |
283,862 |
|
|
$ |
364,614 |
|
| |
|
|
|
|
| NET
DEBT-TO-CAPITAL |
|
|
94.6 |
% |
|
|
84.1 |
% |
|
|
|
|
|
|
For Further Information:
-At ALPHA IR-
Analyst Contact
Chris Hodges or Chris Donovan
(312) 445-2870
Email: CAS@alpha-ir.com