Generated cash flow from operations of
Third Quarter 2020 Financial Results Summary:
- Generated net sales of
$79.5 million , a 6.1% decrease compared to$84.7 million in the previous quarter and a 41.6% decrease compared to$136.1 million in the third quarter of 2019. - Reported an operating loss of
$10.6 million , an increase in operating loss of$6.1 million compared to$4.5 million in the previous quarter and an increase in operating loss of$6.8 million compared to the same quarter last year. - Reported a net loss of
$14.7 million , which included$5.1 million of interest expense, of which$4.1 million was non-cash, compared to a net loss of$12.2 million in the third quarter of 2019, which included$10.2 million of interest expense, of which$8.4 million was non-cash. Included in the reported net loss in the third quarter of 2020 was a foreign currency gain on intercompany loan of$0.2 million , compared to a foreign currency loss on intercompany loan of$0.5 million in the third quarter of 2019. - Reported adjusted net loss of
$8.0 million , compared to an adjusted net loss of$3.2 million in the third quarter of the prior year. - Reported EBITDA of negative
$8.3 million and adjusted EBITDA of negative$4.6 million in the third quarter of 2020, compared to EBITDA of negative$1.0 million and adjusted EBITDA of$1.4 million in the third quarter of 2019. - Cash flow provided by operations was
$19.8 million during the first nine months of 2020, compared to cash flow provided by operations of$4.6 million during the first nine months of 2019. - Maintained gross material margin of 26.3% compared to 28.1% in the second quarter of 2020 and 25.3% in the third quarter of the prior year, which excluded a non-cash inventory charge of
$1.3 million .
President and CEO,
Executive Vice President of Finance and Administration
About
Founded in 1890,
Non-GAAP Financial Measures
This release and the financial information 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. Investors should recognize that these non-GAAP financial measures might not be comparative to similarly titled measures of other companies. 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 loss before provision for income taxes plus depreciation and amortization, and interest expense, 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. EBITDA, adjusted non-GAAP net loss and adjusted EBITDA 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 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 reflect our expectations, estimates or projections concerning our possible or assumed future results of operations, including, but not limited to, descriptions of our business strategy, and the benefits we expect to achieve from our working capital management initiative. 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. These factors include the impact of volatility of metals prices, the cyclical and seasonal aspects of our business, our ability to effectively manage inventory levels, the impact of our substantial level of indebtedness, the impact of the novel Coronavirus (COVID-19) pandemic on our financial results and business, as well as those risk factors identified in our Annual Report on Form 10-K for the fiscal year ended
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Unaudited | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net sales | $ | 79,535 | $ | 136,113 | $ | 290,857 | $ | 433,570 | |||||||
Costs and expenses: | |||||||||||||||
Cost of materials (exclusive of depreciation) | 58,610 | 103,019 | 211,806 | 323,918 | |||||||||||
Warehouse, processing and delivery expense | 13,394 | 18,759 | 45,584 | 59,577 | |||||||||||
Sales, general and administrative expense | 13,515 | 16,048 | 41,815 | 49,027 | |||||||||||
Depreciation expense | 1,921 | 2,055 | 6,035 | 6,306 | |||||||||||
Impairment of goodwill | 2,676 | — | 2,676 | — | |||||||||||
Total costs and expenses | 90,116 | 139,881 | 307,916 | 438,828 | |||||||||||
Operating loss | (10,581 | ) | (3,768 | ) | (17,059 | ) | (5,258 | ) | |||||||
Interest expense, net | 5,077 | 10,204 | 20,146 | 29,503 | |||||||||||
Unrealized gain on embedded debt conversion option | — | — | (2,010 | ) | — | ||||||||||
Other (income) expense, net | (342 | ) | (697 | ) | (2,194 | ) | (4,779 | ) | |||||||
Loss before income taxes | (15,316 | ) | (13,275 | ) | (33,001 | ) | (29,982 | ) | |||||||
Income tax benefit | (572 | ) | (1,079 | ) | (3,163 | ) | (1,479 | ) | |||||||
Net loss | $ | (14,744 | ) | $ | (12,196 | ) | $ | (29,838 | ) | $ | (28,503 | ) |
