Completed Operational Restructure and Refinance of Senior Secured
Notes
Positioned for Long-Term Growth with Improved Profitability and
Liquidity Profile
Executed Agreement for Sale of Total Plastics, Inc. Subsidiary
A. M. Castle & Co. (NYSE:CAS) (“the Company” or “Castle”), a
global distributor of specialty metal and plastic products, value-added
services and supply chain solutions, today reported financial results
for the fourth quarter and year ended December 31, 2015.
President and CEO Steve Scheinkman commented, “When I was appointed CEO
of Castle just under a year ago, there were questions about the
long-term viability of the Company. Our cost structure was not aligned
with the outlook for the business and the macroeconomic environment, our
management structure was not conducive to nimble, customer-focused
action at our branches, and the business had limited liquidity, all with
more than $200 million of debt quickly approaching maturity. In light of
this, we took bold action during the year to operationally restructure
our Company and strategically refinance our debt with an objective to
improve profitability and better position Castle for long-term growth.”
Summary of Key Accomplishments:
-
Completed operational restructuring plan including consolidation of
seven facilities, on time and within budget
-
Reconfigured management structure and philosophy to focus on branch
accountability and customer responsiveness
-
Aligned corporate teams to ensure best practices in purchasing and
management of inventory
-
Refinanced Senior Secured Notes due in December 2016
-
Overwhelming 97% participation in private exchange offer for new
Senior Secured Notes due December 2018
-
Maintained ability to prepay the new Senior Secured Notes without
penalty
-
Executed Transaction Support Agreements with 89.7% of holders to
exchange Convertible Notes due December 2017
-
Upon completion, provides 30% discount in principal amount and
1.75% reduction in coupon rate
-
New Convertible Notes provide ability, in certain circumstances,
for the Company to initiate conversion into equity
-
Completed sale of vast majority of remaining energy-related inventory
and closure of Houston and Edmonton facilities that generated
significant operating and non-cash losses in 2015
-
Entered into sale agreement for subsidiary, Total Plastics, Inc. which
will provide significant additional debt reduction upon closing
scheduled for this week
Scheinkman further added, “We have substantially completed the
initiatives promised by the new Castle management team 11 months ago,
when I took the reins as CEO. Further, fulfilling the commitments made
earlier this year, we have completed the sale of a vast majority of our
remaining energy-related inventory and have signed an agreement to sell
our Total Plastics, Inc. subsidiary, which we expect to close later this
week. With the proceeds from these sales, we will reduce our debt and
improve our capital structure for the long-term. In addition, the
closure of our facilities in Houston and Edmonton substantially reduces
our exposure to the energy markets and immediately eliminates facilities
that generated significant operating and non-cash losses in 2015. While
our restructuring activities created a temporary headwind at certain
branches, we believe our market position in the aerospace and industrial
channels we serve will allow us to grow our business as we continue to
execute our plan step-by-step, which we believe demonstrates that
Castle’s financial stability is as solid as our reputation for high
standards of safety, quality, delivery performance, and customer focus.
We are now excited to be able to turn our attention to commercial
activities to return to profitability.”
Change in Accounting for Inventory Costing
During the fourth quarter 2015, the Company elected to change its method
of costing for its U.S. metals inventory to the average cost method from
the last-in first-out (LIFO) method. Prior to this change in accounting
principle, at December 31, 2014, approximately 68% of the Company’s
inventories were valued at the lower of LIFO cost or market. The Company
applied this change in method of costing for its U.S. metals inventory
by retrospectively adjusting the prior period financial statements. The
cumulative effect of this accounting change resulted in a $84.1 million
after-tax increase in retained earnings as of January 1, 2013. The
financial results that follow reflect the retrospective application of
this change in accounting principle.
