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
third quarter ended September 30, 2016.
Highlights:
- Improved third quarter 2016 gross material margin to 26.0%,
compared to 25.3% in second quarter 2016 and 23.4% in third quarter
2015;
- Reduced operating expenses to $41.1 million in third quarter
2016, compared to $44.3 million in second quarter 2016 and $50.8
million in third quarter 2015;
- Achieved sequential quarterly improvement in loss from
continuing operations and EBITDA with majority of
branches now contributing positively; and
- Completed the sale of 50% equity ownership in Kreher Steel
Company, LLC ("Kreher") to the Company's former joint venture
partner.
President and CEO Steve Scheinkman commented,
"Although we experienced the normal industry slowdown during the
summer months, our transformation continued to take hold as we
achieved our third sequential quarter of EBITDA improvement. While
our sales tons per day decreased by 6.0% compared to the previous
quarter, our financial performance improved as we were able to
increase our gross margins to align with Castle's traditional
margins in more stable markets even in this historically low
commodity price environment. We also increased our margin per ton
by 6.2% while at the same time reducing our operating expenses. We
experienced a greater decline in volume in the United States and
Canada than reported by the MSCI for the industry; however, our
foreign subsidiaries performed above the MSCI rate."
Scheinkman continued, "As we expect volumes to
decrease in the fourth quarter due to normal holiday and year-end
seasonality, and with the industrial end markets yet to show signs
of significant recovery, we remain focused on improving the
efficiencies of our overall operations. We continue to work to win
new contracts and to grow our participation in both of our end
markets. Additionally, we have lowered both our fixed overhead and
variable costs without sacrificing on-time delivery performance,
safety, or quality. We expect these synergies to help us leverage
profitability on new contracts and allow us to increase our
transactional business at accretive net margins. Coupled with our
recently-announced commitments intended to improve liquidity and
working capital, we believe that we are well positioned to take
advantage of the eventual recovery in the industrial end markets
and improvement in commodity prices."
Third Quarter 2016 Results
Net sales in the third quarter 2016 were $124.9
million, a decrease of $25.7 million, or 17.1%, compared to the
third quarter 2015. The decrease in net sales was mainly
attributable to a 9.6% decrease in tons sold per day compared to
the same period last year, coupled with a 4.4% 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 third quarter
2015, tons sold per day decreased 3.6% in the third quarter 2016
compared to the third quarter 2015.
Gross material margin, calculated as net sales
less cost of materials (exclusive of depreciation and amortization)
divided by net sales, was 26.0% in the third quarter 2016, compared
to 25.3% in the second quarter 2016 and 23.4% in the third quarter
2015. Loss from continuing operations in the third quarter 2016 was
$18.3 million, compared to a loss from continuing operations of
$21.3 million in the second quarter 2016 and $28.8 million in the
third quarter 2015. Negative EBITDA from continuing operations
in the third quarter 2016 was $4.8 million, compared to negative
EBITDA from continuing operations of $6.9 million in the second
quarter 2016 and $13.6 million in the third quarter 2015.
Executive Vice President and CFO, Pat Anderson,
commented, "Positive branch-level operating results were generated
by the majority of our reporting locations during the quarter. The
number of branches contributing positively has grown throughout the
year and we are executing specific steps at all branches, including
those performing below expectations, to drive increased
contribution. This, paired with a gross material margin rate that
is more in line with Castle’s historical performance in more stable
markets, is a very encouraging development as we enter the fourth
quarter."
Net cash used in operating activities of
continuing operations was $10.7 million during the nine months
ended September 30, 2016, compared to $13.1 million of net cash
used in operating activities of continuing operations during the
nine months ended September 30, 2015. Net cash from investing
activities of $85.5 million during the nine months ended September
30, 2016 is primarily attributable to cash proceeds from the sale
of Total Plastics Inc. ("TPI") and the sale of the Company's 50%
equity interest in Kreher. The proceeds from the sale of TPI and
Kreher were used to pay down the Company's long-term debt. Net cash
used in financing activities was $68.7 million during the nine
months ended September 30, 2016. The Company had $12.5 million of
borrowings outstanding under its revolving credit facility at
September 30, 2016, and $42.0 million of additional
unrestricted borrowing capacity available under its revolving
credit facility, compared with $66.1 million in borrowings and
$30.1 million of additional unrestricted borrowing capacity under
the revolving credit facility 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 $235.6 million at September 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.