Reconciliation of Reported Net Loss to EBITDA and Adjusted EBITDA: | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
(Dollars in thousands) | |||||||||||||||
Unaudited | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net loss, as reported | $ | (14,744 | ) | $ | (12,196 | ) | $ | (29,838 | ) | $ | (28,503 | ) | |||
Depreciation expense | 1,921 | 2,055 | 6,035 | 6,306 | |||||||||||
Interest expense, net | 5,077 | 10,204 | 20,146 | 29,503 | |||||||||||
Income tax benefit | (572 | ) | (1,079 | ) | (3,163 | ) | (1,479 | ) | |||||||
EBITDA | (8,318 | ) | (1,016 | ) | (6,820 | ) | 5,827 | ||||||||
Non-GAAP adjustments (a) | 3,690 | 2,367 | 4,923 | 2,626 | |||||||||||
Adjusted EBITDA | $ | (4,628 | ) | $ | 1,351 | $ | (1,897 | ) | $ | 8,453 | |||||
(a) Refer to "Reconciliation of Reported Net Loss to Adjusted Non-GAAP Net Loss" table for additional details on these amounts. |
Reconciliation of Reported Net Loss to Adjusted Non-GAAP Net Loss: | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
(Dollars in thousands) | |||||||||||||||
Unaudited | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net loss, as reported | $ | (14,744 | ) | $ | (12,196 | ) | $ | (29,838 | ) | $ | (28,503 | ) | |||
Non-GAAP adjustments: | |||||||||||||||
Noncash compensation expense | 199 | 524 | 778 | 1,715 | |||||||||||
Foreign exchange (gain) loss on intercompany loan | (215 | ) | 506 | 692 | (426 | ) | |||||||||
Noncash impairment of goodwill(a) | 2,676 | — | 2,676 | — | |||||||||||
Noncash write-off on inventory(b) | — | 1,277 | — | 1,277 | |||||||||||
Noncash loss on disposal of equipment(b) | — | 60 | — | 60 | |||||||||||
Unrealized gain on embedded debt conversion option | — | — | (2,010 | ) | — | ||||||||||
Common stock registration fees | 294 | — | 294 | — | |||||||||||
Employee severance charges | 736 | — | 1,117 | — | |||||||||||
Debt restructuring expenses | — | — | 1,376 | — | |||||||||||
Non-GAAP adjustments to arrive at Adjusted EBITDA | 3,690 | 2,367 | 4,923 | 2,626 | |||||||||||
Non-cash interest expense(c) | 3,054 | 7,139 | 13,484 | 20,321 | |||||||||||
Total non-GAAP adjustments | 6,744 | 9,506 | 18,407 | 22,947 | |||||||||||
Tax effect of adjustments | — | (468 | ) | — | (468 | ) | |||||||||
Adjusted non-GAAP net loss | $ | (8,000 | ) | $ | (3,158 | ) | $ | (11,431 | ) | $ | (6,024 | ) | |||
(a) Due to the ongoing unfavorable impacts of the COVID-19 pandemic, which represented a triggering event in the third quarter of 2020, the Company performed an assessment of its goodwill as of | |||||||||||||||
(b) Amounts relates to the nonrecurring noncash disposal of equipment and nonrecurring noncash write-down of inventory in conjunction with the Company's decision to exit a portion of its carbon flat-roll business in one of its Mexican operations. | |||||||||||||||
(c) Non-cash interest expense for the three months ended |
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(Dollars in thousands, except par value data) | As of | ||||||
Unaudited | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 24,230 | $ | 6,433 | |||
Accounts receivable | 46,768 | 74,697 | |||||
Inventories | 140,085 | 144,411 | |||||
Prepaid expenses and other current assets | 9,717 | 9,668 | |||||
Income tax receivable | 2,486 | 1,995 | |||||
Total current assets | 223,286 | 237,204 | |||||
5,500 | 8,176 | ||||||
Prepaid pension cost | 7,504 | 5,758 | |||||
Deferred income taxes | 1,497 | 1,534 | |||||
Operating right-of-use assets | 29,943 | 29,423 | |||||
Other noncurrent assets | 550 | 792 | |||||
Property, plant and equipment: | |||||||
Land | 5,578 | 5,579 | |||||
Buildings | 20,928 | 20,950 | |||||
Machinery and equipment | 41,562 | 41,054 | |||||
Property, plant and equipment, at cost | 68,068 | 67,583 | |||||
Accumulated depreciation | (24,115 | ) | (20,144 | ) | |||
Property, plant and equipment, net | 43,953 | 47,439 | |||||
Total assets | $ | 312,233 | $ | 330,326 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 40,589 | $ | 41,745 | |||
Accrued and other current liabilities | 10,785 | 11,188 | |||||
Operating lease liabilities | 6,508 | 6,537 | |||||
Income tax payable | 542 | 573 | |||||
Short-term borrowings | 1,980 | 2,888 | |||||
Current portion of finance leases | 663 | 596 | |||||
Current portion of long-term debt | 2,000 | — | |||||
Total current liabilities | 63,067 | 63,527 | |||||
Long-term debt, less current portion | 213,253 | 263,523 | |||||
Deferred income taxes | 1,543 | 3,775 | |||||
Finance leases, less current portion | 7,893 | 8,208 | |||||
Other noncurrent liabilities | 3,621 | 2,894 | |||||
Pension and postretirement benefit obligations | 6,554 | 6,709 | |||||
