CAS Simplify China A Shares Plus Income ETF

A. M. Castle & Co. Announces Record Third Quarter 2004 Results FRANKLIN PARK, Ill., Nov. 2 /PRNewswire-FirstCall/ -- A. M. Castle & Co. (AMEX:CAS), a North American distributor of highly engineered metals and plastics, today announced record sales and earnings for the three months ending September 30, 2004. Sales in the current quarter rose 48% to $199.3 million, up $64.4 million compared with $134.9 million in the same period a year ago. Net income applicable to common stock totalled $5.8 million, or 37 cents per share, compared with a loss of $2.6 million, or 16 cents per share, in the third quarter of 2003. For the first nine months of 2004, sales rose $152.7 million to $563.2 million, a 37% increase over prior year sales of $410.5 million. Net income totalled $13.7 million, or 87 cents per share, compared with a loss of $13.5 million, or 86 cents per share in 2003. The results for 2003 include $10.3 million of pre-tax costs for impairments and special charges which, net of their tax benefits, increased prior period losses by $6.3 million, or 40 cents per share. Excluding the impact of those charges, the net loss for the first nine months of last year was $7.2 million, or 45 cents per share. In making the announcement, G. Thomas McKane, Chairman and CEO, cited continued strong demand from Castle's customers, higher material price levels and improved operating efficiency as the key factors driving the Company's results. "In the metals portion of our business," said Mr. McKane, "constant dollar sales were up 18% and 17% for the third quarter and first nine months, respectively. The increases were driven by strong demand from virtually all the markets that Castle serves. The aerospace and the gas and oil markets started to rebound in the third quarter after remaining relatively flat during the first half of the year. In an environment of worldwide raw material shortages and improved domestic demand for metals, mill prices have increased significantly. Average metal prices were up 31% for the quarter and 20% for the first nine months of the year compared with prior period levels." In the Company's plastics business, which accounts for approximately 12% of total revenue, sales also rose sharply. With small material cost increases beginning in the mid-third quarter, sales were up 41% for the three month period and 36% for the first nine months of the year. On the metals side of the business, the value of each order we handle has increased significantly due to both larger order quantities and higher mill prices. Since our direct operating costs are driven by order volume rather than tons sold, our operating expenses have risen much more slowly than have our revenues and gross material margins. This generates significant earnings leverage for Castle. "The key measure of this leverage," Mr. McKane stated, "is earnings before interest, taxes, depreciation and amortization (EBITDA). For the third quarter of 2004, EBITDA totalled a record $14.7 million, up from $0.9 million in the same period last year. This represents a return on incremental sales volume of 21%. For the first nine months, EBITDA totalled $38.2 million, compared with $4.2 million (exclusive of impairments and special charges) in the first nine months of 2003, for a 22% return on the increase in total sales. As we have pointed out throughout the year, there is very little inventory inflation profit in our operating results as a substantial majority of Castle's inventories are accounted for on a last-in, first-out (LIFO) basis." Looking toward the final quarter of the year, Mr. McKane noted that business continued the strong pace of September all the way through October but cautioned that the industry traditionally experiences a seasonal slowdown during the fourth quarter during the Thanksgiving and Christmas holiday periods. "Our current expectation," McKane said, "is that this year the slowdown will not be nearly as extensive as it has been in recent years." Mr. McKane also noted that in spite of the fact that the raw