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

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A. M. Castle & Co. (CAS)

Q2 2010 Earnings Call Transcript

July 27, 2010 11:00 am ET

Executives

Katie Pyra – IR, FD Ashton Partners

Mike Goldberg – President and CEO

Scott Stephens – VP Finance, CFO and Treasurer

Analysts

Edward Marshall – Sidoti & Company

Phil Gibbs – Keybanc Capital Markets

Dan Whalen – Capstone Investments

Tim Hayes – Davenport & Company

Presentation

Operator

Thank you for standing by, and welcome to the A.M. Castle & Company's second quarter 2010 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. As a reminder, this conference call is being recorded today, Tuesday, July 27, 2010. I would now like to turn the conference over to Katie Pyra with FD. Please go ahead.

Katie Pyra

Thank you. Good morning. Thank you everyone for joining us for A.M. Castle's 2010 second quarter 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'll 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. As a reminder, this call is being recorded.

Certain information relating to projections of the company's results that will be discussed during today's call may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements are based on current expectations and assumptions that are subject to a number of factors that could cause actual results to differ materially.

Additional information concerning these factors is contained in the risk factors section of the company's most recent Form 10-K and other reports and filings with the SEC, and also in the cautionary statement contained in today's release. The company does not undertake any duty to update any forward-looking statements.

This presentation also includes certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You will find the reconciliation in the financial information attached to today's release, which is available on the company's website at www.amcastle.com under the Investors tab and in the Form 8-K submitted to the SEC.

And now, I'll turn the call over to Mike Goldberg. Go ahead, Mike.

Mike Goldberg

Thanks, Katie. Good morning, everyone. On today's call, Scott and I will review our second quarter results and comment on the current business environment and our outlook for the remainder of 2010. And also give you a longer-term view to some of their markets.

First, a quick recap of our financial results, second quarter consolidated net sales was $240.1 million, which is at $45 million or 23% higher than in the second quarter of last year. Year-to-date sales were $463.1 million, a 3.5% increase compared to the first half of 2009. Company reported net income for the quarter of $0.4 million or $0.02 per diluted share as compared to a net loss of $5.5 million or $0.24 per diluted share in the prior year period.

The first half of 2010, the company reported a net loss of $4.2 million or $0.18 per diluted share versus a net loss of $5 million or $0.22 per diluted share in the first half of 2009.

Second quarter net sales in our metals segment rose 22.5 % to $213.3 million, compared to $174.1 million for the same period last year. The sales increase reflected stronger volumes as tons sold to date were up 20.6% from the comparable period in 2009.

Larger sales increase were in our alloy and carbon bar products, primarily reflecting continued pick-up in our general industrial and oil and gas markets. Sequentially, second quarter metals tons sold to date were up 3.5% from quarter one of 2010 and metals net sales were 6.8% higher than Q1 of 2010.

Sales for our plastics segment were $26.8 million, an increase of $5.8 million or 27.6% over the second quarter of 2009. Year-to-date, plastic sales were $50.1 million thru June of 2010, 19% higher than the first half of 2009. Sequentially, plastic sales were 15% higher in Q2 versus Q1 of this year.

So now, for a few market observations, in the second half of last year, we saw signs that the overall market was slowly beginning to come out of its deep recession. We saw productivity and inquiries begin picking up in all our markets, albeit very slowly. And in the first quarter we saw a year-over-year increase in metals volumes for the first time since mid-2008. And sequentially, tons sold per day were 22% higher in the first quarter of '10 than the fourth quarter of '09. In the second quarter, we saw a further increase in tons sold per day of 3.5% over the first quarter of 2010.

The last time we told you we expected to return to profitability in the second half of the year, provided the economy continued its recovery. Since then, business conditions have continued to improve. And as you saw with today's release, we returned to profitability somewhat earlier than anticipated. However, our figures indicate that the momentum of the first quarter has slowed and we do not anticipate business conditions to slip back nor do we expect a significant further growth for the balance of the year.

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