Scheinkman concluded, “While we continue to
demonstrate progress, especially at the end of the current quarter,
we are cautious heading into the seasonally-slow year end months
where volumes are traditionally lower. We are also very pleased
with the recently announced debt repayment of $27.5 million made
today and the support from a world-class syndicate of lenders who
provided commitment letters for the new $100 million term loan
facilities. Finally, the transaction between W.B. & Co. and
Raging Capital and the new settlement agreement between Raging
Capital and the Company will bring additional stability to our
Board of Directors and allow Castle to focus solely on returning to
profitability and future success. Our momentum is building and we
are growing more confident about our prospects for 2017 and
beyond."
Webcast Information
Management will hold a conference call at 11:00
a.m. ET today to review the Company's results for the third quarter
ended September 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 4363
2636#.
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 for the second quarter ended
June 30, 2016. 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 |
|
Nine Months Ended |
| Unaudited |
September 30, |
|
September 30, |
| |
2016 |
|
2015 |
|
2016 |
|
2015 |
| Net sales |
$ |
124,893 |
|
|
$ |
150,571 |
|
|
$ |
419,433 |
|
|
$ |
505,439 |
|
| Costs and
expenses: |
|
|
|
|
|
|
|
| Cost of
materials (exclusive of depreciation and amortization) |
92,406 |
|
|
115,300 |
|
|
323,808 |
|
|
411,834 |
|
|
Warehouse, processing and delivery expense |
19,561 |
|
|
25,893 |
|
|
63,772 |
|
|
76,826 |
|
| Sales,
general, and administrative expense |
16,820 |
|
|
18,023 |
|
|
51,486 |
|
|
60,338 |
|
|
Restructuring expense |
912 |
|
|
1,204 |
|
|
14,674 |
|
|
17,653 |
|
|
Depreciation and amortization expense |
3,845 |
|
|
5,666 |
|
|
12,498 |
|
|
17,447 |
|
| Total costs and
expenses |
133,544 |
|
|
166,086 |
|
|
466,238 |
|
|
584,098 |
|
| Operating loss |
(8,651 |
) |
|
(15,515 |
) |
|
(46,805 |
) |
|
(78,659 |
) |
| Interest expense,
net |
8,743 |
|
|
10,156 |
|
|
28,711 |
|
|
30,345 |
|
| Unrealized gain on
embedded debt conversion option |
(6,285 |
) |
|
— |
|
|
(7,569 |
) |
|
— |
|
| Debt restructuring
loss, net |
— |
|
|
— |
|
|
6,562 |
|
|
— |
|
| Other expense, net |
6,250 |
|
|
2,270 |
|
|
4,587 |
|
|
4,532 |
|
| Loss from continuing
operations before income taxes and equity in losses of joint
venture |
(17,359 |
) |
|
(27,941 |
) |
|
(79,096 |
) |
|
(113,536 |
) |
| Income tax expense
(benefit) |
903 |
|
|
(629 |
) |
|
1,099 |
|
|
(22,141 |
) |
| Loss from continuing
operations before equity in losses of joint venture |
(18,262 |
) |
|
(27,312 |
) |
|
(80,195 |
) |
|
(91,395 |
) |
| Equity in losses of
joint venture |
(36 |
) |
|
(1,460 |
) |
|
(4,177 |
) |
|
(134 |
) |
| Loss from continuing
operations |
(18,298 |
) |
|
(28,772 |
) |
|
(84,372 |
) |
|
(91,529 |
) |
| Income (loss) from
discontinued operations, net of income taxes |
(1,688 |
) |
|
955 |
|
|
6,246 |