Fourth Quarter and Full Year 2015 Results
Consolidated net sales were $164.2 million for the fourth quarter 2015
compared to $231.5 million in the fourth quarter 2014. The Company
reported a fourth quarter 2015 net loss of $119.7 million, or a loss of
$5.08 per diluted share, compared to a net loss of $29.7 million, or a
loss of $1.27 per diluted share, in the prior year period. Adjusted
non-GAAP net loss, which excludes restructuring activity, asset
impairment charges, and other items reconciled in the tables below, for
the fourth quarter 2015 was $27.9 million compared to adjusted non-GAAP
net loss of $29.3 million in the fourth quarter 2014. The Company
reported fourth quarter 2015 negative EBITDA of $104.8 million, compared
to negative EBITDA of $17.6 million in the fourth quarter 2014. Fourth
quarter 2015 and fourth quarter 2014 results were impacted by $1.8
million and $2.9 million of foreign currency transaction losses in each
of those quarters, respectively. In addition, $1.3 million from equity
in the losses of the Company's joint venture negatively impacted the
fourth quarter 2015 results compared to the fourth quarter 2014, which
was positively impacted by $1.8 million from equity in the earnings of
the Company's joint venture. Exclusive of restructuring activity and
other items reconciled in the tables below, the Company reported a
fourth quarter 2015 negative adjusted EBITDA of $13.0 million compared
with negative adjusted EBITDA of $17.0 million in the fourth quarter
2014.
The fourth quarter and full year 2015 results include the impact of the
Company's decision to sell the inventory and cease operations at its
facilities in Houston and Edmonton, which primarily service the oil and
gas industries. As a result of this decision, the fourth quarter 2015
reported net loss included a $33.7 million non-cash intangible assets
impairment charge and a $61.5 million non-cash charge for the write-down
of inventory and purchase commitments at these facilities.
Total restructuring activity recorded during the fourth quarter of 2015,
including a $3.3 million charge reflected in cost of materials, resulted
in income of $5.3 million compared to expense from restructuring
activity of $0.5 million in the prior year period. Full year
restructuring charges, including a $25.6 million charge for the
write-down of inventory included in cost of materials and excluding the
gain on the sale of facilities of $16.0 million, were $50.6 million. Of
the full year restructuring charges, $22.2 represented cash charges
including an estimated $5.5 million charge from the withdrawal of a
multi-employer pension plan that may be paid over 20 years. Both the
total restructuring charges and total cash charges for the year were
in-line with management's original estimates.
“The operational restructuring plan announced in April 2015 and put in
place throughout the year is now complete,” said Pat Anderson, Executive
Vice President and CFO. “We believe our lower cost structure and
improved capital structure as the result of our recent strategic
refinancing will support improved cash flow, operating margin, and
EBITDA performance going forward.”
Net sales from the Metals segment during the fourth quarter 2015 were
$132.5 million, which was 33.0% lower than the fourth quarter 2014 and
12.0% lower than the third quarter 2015. Tons sold per day were down
36.3% compared to the fourth quarter 2014 and down 11.4% compared to the
third quarter 2015. Average selling price per ton sold was up 0.9% from
the fourth quarter 2014 and up 1.7% from the third quarter 2015. The
fourth quarter 2015 benefited from a favorable product mix which offset
some of the impact of unfavorable volume shipped compared to both the
fourth quarter 2014 and the third quarter 2015. In the Plastics segment,
fourth quarter 2015 net sales were $31.7 million, which was 5.9% lower
compared to the fourth quarter 2014 and 7.2% lower compared to the third
quarter 2015. The decrease in Plastics segment sales was mainly a result
of lower demand in the automotive and life sciences sectors amplified by
raw material pricing declines across most plastics product lines.
Consolidated gross material margins were negative 16.7% in the fourth
quarter 2015 compared to positive 20.0% in the fourth quarter 2014. The
negative gross material margin in the fourth quarter 2015 was impacted
by the $61.5 million non-cash charge for the write-down of inventory and
purchase commitments at the Company's Houston and Edmonton locations, as
discussed above, and a $3.3 million charge related to restructuring
activity in the fourth quarter 2015. Excluding these charges,
consolidated adjusted gross material margin in the fourth quarter 2015
was positive 22.8%.