Noncurrent operating lease liabilities | 23,563 | 22,760 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity (deficit): | |||||||
Common stock, shares issued and — shares outstanding at issued and 3,650 shares outstanding at | 741 | 38 | |||||
Additional paid-in capital | 123,958 | 61,461 | |||||
Accumulated deficit | (118,579 | ) | (88,741 | ) | |||
Accumulated other comprehensive loss | (12,927 | ) | (13,374 | ) | |||
(454 | ) | (454 | ) | ||||
Total stockholders’ equity (deficit) | (7,261 | ) | (41,070 | ) | |||
Total liabilities and stockholders’ deficit | $ | 312,233 | $ | 330,326 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Nine Months Ended | |||||||
(Dollars in thousands) | |||||||
Unaudited | 2020 | 2019 | |||||
Operating activities: | |||||||
Net loss | $ | (29,838 | ) | $ | (28,503 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depreciation | 6,035 | 6,306 | |||||
Amortization of deferred financing costs and debt discount | 5,207 | 8,511 | |||||
Loss on sale of property, plant & equipment | 101 | 210 | |||||
Unrealized foreign currency loss (gain) | 682 | (223 | ) | ||||
Unrealized gain on embedded debt conversion option | (2,010 | ) | — | ||||
Noncash interest paid in kind | 8,277 | 11,810 | |||||
Noncash rent expense | 290 | 204 | |||||
Noncash compensation expense | 778 | 1,715 | |||||
Noncash impairment of goodwill | 2,676 | — | |||||
Deferred income taxes | (2,319 | ) | (2,016 | ) | |||
Changes in assets and liabilities: | |||||||
Accounts receivable | 27,926 | (8,356 | ) | ||||
Inventories | 4,679 | 10,029 | |||||
Prepaid expenses and other current assets | (39 | ) | 5,873 | ||||
Other noncurrent assets | 911 | (134 | ) | ||||
Prepaid pension costs | (1,671 | ) | (566 | ) | |||
Accounts payable | (1,460 | ) | 5,093 | ||||
Income tax payable and receivable | (512 | ) | (1,805 | ) | |||
Accrued and other current liabilities | (448 | ) | (3,451 | ) | |||
Pension and postretirement benefit obligations and other noncurrent liabilities | 572 | (111 | ) | ||||
Net cash provided by operating activities | 19,837 | 4,586 | |||||
Investing activities: | |||||||
Capital expenditures | (2,426 | ) | (3,530 | ) | |||
Proceeds from sale of property, plant and equipment | 78 | 442 | |||||
Net cash used in investing activities | (2,348 | ) | (3,088 | ) | |||
Financing activities: | |||||||
Proceeds from long-term debt including credit facilities | 19,673 | 3,500 | |||||
Repayments of long-term debt including credit facilities | (15,655 | ) | (4,488 | ) | |||
Repayments of (proceeds from) short-term borrowings, net | (931 | ) | (1,238 | ) | |||
Principal paid on finance leases | (243 | ) | (454 | ) | |||
Payments of debt restructuring costs | (2,752 | ) | — | ||||
Net cash provided by (used in) financing activities | 92 | (2,680 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 216 | 13 | |||||
Net change in cash and cash equivalents | 17,797 | (1,169 | ) | ||||
Cash and cash equivalents—beginning of year | 6,433 | 8,668 | |||||
Cash and cash equivalents—end of period | $ | 24,230 | $ | 7,499 |
LONG-TERM DEBT | |||||||
(Dollars in thousands) | As of | ||||||
Floating rate Revolving A Credit Facility due | $ | 89,246 | $ | 102,000 | |||
12.00% Revolving B Credit Facility due | 28,216 | 25,788 | |||||
3.00% / 5.00% Convertible Senior Secured PIK Toggle Notes due | 97,568 | — | |||||
5.00% / 7.00% Convertible Senior Secured PIK Toggle Notes due | 3,890 | 193,660 | |||||
1.00% Paycheck Protection Program Term Note due | 10,000 | — | |||||
France Term Loan | 7,020 | — | |||||
Total principal balance of long-term debt | 235,940 | 321,448 | |||||
Less: unvested restricted 3.00% / 5.00% Convertible Senior Secured PIK Toggle Notes due | (109 | ) | — | ||||
Less: unvested restricted 5.00% / 7.00% Convertible Senior Secured PIK Toggle Notes due | — | (323 | ) | ||||
Less: unamortized discount | (20,389 | ) | (57,313 | ) | |||
Less: unamortized debt issuance costs | (189 | ) | (289 | ) | |||
Total long-term debt | 215,253 | 263,523 | |||||
Less: current portion of long-term debt | 2,000 | — | |||||
Total long-term portion | $ | 213,253 | $ | 263,523 | |||
(a) Included in balance is interest paid in kind of | |||||||
(b) Included in balance is interest paid in kind of | |||||||
(c) Included in balance is interest paid in kind of | |||||||
(d) Represents the unvested portion of restricted 3.00% / 5.00% Convertible Senior Secured PIK Toggle Notes due |
For Further Information:
+1 (847) 455-7111
Email: Inquiries@amcastle.com
Source:
2020 GlobeNewswire, Inc., source