|
|
2,333 |
|
| Net loss |
$ |
(19,986 |
) |
|
$ |
(27,817 |
) |
|
$ |
(78,126 |
) |
|
$ |
(89,196 |
) |
| |
|
|
|
|
|
|
|
| Basic (loss) earnings
per common share: |
|
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.57 |
) |
|
$ |
(1.22 |
) |
|
$ |
(3.02 |
) |
|
$ |
(3.89 |
) |
|
Discontinued operations |
(0.05 |
) |
|
0.04 |
|
|
0.22 |
|
|
0.10 |
|
| Net basic loss per
common share |
$ |
(0.62 |
) |
|
$ |
(1.18 |
) |
|
$ |
(2.80 |
) |
|
$ |
(3.79 |
) |
| |
|
|
|
|
|
|
|
| Diluted (loss) earnings
per common share: |
|
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.57 |
) |
|
$ |
(1.22 |
) |
|
$ |
(3.02 |
) |
|
$ |
(3.89 |
) |
|
Discontinued operations |
(0.05 |
) |
|
0.04 |
|
|
0.22 |
|
|
0.10 |
|
| Net diluted loss per
common share |
$ |
(0.62 |
) |
|
$ |
(1.18 |
) |
|
$ |
(2.80 |
) |
|
$ |
(3.79 |
) |
| |
|
|
|
|
|
|
|
| Negative EBITDA from
continuing operations (a) |
$ |
(4,807 |
) |
|
$ |
(13,579 |
) |
|
$ |
(42,064 |
) |
|
$ |
(65,878 |
) |
| Adjusted
negative EBITDA from continuing operations(b) |
$ |
(7,668 |
) |
|
$ |
(8,043 |
) |
|
$ |
(22,656 |
) |
|
$ |
(25,920 |
) |
| |
|
|
|
|
|
|
|
| (a) A non-GAAP financial measure, which represents 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: |
|
|
|
|
Three
Months |
|
|
|
|
|
| (Dollars
in thousands) |
Three Months Ended |
|
Ended |
|
Nine Months Ended |
|
| Unaudited |
September 30, |
|
June 30, |
|
September 30, |
|
| |
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
|
| Net loss, as reported |
$ |
(19,986 |
) |
|
$ |
(27,817 |
) |
|
$ |
(21,270 |
) |
|
$ |
(78,126 |
) |
|
$ |
(89,196 |
) |
|
| Less: Income (loss)
from discontinued operations, net of taxes |
(1,688 |
) |
|
955 |
|
|
— |
|
|
6,246 |
|
|
2,333 |
|
|
| Loss from continuing
operations |
(18,298 |
) |
|
(28,772 |
) |
|
(21,270 |
) |
|
(84,372 |
) |
|
(91,529 |
) |
|
| Depreciation and
amortization expense |
3,845 |
|
|
5,666 |
|
|
4,260 |
|
|
12,498 |
|
|
17,447 |
|
|
| Interest expense,
net |
8,743 |
|
|
10,156 |
|
|
9,599 |
|
|
28,711 |
|
|
30,345 |
|
|
| Income tax expense
(benefit) |
903 |
|
|
(629 |
) |
|
531 |
|
|
1,099 |
|
|
(22,141 |
) |
|
| Negative
EBITDA from continuing operations |
(4,807 |
) |
|
(13,579 |
) |
|
(6,880 |
) |
|
(42,064 |
) |
|
(65,878 |
) |
|
| Non-GAAP adjustments
(a) |
(2,861 |
) |
|
5,536 |
|
|
3,521 |
|
|
19,408 |
|
|
39,958 |
|
|
| Adjusted
negative EBITDA from continuing operations |
$ |
(7,668 |
) |
|
$ |
(8,043 |
) |
|
$ |
(3,359 |
) |
|
$ |
(22,656 |
) |
|
$ |
(25,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (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: |
|
|
|
|
Three |
|
|
|
|
| (Dollars in
thousands) |
|
|
Months |
|
|
| Unaudited |
Three Months Ended |
|
Ended |
|
Nine Months Ended |
| |
September 30, |
|
June 30, |
|
September 30, |
| |
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Net loss, as reported |
$ |
(19,986 |
) |
|
$ |
(27,817 |
) |
|
$ |
(21,270 |
) |
|
$ |
(78,126 |
) |
|
$ |
(89,196 |
) |
| Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
Restructuring activity(a) |
