Castle (A.M.) & Co. (CAS)

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Castle & Co. (CAS)

Q4 2008 Earnings Call

March 10, 2009 11:00 am ET

Executives

Michael Goldberg - President & Chief Executive Officer

Scott Stephens - Vice President of Finance, CFO & Treasurer

Katie Pyra - Ashton Partners

Analysts

Lloyd O’Carroll - Davenport & Co.

Timothy Hayes - Davenport & Co.

Nat Kellog - Next Generation Equity Research

Mark Parr - Keybanc Capital Markets

Presentation

Operator

Thank you for standing by and welcome to A.M. Castle & Company’s fourth quarter and full year 2008, earnings conference call. At this time, all participants are in a listen only mode. Following today’s presentation instructions will be given for the question-and-answer session.

I would now like to turn the conference over to Katie Pyra with FD Ashton Partners. Please go ahead.

Katie Pyra

Good morning. Thank you everyone for joining us for A.M. Castle’s 2008 fourth quarter and year-end conference call. By now, you should have all received a copy of this morning’s press release. If anyone still needs one, please call my office at (312) 553-6717, and we will send you a copy immediately following the conference call.

With us from the management of Castle this morning are Mike Goldberg, President and CEO; and Scott Stephens, Vice President of Finance and CFO.

Before we begin, as usual, we would ask that everyone take note of precautionary language regarding forward-looking statements contained in the press release. That same language applies to comments made in this morning’s conference call.

We will begin the call with an overview of the quarter and the year and then we will open up the line for questions.

I will now turn the call over to Mike Goldberg. Please go ahead, Mike.

Michael Goldberg

Thanks, Katie. Good morning everyone and thanks for joining us on the call. We are pleased to report that 2008 our company achieved record revenues and the third best operating earnings in our 118-year history. We expanded our global footprint, we invested new systems and equipment and made significant progress on the strategic initiatives, we believe are vital to our long-term growth and profitability.

However, 2008 seems like a long time ago and the world is a very different place today than it was say last summer. At the fourth quarter, we started to see a significant decline in demand, as well as the elimination of both of the carbon surcharges that are built up over the year.

As we moved into 2009, we have seen across the Board, continuing softening of customer demand and further price declines in certain commodities. We have taken the steps that are necessary in this environment, we have significantly reduced our head count; we have attacked every element of our cost structure and accelerated our efforts to reduce our inventories.

We will talk at greater length about our outlook, later in the call. So today, we’ll highlight our fourth quarter and total 2008 results and along with some of our key business developments and we’ll provide you with our perspective on the current business environment and share our early outlook for 2009. But first, a quick recap of our fourth quarter and year-end financial results.

As you have seen from our press release, our fourth quarter consolidated net sales were $322.5 million comparable to last year’s $322.1 million. The company reported a fourth quarter net loss of $53.6 million, which includes $58.9 million, non-cash charge to reduce the carrying value of goodwill. Excluding the impact of this goodwill impairment charge, fourth quarter 2008 non-GAAP net income was $5.2 million or $0.23 per diluted share compared to $6.7 million or $0.29 per diluted share in the fourth quarter of last year.

The Company’s Metal segment, which accounted for 92% of total reported revenue recorded fourth quarter sales of $297.1 million, this was $3.2 million or 1.1% higher than last year. On a same-store basis, overall volume was 7.3% lower than the prior year period and approximately 9% lower than the third quarter.

The Plastic segment, which comprised the remaining 8% of total reported revenues reported fourth quarter sales of $24.4 million, which was 12.8% lower than the prior year. As you would expect, activity slowed with each month in the fourth quarter and as the holiday period approached many customers extended their shutdowns somewhere into the New Year.

Before I recap our full year results, I’d like to make a few comments about the 2008 business environment. In my nearly 30 years in the metal service center industry, I have never experienced such a sudden change in business conditions. And as always said, that change in this business, whether its price or volume are always larger than you can ever think off or plan to. Well in 2008, we experienced an unbelievable high and a very sudden and large drop off.

During the first six months of last year, we experienced very healthy activity levels with volumes up year-over-year. At the end of the second quarter, we reported that we shipped 5.2% more tons in the first half of 2008 compared to the same period last year. And we also saw unprecedented strength in pricing in carbon and alloy products especially in plate.

The environment began changing in mid-year when we really saw the economy begin to effect our customers , after the normal July holiday slowdown, we started to see a softer market conditions in many of our markets resulting in reduced volumes and increased competitive pressure on pricing and margins for the metal segment.

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