Excluding net restructuring income of $8.6 million and the impairment of
intangible assets of $33.7 million, operating expenses were $55.5
million, or 33.8% of net sales, in the fourth quarter 2015, compared to
$68.8 million, or 29.7% of net sales in fourth quarter 2014 (excluding
net restructuring expense of $0.5 million), and $57.8 million, or 31.3%
of net sales, in the third quarter 2015 (excluding net restructuring
expense of $1.2 million).
Full year 2015 consolidated net sales were $770.8 million compared to
$979.8 million in 2014. The Company reported a net loss of $209.8
million in 2015, or a loss of $8.91 per diluted share, compared to a net
loss in 2014 of $119.4 million, or a loss of $5.11 per diluted share.
The net loss in 2015 included a $33.7 million non-cash intangible assets
impairment charge and the $61.5 million non-cash charge recorded in cost
of materials for the write-down of inventory and purchase commitments
related to the Company's decision to sell the inventory and cease
operations in its Houston and Edmonton facilities. The net loss in 2014
included a $56.2 million non-cash goodwill impairment charge. Adjusted
non-GAAP net loss for 2015 was $78.0 million compared to adjusted
non-GAAP net loss of $71.2 million in 2014. Including the non-cash
intangible asset and goodwill impairment charges in 2015 and 2014,
respectively, the Company reported a 2015 negative EBITDA of $164.6
million, compared to a 2014 negative EBITDA of $73.4 million. Negative
adjusted EBITDA for 2015 was $32.8 million compared to negative adjusted
EBITDA of $21.5 million in 2014.
Net cash used in operations was $22.1 million during 2015, compared to
net cash used in operations of $75.1 million during 2014. The $53.0
million improvement in net cash used in operations from 2014 to 2015 was
largely attributable to a significant decrease in inventory during the
year. Inventory decreased by $124.2 million. Included within this
reduction in inventory was $80.8 million in non-cash reserve adjustments
and non-cash write-downs of inventory during the year. The Company had
$66.1 million of borrowings outstanding under its revolving credit
facility at December 31, 2015, and $30.1 million of additional
unrestricted borrowing capacity available under the terms of the
revolving credit facility. There were $59.2 million in borrowings under
the revolving credit facility at December 31, 2014, and $68.3 million at
September 30, 2015. The Company’s net debt-to-capital ratio was 84.2% at
December 31, 2015, compared to 53.6% at December 31, 2014. Total debt
outstanding, net of unamortized discount, was $321.8 million at
December 31, 2015 and $310.1 million at December 31, 2014. Total debt
outstanding, net of unamortized discount, was $322.7 million at
September 30, 2015. Refer to the ‘Total Debt’ table below for details
related to the Company’s outstanding debt obligations.
Scheinkman concluded, “2015 was a year of significant change for Castle,
and my leadership team and I could not have been more pleased with the
outcome of the actions we have taken to operationally and financially
restructure our Company, allowing us to be more competitive in the core
Metals markets we serve even in this challenging market
environment. Going forward, we are able to focus our undivided attention
on our customers and suppliers to provide supply chain solutions to
address their needs. Our goal is to become even more responsive to the
needs of our customers, while continuing to fine-tune our cost structure
on a branch-by-branch basis. Most importantly, we believe that we are
now positioned take advantage of opportunities that will be available as
market cycles begin to turn.”
Webcast Information
Management will hold a conference call at 11:00 a.m. ET today to review
the Company's results for the fourth quarter and full year ended
December 31, 2015 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) 774-6070 or (630) 691-2753 and citing code 9086 056#.
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 plastic products and supply chain services, principally
serving the producer durable equipment, commercial aircraft, heavy
equipment, industrial goods, construction equipment, oil and gas,
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
41 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".
