FRANKLIN PARK, Ill., April 28 /PRNewswire-FirstCall/ -- A. M. Castle & Co. (NYSE: CAS), a global distributor of specialty metal and plastic products, value-added services and supply chain solutions, today reported financial results for the first quarter ended March 31, 2009.
Consolidated net sales were $252.2 million for the three months ended March 31, 2009, compared to $393.5 million in the first quarter of 2008. Net income for the quarter was $0.5 million or $0.02 per diluted share as compared to $13.8 million or $0.62 per diluted share in the prior year quarter.
The Company's Metals segment sales were $231.1 million in the first quarter of 2009, compared to $362.3 million last year. The sales decline in the Metals business for the quarter was primarily volume related, as tons sold per day were down 34.3%, while total Metals revenue was down 36.2%. The softness experienced in the first quarter was broad-based, with virtually all end markets and products reflecting significantly weaker demand conditions compared to last year.
In the Plastics segment, first quarter sales of $21.1 million were down $10.1 million compared to $31.2 million in the prior year period due to lower sales volume. Continued weakness seen in the boat manufacturing market weighed on results.
'Demand from our end markets continued to soften throughout the first quarter. Sequentially, total revenue in the first quarter of 2009 was lower than the fourth quarter of 2008, which demonstrates the end-market weakness,' stated Michael Goldberg, President and CEO of A.M. Castle. 'We are disappointed that we did not reduce inventory further in the first quarter. We substantially reduced our purchases but demand softened more than we expected. We are committed to meet our second quarter goal to reduce inventory by a further $40 million. However, despite the decline in demand, pricing for the majority of our products held up fairly well during the first quarter of 2009, resulting in solid gross margins of 27.8% of sales for the quarter compared to 26.0% last year.'
Goldberg continued, 'In this environment our strategy is to aggressively cut costs in an effort to maintain profitability, and to preserve our liquidity position into the future. These strategic measures include a reduction in capital spending for the year, reductions in our payroll costs and reductions in hours worked across the board. We recently announced our plan to reduce 2009 operating costs by $65 million compared to 2008, which is $20 million higher than our previous target of $45 million. As a part of these cost reduction measures, we have reduced our workforce by 20% from peak levels of the third quarter of 2008. We believe that the difficult yet necessary cost-cutting measures we have undertaken thus far will help preserve the financial flexibility and sustainability of our business in the long-run.'
In light of recent activity, the Company also announced its decision to suspend future dividend payments in order to focus on debt reduction and short-term liquidity. The Board of Directors intends to review the dividend policy on a periodic basis, based on performance of the overall business, business conditions and other appropriate factors. 'We have taken many difficult but necessary steps since this economic slow-down began last year, and we believe that those steps, including this announcement to suspend the dividend, will maintain liquidity and financial flexibility intended to position the Company well when the recovery begins,' stated Goldberg.
The Company's debt-to-capital ratio was 25.6% as of March 31, 2009, compared to 25.2% at year-end 2008. Total debt was $120 million as of March 31, 2009, compared to $117 million at year-end 2008. Interest expense during the first quarter was $1.7 million, or $0.3 million lower than the prior year period due to lower borrowing rates
'We continue to look for indications of economic recovery. While we have seen a few positive signs in some of the macroeconomic trends, including the PMI index appearing to bottom out in December, we recognize that we still have a long road ahead of us. Recent comments from Congress on the funding for the Joint Strike Fighter program increase the importance of our aerospace position in this program. Meanwhile, destocking efforts continued across most end-markets throughout the first quarter, indicating that there could be an opportunity for a pick up in activity levels for the second half of the year. In addition, we opened a sales office in Singapore to support our oil and gas customers in the Asia-Pacific region and we remain excited about our long-term growth prospects in that region,' stated Goldberg.
'Our focus for 2009 remains on expense management, working capital management and completing the rollout of our Oracle ERP implementation. We were pleased to report a successful Canadian conversion to the ERP program on February 1, 2009. We remain on track to convert the domestic western region in the second quarter and the balance of U.S. locations in the second half of 2009,' concluded Goldberg.
Webcast Information
Management will hold a conference call at 11:00 a.m. ET today to review the Company's results for the three month period ended March 31, 2009. The call can be accessed via the Internet live or as a replay.
