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 2012.
Consolidated net sales were $329.4 million for the quarter, compared to $282.6 million in the second quarter of 2011. Reported net loss for the quarter was $3.0 million as compared to a net income of $3.7 million in the prior year quarter. The reported net loss primarily resulted from an unrealized loss of $4.3 million for the mark-to-market adjustment on the conversion option associated with the convertible notes issued in December 2011, as well as, increased charges due to unrealized losses for commodity hedges and the impact of costs associated with the CEO transition. Adjusted non-GAAP net income, as reconciled below, was $2.6 million for the second quarter of 2012.
"Consolidated gross material margins of 26.9% for the second quarter of 2012 were more than 70 basis points higher than the prior year quarter. And, while we experienced a slight softening in demand when compared to the first quarter, I was pleased with our gross margin performance," stated Scott Stephens, Interim President and Chief Executive Officer and Chief Financial Officer of A. M. Castle.
The company reported adjusted EBITDA, as defined and reconciled in the financial statement table below, of $18.9 million, or 5.7% of net sales, in the second quarter of 2012, compared to $12.3 million, or 4.4% of net sales, in the second quarter of 2011.
In the Metals segment, second quarter 2012 net sales of $297.2 million were $44.9 million, or 17.8% higher than last year, primarily due to the acquisition of Tube Supply in December 2011. Metals segment tons sold per day, excluding Tube Supply, for the second quarter of 2012 were up 1.1% from the second quarter of 2011, primarily driven by growth in the heavy equipment and oil and gas sectors. Sequentially, tons sold per day were 4.1% lower than the first quarter of 2012 as virtually all key end-use markets, with the exception of oil and gas, experienced softer demand as customers adjusted inventory levels due to a more cautious outlook.
In the Plastics segment, second quarter 2012 net sales of $32.2 million were $1.9 million, or 6.3% higher than the prior year period due to increased pricing and higher sales volume reflecting continued strength in the automotive and office furniture sectors, partially offset by weaker demand in the store fixtures sector.
"We will remain focused on gross material margin management, operating efficiency and working capital execution during the second half of the year. Given our customers’ cautious outlook for the balance of 2012 and assuming no further softening of demand, we expect operating results to be comparable to levels achieved in the second quarter," concluded Stephens.
During the second quarter of 2012, the company retained an executive recruiting firm to assist in the identification of a Chief Executive Officer. Based on the progress to date, the Board of Directors expects to appoint a new Chief Executive Officer by the end of the third quarter of 2012.
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. 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 60 locations throughout North America, Europe and Asia.