materials required for metal production are in short supply worldwide and mill lead times remain extended, the Company has been able to rebuild its inventories which rose $16 million in real (non-inflationary) terms during the quarter. "At September 30th," McKane said, "inventories equaled 115 days of sales which is right in line with our long-term target turn rates. Mill pricing continues to be strong and, while there could be some softening in 2005, we do not expect a significant downward move as has been forecast by some industry analysts for commodity products such as carbon-flat rolled steels." In closing, Mr. McKane invited interested parties to listen to its conference call scheduled for 11:00 a.m. (EST) today, Tuesday, November 2, 2004. Connection is available at http://www.amcastle.com/ and will be available for 14 days following the call. Founded in 1890, A. M. Castle & Co. provides highly engineered materials and value added services to a wide range of companies within the producer durable equipment sector of the economy. Its customer base includes many Fortune 500 companies as well as thousands of medium and smaller-sized firms spread across a wide spectrum of industries. Within its core metals business, it specializes in the distribution of carbon, alloy and stainless steels; nickel alloy; aluminum; copper and brass. Through its subsidiary, Total Plastics, Inc., the Company also distributes a broad range of value-added industrial plastics. Together, Castle operates over 60 locations throughout North America. Its common stock is traded on the American and Chicago Stock Exchange under the ticker symbol "CAS". This release contains a non-GAAP disclosure, EBITDA, which consists of income before provision for income taxes plus depreciation and amortization, and interest expense (including discount on accounts receivable sold), less interest income. EBITDA is presented as a supplemental disclosure to provide the reader with additional information in analyzing the Company's operating results. A reconciliation of EBITDA to net income is provided per SEC requirements. This release may contain forward-looking statements relating to future financial results. Actual results may differ materially as a result of factors over which the Company has no control. These risk factors and additional information are included in the Company's reports on file with the Securities and Exchange Commission. COMPARATIVE STATEMENTS OF OPERATIONS (Amounts in thousands, except per For the Three For the Nine share data) Months Ended Months Ended (Unaudited) Sept 30, Sept 30, 2004 2003 2004 2003 Net sales $199,341 $134,917 $563,195 $410,510 Cost of material sold (142,033) (95,948) (398,378) (287,931) Special charges - - - (1,524) Gross material margin 57,308 38,969 164,817 121,055 Plant and delivery expense (23,665) (21,300) (70,667) (65,913) Sales, general, and administrative expense (20,345) (16,723) (59,117) (52,402) Depreciation and amortization expense (2,245) (2,083) (6,736) (6,700) Impairment and other operating expenses - - - (5,924) Total other operating expense (46,255) (40,106) (136,520) (130,939) Operating income (loss) 11,053 (1,137) 28,297 (9,884) Equity in earnings (loss) of joint ventures 1,458 2 3,197 (79) Impairment to joint venture investment and advances - - - (2,830) Interest expense, net (2,175) (2,452) (6,706) (7,347) Discount on sale of accounts receivable (167) (295) (684) (874) Income (loss) before income tax 10,169 (3,882) 24,104 (21,014) Income tax (provision) benefit Federal (3,250) 1,284 (7,720) 6,808 State (832) 261 (1,994) 1,431 (4,082) 1,545 (9,714) 8,239 Net income (loss) 6,087 (2,337) 14,390 (12,775) Preferred Dividends (240) (242) (720) (719) Net income (loss) applicable to common stock $5,847 $(2,579) $13,670 $(13,494) Basic earnings (loss) per share $0.37 $(0.16) $0.87 $(0.86) Diluted earnings (loss) per share $0.36 (0.16) $0.87 (0.86) EBITDA * $14,756 $948 $38,230 $(6,093) *Earnings before interest, discount on sale of accounts receivable, taxes, depreciation and amortization Reconciliation of EBITDA to net