Regulation G Disclosure
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 analyses 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) 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) and
adjusted EBITDA, which are defined as reported net income (loss) and
EBITDA 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. Management uses EBITDA, adjusted
non-GAAP net income (loss) and adjusted EBITDA 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 and
plastics 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, 2014, and our Annual Report on Form 10-K for the fiscal
year ended December 31, 2015, which will 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
|
|
For the Three Months Ended
|
|
For the Year Ended
|
(Dollars in thousands, except per share data)
|
|
|
Unaudited
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net sales
|
|
$
|
164,151
|
|
|
$
|
231,466
|
|
|
$
|
770,758
|
|
|
$
|
979,837
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of materials (exclusive of depreciation and amortization)
|
|
|
191,530
|
|
|
|
185,220
|
|
|
|
674,615
|
|
|
|
750,408
|
|
Warehouse, processing and delivery expense
|
|
|
27,394
|
|
|
|
33,991
|
|
|
|
114,734
|
|
|
|
140,559
|
|
Sales, general, and administrative expense
|
|
|
21,864
|
|
|
|
28,185
|
|
|
|
95,479
|
|
|
|
112,465
|
|
Restructuring expense (income)
|
|
|
(8,645
|
)
|
|
|
541
|
|
|
|
9,008
|
|
|
|
(2,960
|
)
|
Depreciation and amortization expense
|
|
|
6,193
|
|
|
|
6,655
|
|
|
|
24,854
|
|
|
|
26,044
|
|
Impairment of intangible assets
|
|
|
33,742
|
|
|
|
—
|
|
|
|
33,742
|
|
|
|
—
|
|
Impairment of goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,160
|
|
Total costs and expenses
|
|
|
272,078
|
|
|
|
254,592
|
|
|
|
952,432
|
|
|
|
1,082,676
|
|
Operating loss
|
|
|
(107,927
|
)
|
|
|
(23,126
|
)
|
|
|
(181,674
|
)
|
|
|
(102,839
|
)
|
Interest expense, net
|
|
|
10,554
|
|
|
|
10,560
|
|
|
|
41,980
|
|
|
|
40,548
|
|
Other expense, net
|
|
|
1,774
|
|
|
|
2,896
|
|
|
|
6,306
|
|
|
|
4,323
|
|
Loss before income taxes and equity in earnings (losses) of joint
venture
|
|
|
(120,255
|
)
|
|
|
(36,582
|
)
|
|
|
(229,960
|
)
|
|
|
(147,710
|
)
|
Income tax benefit
|
|
|
(1,830
|
)
|
|
|
(5,121
|
)
|
|
|
(21,621
|
)
|
|
|
(20,631
|
)
|
Loss before equity in earnings (losses) of joint venture
|
|
|
(118,425
|
)
|
|
|
(31,461
|
)
|
|
|
(208,339
|
)
|
|
|
(127,079
|
)
|
Equity in earnings (losses) of joint venture
|
|
|
(1,292
|
)
|
|
|
1,777
|
|
|
|
(1,426
|
)
|
|
|
7,691
|
|
Net loss
|
|
$
|
(119,717
|
)
|
|
$
|
(29,684
|
)
|
|
$
|
(209,765
|
)
|
|
$
|
(119,388
|
)
|
Basic loss per common share
|
|
$
|
(5.08
|
)
|
|
$
|
(1.27
|
)
|
|
$
|
(8.91
|
)
|
|
$
|
(5.11
|
)
|
Diluted loss per common share
|
|
$
|
(5.08
|
)
|
|
$
|
(1.27
|
)
|
|
$
|
(8.91
|
)
|
|
$
|
(5.11
|
)
|
EBITDA (a)
|
|
$
|
(104,800
|
)
|
|
$
|
(17,590
|
)
|
|
$
|
(164,552
|
)
|
|
$
|
(73,427
|
)
|
|
|
|
|
|
|
|
|
|
(a) Earnings (loss) before interest, taxes, and depreciation and
amortization. See reconciliation to net loss below.