912 |
|
|
1,204 |
|
|
2,044 |
|
|
15,126 |
|
|
39,988 |
|
| Gain on
purchase commitments(b) |
(843 |
) |
|
— |
|
|
— |
|
|
(843 |
) |
|
— |
|
| Debt
restructuring (gain) loss |
— |
|
|
— |
|
|
(513 |
) |
|
6,562 |
|
|
— |
|
| Foreign
exchange (gain) loss on intercompany loans |
3,570 |
|
|
2,709 |
|
|
(1,024 |
) |
|
2,484 |
|
|
4,142 |
|
| Foreign
exchange gain on intercompany loans of joint venture |
— |
|
|
— |
|
|
(4 |
) |
|
(175 |
) |
|
— |
|
| Impairment
of equity investment in joint venture(c) |
|
|
— |
|
|
4,636 |
|
|
4,636 |
|
|
— |
|
| Impairment
of goodwill of equity investment joint venture(d) |
— |
|
|
1,763 |
|
|
|
|
— |
|
|
1,763 |
|
| Unrealized
gain on commodity hedges |
(215 |
) |
|
(140 |
) |
|
(334 |
) |
|
(813 |
) |
|
(313 |
) |
| Gain on sale
of property, plant and equipment |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,622 |
) |
| Unrealized
gain on embedded debt conversion option |
(6,285 |
) |
|
— |
|
|
(1,284 |
) |
|
(7,569 |
) |
|
— |
|
| Non-GAAP adjustments |
(2,861 |
) |
|
5,536 |
|
|
3,521 |
|
|
19,408 |
|
|
39,958 |
|
| Tax effect of
adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Adjusted non-GAAP net
loss |
$ |
(22,847 |
) |
|
$ |
(22,281 |
) |
|
$ |
(17,749 |
) |
|
$ |
(58,718 |
) |
|
$ |
(49,238 |
) |
| Less: Income (loss) from
discontinued operations, net of taxes |
(1,688 |
) |
|
955 |
|
|
— |
|
|
6,246 |
|
|
2,333 |
|
| Adjusted non-GAAP loss
from continuing operations |
$ |
(21,159 |
) |
|
$ |
(23,236 |
) |
|
$ |
(17,749 |
) |
|
$ |
(64,964 |
) |
|
$ |
(51,571 |
) |
| |
|
|
|
|
|
|
|
|
|
| (a) Restructuring activity includes amounts recorded
to restructuring expense. For the nine months ended September 30,
2016, amount includes $452 in inventory write-down charges recorded
to cost of materials in the Condensed Consolidated Statements of
Operations. For the nine months ended September 30, 2015, amount
includes $22,335 in inventory write-down charges, recorded to cost
of materials in the Condensed Consolidated Statements of
Operations. |
| (b) Amount recorded to cost of materials in the Condensed
Consolidated Statements of Operations, which represents adjustment
to the liability for purchase commitments associated with the
Company's Houston and Edmonton locations that were closed in
February 2016. |
| (c) The Company determined that its 50% investment in its
Kreher joint venture was impaired as of June 30, 2016. The Company
recorded a charge of $4,636 in equity in 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. |
| (d) The Company's 50% joint venture, which was sold in August
2016, determined that its goodwill balance of $3,525 was impaired
as of September 30, 2015. The Company recorded $1,763 in equity in
losses of joint venture in the Condensed Consolidated Statements of
Operations to reflect is share of the goodwill impairment. |
| |
| Reconciliation of
Gross Material Margin and Adjusted Gross Material
Margin: |
|
|
|
|
Three |
|
|
|
|
| (Dollars in
thousands) |
|
|
Months |
|
|
| Unaudited |
Three Months Ended |