income: For the Three For the Nine Months Ended Months Ended Sept 30, Sept 30, 2004 2003 2004 2003 Net income (loss) from operations $6,087 $(2,337) $14,390 $(12,775) Depreciation and amortization 2,245 2,083 6,736 6,700 Interest, net 2,175 2,452 6,706 7,347 Discount on accounts receivable sold 167 295 684 874 Provision (benefit) from income taxes 4,082 (1,545) 9,714 (8,239) EBITDA as reported 14,756 948 38,230 (6,093) Add back impairment and special charges - - - 10,278 EBITDA excluding impairment and special charges $14,756 $948 $38,230 $4,185 COMPARATIVE BALANCE SHEETS (Amounts in thousands) Unaudited Sep. 30 Dec. 31, Sep. 30 2004 2003 2003 ASSETS Current assets Cash and equivalents $5,435 $2,455 $831 Accounts receivable, net 99,073 54,232 51,666 Inventories (principally on last- in first-out basis) 121,297 117,270 119,730 Income tax receivable 310 660 - Assets held for sale 995 1,067 - Other current assets 7,926 7,184 5,546 Total current assets 235,036 182,868 177,773 Investment in joint ventures 7,024 5,492 5,317 Goodwill 31,959 31,643 31,619 Pension assets 42,216 42,075 41,823 Advances to joint ventures and other assets 7,517 8,688 8,875 Property, plant and equipment, at cost Land 4,767 4,767 5,020 Building 47,255 45,346 48,885 Machinery and equipment 121,093 118,447 118,741 173,115 168,560 172,646 Less - accumulated depreciation (107,528) (100,386) (101,763) 65,587 68,174 70,883 Total assets $389,339 $338,940 $336,290 LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable $102,893 $67,601 $60,422 Accrued liabilities and deferred gains 23,990 19,145 19,259 Current and deferred income taxes 2,954 4,852 4,183 Current portion of long-term debt 11,676 8,248 7,980 Total current liabilities 141,513 99,846 91,844 Long-term debt, less current portion 89,450 100,034 98,786 Deferred income taxes 19,942 13,963 16,018 Deferred gain on sale of assets 6,673 7,304 6,997 Minority interest 1,268 1,456 1,441 Post retirement benefits obligations 2,834 2,683 2,352 Stockholders' equity Preferred stock 11,239 11,239 11,239 Common stock 159 159 159 Additional paid in capital 35,025 35,009 35,017 Earnings reinvested in the business 80,147 66,480 72,002 Accumulated other comprehensive income 1,350 1,042 727 Other - deferred compensation (16) (30) (62) Treasury stock, at cost (245) (245) (230) Total stockholders' equity 127,659 113,654 118,852 Total liabilities and stockholders' equity $389,339 $338,940 $336,290 CONDENSED STATEMENT OF CASH FLOWS (Dollars in thousands) For the Nine Months (Unaudited) Sept. 30, 2004 2003 Cash flows from operating activities: Net income/(loss) $14,390 $(12,775) Depreciation 6,736 6,700 Amortization of deferred gain (631) (150) Equity in (earnings) loss from joint ventures (3,197) 79 Deferred taxes and income tax receivable 6,315 4,732 Non-cash pension income (loss) and post-retirement benefits 315 (1,053) Other 1,267 (3,257) Cash from operating activities before working capital changes 25,195 (5,724) Asset impairment and special charges - 10,278 Net change in accounts receivable sold (8,000) (5,866) Other increase in working capital (1,076) (61) Net cash from operating activities 16,119 (1,373) Cash flows from investing activities: Investments and acquisitions (1,744) - Advances to joint ventures - (199) Capital expenditures (3,419) (2,183) Proceeds from sale of assets - 10,538 Net cash from investing activities (5,163) 8,156 Cash flows from financing activities Payments on long-term debt (7,337) (6,453) Effect of exchange rate changes on cash 166 302 Preferred dividends paid (720) (719) Other (85) - Net cash from financing activities (7,976) (6,870) Net increase (decrease) in cash 2,980 (87) Cash - beginning of year 2,455 918 Cash - end of period $5,435 $831 DATASOURCE: A. M. Castle & Co. CONTACT: Edward Culliton, Vice President of A. M. Castle & Co., +1-847-349-2508, or ; or Analyst Contact, John McNamara, +1-212-445-8435, , or General Information, George Zagoudis, +1-312-640-6663, or , both of Financial Relations Board Web site: http://www.amcastle.com/

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