|
|
|
Reconciliation of EBITDA and of Adjusted
EBITDA to Net Loss:
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Year Ended
|
(Dollars in thousands)
|
|
|
Unaudited
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net loss
|
|
$
|
(119,717
|
)
|
|
$
|
(29,684
|
)
|
|
$
|
(209,765
|
)
|
|
$
|
(119,388
|
)
|
Depreciation and amortization expense
|
|
|
6,193
|
|
|
|
6,655
|
|
|
|
24,854
|
|
|
|
26,044
|
|
Interest expense, net
|
|
|
10,554
|
|
|
|
10,560
|
|
|
|
41,980
|
|
|
|
40,548
|
|
Income tax expense (benefit)
|
|
|
(1,830
|
)
|
|
|
(5,121
|
)
|
|
|
(21,621
|
)
|
|
|
(20,631
|
)
|
Negative EBITDA
|
|
|
(104,800
|
)
|
|
|
(17,590
|
)
|
|
|
(164,552
|
)
|
|
|
(73,427
|
)
|
Non-GAAP adjustments (a)
|
|
|
91,810
|
|
|
|
619
|
|
|
|
131,770
|
|
|
|
51,944
|
|
Adjusted negative EBITDA
|
|
$
|
(12,990
|
)
|
|
$
|
(16,971
|
)
|
|
$
|
(32,782
|
)
|
|
$
|
(21,483
|
)
|
(a) Refer to 'Reconciliation of Adjusted Non-GAAP Net Loss to
Reported Net Loss' table for additional details on these amounts.
Unrealized foreign exchange losses on intercompany loans were not
included in Adjusted EBITDA in the prior year period presented; had
losses been included, Adjusted EBITDA would have been $(14,764) and
$(17,945), respectively, for the three-months and year ended
December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Non-GAAP Net
Loss to Reported Net Loss:
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
For the Three Months Ended
|
|
For the Year Ended
|
Unaudited
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net loss, as reported
|
|
$
|
(119,717
|
)
|
|
$
|
(29,684
|
)
|
|
$
|
(209,765
|
)
|
|
$
|
(119,388
|
)
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
Restructuring activity (a)
|
|
|
(5,324
|
)
|
|
|
541
|
|
|
|
34,664
|
|
|
|
(2,960
|
)
|
Non-cash write-down of inventory(b)
|
|
|
61,472
|
|
|
|
|
|
61,472
|
|
|
|
—
|
|
Foreign exchange losses on intercompany loans(c)
|
|
|
1,242
|
|
|
|
—
|
|
|
|
5,385
|
|
|
|
—
|
|
Foreign exchange losses on intercompany loans of joint venture
|
|
|
966
|
|
|
|
—
|
|
|
|
966
|
|
|
|
—
|
|
Impairment of intangible assets
|
|
|
33,742
|
|
|
|
—
|
|
|
|
33,742
|
|
|
|
—
|
|
Impairment of goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,160
|
|
Impairment of goodwill of equity investment joint venture(d)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,763
|
|
|
|
—
|
|
Unrealized (gains) losses on commodity hedges
|
|
|
(288
|
)
|
|
|
78
|
|
|
|
(600
|
)
|
|
|
(1,256
|
)
|
Gain on sale of property, plant and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,622
|
)
|
|
|
—
|
|
Non-GAAP adjustments
|
|
$
|
91,810
|
|
|
$
|
619
|
|
|
$
|
131,770
|
|
|
$
|
51,944
|
|
Tax effect of adjustments
|
|
|
(16
|
)
|
|
|
(244
|
)
|
|
|
(42
|
)
|
|
|
(3,770
|
)
|
Adjusted non-GAAP net loss
|
|
$
|
(27,923
|
)
|
|
$
|
(29,309
|
)
|
|
$
|
(78,037
|
)
|
|
$
|
(71,214
|
)
|
Adjusted non-GAAP basic loss per share
|
|
$
|
(1.18
|
)
|
|
$
|
(1.25
|
)
|
|
$
|
(3.31
|
)
|
|
$
|
(3.05
|
)
|
Adjusted non-GAAP diluted loss per share
|
|
$
|
(1.18
|
)
|
|
$
|
(1.25
|
)
|
|
$
|
(3.31
|
)
|
|
$
|
(3.05
|
)
|
(a) Restructuring activity includes amounts recorded to
restructuring expense (income). For the three months and year ended
December 31, 2015, amount include $3,321 and $25,656 in inventory
write-down charges, respectively, recorded to cost of materials in
the Condensed Consolidated Statements of Operations.