|
Ended |
|
Nine Months Ended |
| |
September 30, |
|
June 30, |
|
September 30, |
| |
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
| Net sales, as
reported |
$ |
124,893 |
|
|
$ |
150,571 |
|
|
$ |
130,692 |
|
|
$ |
419,433 |
|
|
$ |
505,439 |
|
| Sale of
Houston and Edmonton inventory |
— |
|
|
— |
|
|
— |
|
|
(27,107 |
) |
|
— |
|
| Adjusted net sales |
$ |
124,893 |
|
|
$ |
150,571 |
|
|
$ |
130,692 |
|
|
$ |
392,326 |
|
|
$ |
505,439 |
|
| |
|
|
|
|
|
|
|
|
|
| Cost of materials, as
reported (exclusive of depreciation and amortization) |
$ |
92,406 |
|
|
$ |
115,300 |
|
|
$ |
97,644 |
|
|
$ |
323,808 |
|
|
$ |
411,834 |
|
| Sale of
Houston and Edmonton inventory |
— |
|
|
— |
|
|
— |
|
|
(27,107 |
) |
|
— |
|
| Gain on
purchase commitments |
843 |
|
|
— |
|
|
— |
|
|
843 |
|
|
— |
|
|
Restructuring activity in cost of materials |
— |
|
|
— |
|
|
— |
|
|
(452 |
) |
|
(22,335 |
) |
| Adjusted cost of
materials (exclusive of depreciation and amortization) |
$ |
93,249 |
|
|
$ |
115,300 |
|
|
$ |
97,644 |
|
|
$ |
297,092 |
|
|
$ |
389,499 |
|
| Gross margin
(calculated as net sales, as reported, less cost of materials, as
reported) |
$ |
32,487 |
|
|
$ |
35,271 |
|
|
$ |
33,048 |
|
|
$ |
95,625 |
|
|
$ |
93,605 |
|
| Gross material margin
(calculated as gross margin divided by net sales, as reported) |
26.0 |
% |
|
23.4 |
% |
|
25.3 |
% |
|
22.8 |
% |
|
18.5 |
% |
| Adjusted gross margin
(calculated as adjusted net sales less adjusted cost of
materials) |
$ |
31,644 |
|
|
$ |
35,271 |
|
|
$ |
33,048 |
|
|
$ |
95,234 |
|
|
$ |
115,940 |
|
| Adjusted gross material
margin (calculated as adjusted gross margin divided by adjusted net
sales) |
25.3 |
% |
|
23.4 |
% |
|
25.3 |
% |
|
24.3 |
% |
|
22.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| CONDENSED
CONSOLIDATED BALANCE SHEETS |
As of |
| (In thousands, except
par value data) |
September 30, |
|
December 31, |
| Unaudited |
2016 |
|
2015 |
|
ASSETS |
|
|
|
| Current assets: |
|
|
|
| Cash and
cash equivalents |
$ |
10,005 |
|
|
$ |
11,100 |
|
| Accounts
receivable, less allowances of $2,141 and $2,380, respectively |
76,899 |
|
|
73,191 |
|
|
Inventories |
179,396 |
|
|
216,090 |
|
| Prepaid
expenses and other current assets |
11,609 |
|
|
10,424 |
|
| Income
tax receivable |
1,583 |
|
|
346 |
|
| Current
assets of discontinued operations |
— |
|
|
37,140 |
|
| Total
current assets |
279,492 |
|
|
348,291 |
|
| Investment in joint
venture |
— |
|
|
35,690 |
|
| Intangible assets,
net |
5,637 |
|
|
10,250 |
|
| Prepaid pension
cost |
10,372 |
|
|
8,422 |
|
| Deferred income
taxes |
416 |
|
|
378 |
|
| Other noncurrent
assets |
6,624 |
|
|
6,109 |
|
| Property, plant and
equipment: |
|
|
|
| Land |
2,071 |
|
|
2,519 |
|
|
Buildings |
37,402 |
|
|
39,778 |
|
| Machinery
and equipment |
127,690 |
|
|
153,955 |
|
| Property,
plant and equipment, at cost |
167,163 |
|
|
196,252 |
|
|
Accumulated depreciation |
(115,279 |
) |
|
(131,691 |
) |
| Property,
plant and equipment, net |
51,884 |
|
|
64,561 |
|
| Noncurrent assets of