|
(b) Amount relates to the non-cash write-down of inventory and
purchase commitments of the Company's Houston and Edmonton
locations which served the oil and gas industries. The write-down
was recorded in conjunction with the Company's decision to market
the inventory at this location and reduces the carrying value of
the inventory to its market value. In February 2016, the Company
announced the sale of all of the Houston and Edmonton inventory
and the planned closure of those facilities.
|
(c) Unrealized foreign exchange losses on intercompany loans were
not included in the prior year period presented as an adjustment to
GAAP results as the amount was not significant. Had the losses been
included, adjusted non-GAAP net loss, adjusted non-GAAP loss per
share and adjusted non-GAAP diluted loss per share would have been
$(27,102), $(1.16), and $(1.16), respectively, for the three-month
period ended December 31, 2014. Adjusted non-GAAP net loss, adjusted
non-GAAP loss per share and adjusted non-GAAP diluted loss per share
would have been $(67,675), $(2.90), and $(2.90), respectively, for
the year ended December 31, 2014.
|
(d) The Company's 50% joint venture has determined that its goodwill
balance of $3,525 was impaired as of September 30, 2015. The Company
has recorded a charge of $1,763 in equity in earnings (losses) of
joint venture in the Condensed Consolidated Statements of Operations
to reflect its share of the goodwill impairment.
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
As of
|
(In thousands, except par value data)
|
|
December 31,
|
|
December 31,
|
Unaudited
|
|
2015
|
|
2014
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,100
|
|
|
$
|
8,454
|
|
Accounts receivable, less allowances of $3,440 and $3,375,
respectively
|
|
|
89,879
|
|
|
|
131,003
|
|
Inventories
|
|
|
235,443
|
|
|
|
359,630
|
|
Prepaid expenses and other current assets
|
|
|
11,523
|
|
|
|
9,458
|
|
Income tax receivable
|
|
|
346
|
|
|
|
2,886
|
|
Total current assets
|
|
|
348,291
|
|
|
|
511,431
|
|
Investment in joint venture
|
|
|
35,690
|
|
|
|
37,443
|
|
Goodwill
|
|
|
12,973
|
|
|
|
12,973
|
|
Intangible assets, net
|
|
|
10,250
|
|
|
|
56,555
|
|
Prepaid pension cost
|
|
|
8,422
|
|
|
|
7,092
|
|
Deferred income taxes
|
|
|
378
|
|
|
|
685
|
|
Other non-current assets
|
|
|
10,256
|
|
|
|
11,660
|
|
Property, plant and equipment:
|
|
|
|
|
Land
|
|
|
2,869
|
|
|
|
4,466
|
|
Buildings
|
|
|
42,559
|
|
|
|
52,821
|
|
Machinery and equipment
|
|
|
177,803
|
|
|
|
183,923
|
|
Property, plant and equipment, at cost
|
|
|
223,231
|
|
|
|
241,210
|
|
Accumulated depreciation
|
|
|
(151,838
|
)
|
|
|
(168,375
|
)
|
Property, plant and equipment, net
|
|
|
71,393
|
|
|
|
72,835
|
|
Total assets
|
|
$
|
497,653
|
|
|
$
|
710,674
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
56,272
|
|
|
$
|
68,782
|
|
Accrued payroll and employee benefits
|
|
|
11,246
|
|
|
|
9,332
|
|
Accrued and other current liabilities
|
|
|
17,324
|
|
|
|
18,338
|
|
Income tax payable
|
|
|
33
|
|
|
|
328
|
|
Current portion of long-term debt
|
|
|
7,012
|
|
|
|
737
|
|
Total current liabilities
|
|
|
91,887
|
|
|
|
97,517
|
|
Long-term debt, less current portion
|
|
|
314,761
|
|
|
|
309,377
|
|
Deferred income taxes
|
|
|
4,169
|
|
|
|
28,729
|
|
Build-to-suit liability
|
|
|
13,237
|
|
|
|
—
|
|
Other non-current liabilities
|
|
|
7,935
|
|
|
|
3,655
|
|
Pension and postretirement benefit obligations
|
|
|
18,676
|
|
|
|
18,747
|
|
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 shares); no shares
issued and outstanding at December 31, 2015 and December 31, 2014,
respectively
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.01 par value—60,000 shares authorized and 23,888
shares issued and 23,794 outstanding at December 31, 2015 and 23,630
shares issued and 23,559 outstanding at December 31, 2014
|
|
|
238
|
|
|
|
236
|
|
Additional paid-in capital
|
|
|
226,844
|
|
|
|
225,953
|
|
(Accumulated deficit) retained earnings
|
|
|
(145,309
|
)
|
|
|
64,456
|
|
Accumulated other comprehensive loss
|
|
|
(33,821
|
)
|
|
|
(37,116
|
)
|
Treasury stock, at cost—94 shares at December 31, 2015 and 71 shares
at December 31, 2014
|
|
|
(964
|
)
|
|
|
(880
|
)
|
Total stockholders' equity
|
|
|
46,988
|
|
|
|
252,649
|
|
Total liabilities and stockholders' equity
|
|
$
|
497,653
|
|
|
$
|
710,674
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Year Ended
|
(Dollars in thousands)
|
|
December 31,
|
Unaudited
|
|
2015
|
|
2014
|
Operating activities:
|
|
|
|
|
Net loss
|
|
$
|
(209,765
|
)
|
|
$
|
(119,388
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
24,854
|
|
|
|
26,044
|
|
Amortization of deferred loss (gain)
|
|
|
5
|
|
|
|
(261
|
)
|
Amortization of deferred financing costs and debt discount
|
|
|
8,355
|
|
|
|
8,064
|
|
Impairment of intangible assets
|
|
|
33,742
|
|
|
|
—
|
|
Impairment of goodwill
|
|
|
—
|
|
|
|
56,160
|
|
Non-cash write-down of inventory
|
|
|
53,971
|
|
|
|
—
|
|
Gain on sale of property, plant and equipment
|
|
|
(21,568
|
)
|
|
|
(5,603
|
)
|
Unrealized gains on commodity hedges
|
|
|
(600
|
)
|
|
|
(1,256
|
)
|
Unrealized foreign currency transaction losses
|
|
|
5,385
|
|
|
|
3,540
|
|
Equity in losses (earnings) of joint venture
|
|
|
1,426
|
|
|
|
(7,691
|
)
|
Dividends from joint venture
|
|
|
316
|
|
|
|
12,127
|
|
Pension curtailment
|
|
|
2,923
|
|
|
|
—
|
|
Pension settlement
|
|
|
3,915
|
|
|
|
—
|
|
Deferred tax (benefit) expense
|
|
|
(23,842
|
)
|
|
|
(19,094
|
)
|
Share-based compensation expense
|
|
|
828
|
|
|
|
1,972
|
|
Excess tax benefits from share-based payment arrangements
|
|
|
—
|
|
|
|
(76
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
Accounts receivable
|
|
|
37,063
|
|
|
|
(5,785
|
)
|
Inventories
|
|
|
63,986
|
|
|
|
(22,976
|
)
|
Prepaid expenses and other current assets
|
|
|
(7,884
|
)
|
|
|
(60
|
)
|
Other non-current assets
|
|
|
(520
|
)
|
|
|
1,777
|
|
Prepaid pension costs
|
|
|
2,675
|
|
|
|
387
|
|
Accounts payable
|
|
|
(4,461
|
)
|
|
|
2,630
|
|
Accrued payroll and employee benefits
|
|
|
6,938
|
|
|
|
(230
|
)
|
Income tax payable and receivable
|
|
|
2,083
|
|
|
|
(863
|
)
|
Accrued and other current liabilities
|
|
|
(196
|
)
|
|
|
(3,493
|
)
|
Pension and postretirement benefit obligations and other non-current
liabilities
|
|
|
(1,762
|
)
|
|
|
(1,002
|
)
|
Net cash used in operating activities