discontinued operations |
— |
|
|
19,805 |
|
| Total assets |
$ |
354,425 |
|
|
$ |
493,506 |
|
| LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
| Current
liabilities: |
|
|
|
| Accounts
payable |
$ |
51,856 |
|
|
$ |
45,606 |
|
| Accrued
and other current liabilities |
37,401 |
|
|
28,078 |
|
| Income
tax payable |
1,512 |
|
|
33 |
|
| Current
portion of long-term debt |
142 |
|
|
7,012 |
|
| Current
liabilities of discontinued operations |
— |
|
|
11,158 |
|
| Total
current liabilities |
90,911 |
|
|
91,887 |
|
| Long-term debt, less
current portion |
235,454 |
|
|
310,614 |
|
| Deferred income
taxes |
— |
|
|
4,169 |
|
| Build-to-suit
liability |
13,229 |
|
|
13,237 |
|
| Other noncurrent
liabilities |
9,044 |
|
|
7,935 |
|
| Pension and
postretirement benefit obligations |
18,513 |
|
|
18,676 |
|
| Commitments and
contingencies |
|
|
|
| Stockholders' equity
(deficit): |
|
|
|
| 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 September 30, 2016 and December 31, 2015 |
— |
|
|
— |
|
| Common
stock, $0.01 par value—60,000 shares authorized; 32,768 shares
issued and 32,639 outstanding at September 30, 2016 and 23,888
shares issued and 23,794 outstanding at December 31, 2015 |
327 |
|
|
238 |
|
|
Additional paid-in capital |
244,344 |
|
|
226,844 |
|
|
Accumulated deficit |
(223,435 |
) |
|
(145,309 |
) |
|
Accumulated other comprehensive loss |
(32,950 |
) |
|
(33,821 |
) |
| Treasury
stock, at cost—129 shares at September 30, 2016 and 94 shares at
December 31, 2015 |
(1,012 |
) |
|
(964 |
) |
| Total
stockholders' equity (deficit) |
(12,726 |
) |
|
46,988 |
|
| Total liabilities and
stockholders' equity (deficit) |
$ |
354,425 |
|
|
$ |
493,506 |
|
| |
|
|
|
|
|
|
|
| CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
Nine Months Ended |
| (Dollars in
thousands) |
September 30, |
| Unaudited |
2016 |
|
2015 |
| Operating
activities: |
|
|
|
| Net
loss |
$ |
(78,126 |
) |
|
$ |
(89,196 |
) |
| Less:
Income from discontinued operations, net of income taxes |
6,246 |
|
|
2,333 |
|
| Loss from continuing
operations |
(84,372 |
) |
|
(91,529 |
) |
| Adjustments to
reconcile loss from continuing operations to net cash used in
operating activities of continuing operations: |
|
|
|
|
Depreciation and amortization |
12,498 |
|
|
17,447 |
|
|
Amortization of deferred gain |
(92 |
) |
|
— |
|
|
Amortization of deferred financing costs and debt discount |
4,258 |
|
|
6,241 |
|
| Debt
restructuring loss |
6,562 |
|
|
— |
|
| Loss from
lease termination |
4,452 |
|
|
— |
|
|
Unrealized gain on embedded debt conversion option |
(7,569 |
) |
|
— |
|
| Loss
(gain) on sale of property, plant and equipment |
1,720 |
|
|
(5,741 |
) |
|
Unrealized gain on commodity hedges |
(813 |
) |
|
(313 |
) |
|
Unrealized foreign currency transaction loss |
2,484 |
|
|
4,142 |
|
| Equity in
losses of joint venture |
4,141 |
|
|
134 |
|
| Dividends
from joint venture |
— |
|
|
315 |
|
| Pension
curtailment |
— |
|
|
3,080 |
|
| Deferred
income taxes |
113 |
|
|
(23,310 |
) |
|
Share-based compensation expense |
916 |
|
|
424 |
|
| Other,
net |
679 |
|
|
(12 |
) |
| Changes
in assets and liabilities: |
|
|
|
| Accounts
receivable |
(5,128 |
) |
|
18,326 |
|
|
Inventories |
34,780 |
|
|
43,838 |
|
| Prepaid
expenses and other current assets |
(301 |
) |
|
(8,258 |
) |
| Other
noncurrent assets |
(302 |
) |
|
(2,789 |
) |
| Prepaid
pension costs |
(406 |
) |
|
1,272 |
|
| Accounts
payable |
6,026 |
|
|
4,059 |
|
| Income
tax payable and receivable |
198 |
|
|
1,188 |
|
| Accrued
and other current liabilities |
8,604 |
|
|
18,802 |
|
| Pension
and postretirement benefit obligations and other noncurrent
liabilities |
865 |
|
|
(400 |
) |
| Net cash used in
operating activities of continuing operations |
(10,687 |
) |
|
(13,084 |
) |
| Net cash (used in) from
operating activities of discontinued operations |
(6,907 |
) |
|
6,673 |
|
| Net cash used
in operating activities |
(17,594 |
) |
|
(6,411 |
) |
| Investing
activities: |
|
|
|
| Proceeds
from sale of investment in joint venture |
31,550 |
|
|
— |
|
| Capital
expenditures |
(2,431 |
) |
|
(4,526 |
) |
| Proceeds
from sale of property, plant and equipment |
2,829 |
|
|
7,742 |
|
| Net cash from investing
activities of continuing operations |
31,948 |
|
|
3,216 |
|
| Net cash from (used in)
investing activities of discontinued operations |
53,570 |
|
|
(867 |
) |
| Net cash from
investing activities |
85,518 |
|
|
2,349 |
|
| Financing
activities: |
|
|
|
| Proceeds
from long-term debt |
581,052 |
|
|
707,200 |
|
|
Repayments of long-term debt |
(640,415 |
) |
|
(698,696 |
) |
| Payment
of debt restructuring costs |
(8,677 |
) |
|
— |
|
| Payments of
build-to-suit liability |
(687 |
) |
|
(500 |
) |
| Net cash (used
in) from financing activities |
(68,727 |
) |
|
8,004 |
|
| Effect of exchange rate
changes on cash and cash equivalents |
(292 |
) |
|
(424 |
) |
| Net change in cash and
cash equivalents |
(1,095 |
) |
|
3,518 |
|
| Cash and
cash equivalents—beginning of year |
11,100 |
|
|
8,454 |
|
| Cash and
cash equivalents—end of period |
$ |
10,005 |
|
|
$ |
11,972 |
|
| |
|
|
|
|
|
|
|
| Total Long-Term
Debt: |
As of |
| (Dollars in
thousands) |
September 30, |
|
December 31, |
| Unaudited |
2016 |
|
2015 |
| LONG-TERM DEBT |
|
|
|
| 12.75%
Senior Secured Notes due December 15, 2016 |
$ |
— |
|
|
$ |
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 |
12,500 |
|
|
66,100 |
|
| 5.0%
Convertible Notes due December 31, 2019 |
22,323 |
|
|
— |
|
| Other,
primarily capital leases |
143 |
|
|
428 |
|
| Plus:
derivative liability for embedded conversion feature |
3,284 |
|
|
— |
|
| Less:
unamortized discount |
(4,502 |
) |
|
(12,255 |
) |
| Less:
unamortized debt issuance costs |
(2,712 |
) |
|
(4,147 |
) |
| Total
long-term debt |
$ |
235,596 |
|
|
$ |
317,626 |
|
|
Less: current portion |
142 |
|
|
7,012 |
|
| Total
long-term portion |
$ |
235,454 |
|
|
$ |
310,614 |
|
| |
|
|
|
|
|
|
|
For Further Information:
-At ALPHA IR-
Analyst Contact
Chris Hodges or Chris Donovan
(312) 445-2870
Email: CAS@alpha-ir.com
Traded: NYSE (CAS)