|
|
|
(22,133
|
)
|
|
|
(75,077
|
)
|
Investing activities:
|
|
|
|
|
Capital expenditures
|
|
|
(8,250
|
)
|
|
|
(12,351
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
28,631
|
|
|
|
7,464
|
|
Net cash from (used in) investing activities
|
|
|
20,381
|
|
|
|
(4,887
|
)
|
Financing activities:
|
|
|
|
|
Proceeds from long-term debt
|
|
|
967,035
|
|
|
|
462,404
|
|
Repayments of long-term debt
|
|
|
(960,962
|
)
|
|
|
(403,811
|
)
|
Payment of debt issue costs
|
|
|
—
|
|
|
|
(627
|
)
|
Exercise of stock options
|
|
|
—
|
|
|
|
158
|
|
Excess tax benefits from share-based payment arrangements
|
|
|
—
|
|
|
|
76
|
|
Payments of build-to-suit liability
|
|
|
(500
|
)
|
|
|
—
|
|
Net cash from (used in) financing activities
|
|
|
5,573
|
|
|
|
58,200
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(1,175
|
)
|
|
|
(611
|
)
|
Net change in cash and cash equivalents
|
|
|
2,646
|
|
|
|
(22,375
|
)
|
Cash and cash equivalents—beginning of year
|
|
|
8,454
|
|
|
|
30,829
|
|
Cash and cash equivalents—end of year
|
|
$
|
11,100
|
|
|
$
|
8,454
|
|
|
|
|
|
|
|
|
|
Total Debt:
|
|
As of
|
(Dollars in thousands)
|
|
December 31,
|
|
December 31,
|
Unaudited
|
|
2015
|
|
2014
|
LONG-TERM DEBT
|
|
|
|
|
12.75% Senior Secured Notes due December 15, 2016(a)
|
|
$
|
6,681
|
|
|
$
|
210,000
|
|
7.0% Convertible Notes due December 15, 2017
|
|
|
57,500
|
|
|
|
57,500
|
|
12.75% Senior Secured Notes due December 15, 2018
|
|
|
203,319
|
|
|
|
—
|
|
Revolving Credit Facility due December 10, 2019
|
|
|
66,100
|
|
|
|
59,200
|
|
Other, primarily capital leases
|
|
|
428
|
|
|
|
1,257
|
|
Less: unamortized discount
|
|
|
(12,255
|
)
|
|
|
(17,843
|
)
|
Total debt
|
|
$
|
321,773
|
|
|
$
|
310,114
|
|
Less: current portion
|
|
|
(7,012
|
)
|
|
|
(737
|
)
|
Total long-term portion
|
|
$
|
314,761
|
|
|
$
|
309,377
|
|
|
|
|
|
|
(a) In February 2016, the Company completed a private
exchange offer and consent solicitation (the “Exchange Offer”) to
certain eligible holders to exchange new 12.75% Senior Secured Notes due
2018 ("New Secured Notes") for the Company’s outstanding 12.75% Senior
Secured Notes due 2016 ("Secured Notes"). In connection with the
Exchange Offer, the Company issued $203,319 aggregate principal amount
of New Secured Notes leaving $6,681 aggregate principal amount of
Secured Notes outstanding. However, at a minimum, the Company maintains
a contractual right to exchange approximately $3 million of the
remaining Secured Notes with New Secured Notes prior to their maturity
date.
Reconciliation of Total Debt to Net Debt
and Net Debt-to-Capital:
|
|
As of
|
(Dollars in thousands)
|
|
December 31,
|
|
December 31,
|
Unaudited
|
|
2015
|
|
2014
|
Total debt
|
|
$
|
321,773
|
|
|
$
|
310,114
|
|
Less: Cash and cash equivalents
|
|
|
(11,100
|
)
|
|
|
(8,454
|
)
|
NET DEBT
|
|
$
|
310,673
|
|
|
$
|
301,660
|
|
|
|
|
|
|
Stockholders' equity
|
|
$
|
46,988
|
|
|
$
|
252,649
|
|
Total debt
|
|
|
321,773
|
|
|
|
310,114
|
|
CAPITAL
|
|
$
|
368,761
|
|
|
$
|
562,763
|
|
|
|
|
|
|
NET DEBT-TO-CAPITAL
|
|
|
84.2
|
%
|
|
|
53.6
|
%
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160314005379/en/
Copyright Business Wire 2016