Castle & Co. Q3 2008 Earnings Call Transcript

| About: A. M. (CAS)

Castle & Co. (NYSE:CAS)

Q3 2008 Earnings Call

October 27, 2008 11:00 am


Michael H. Goldberg - President & Chief Executive Officer

Scott F. Stephens - Vice President - Finance, CFO & Treasurer

Katie Pyra - Ashton Partners


Lloyd O'Carroll - Davenport & Company Llc

Timothy Hayes - Davenport & Company Llc

Nat Kellog - Next Generation Equity Research

Mark Parr - Keybanc Capital Markets


Good day, ladies and gentlemen, thank you so much for standing by and welcome to A.M. Castle & Company’s third quarter 2008 earning conference call. (Operation instructions)

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

Katie Pyra

Good morning. Thank you, everyone, for joining us for A.M. Castle’s 2008 third 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 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—I am sorry, of the quarter—and then we will open up the line for questions.

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

Michael Goldberg

Thank you, Katie. Good morning and thank you for joining us today on the call. In a few minutes, Scott will speak to our third quarter results in greater detail, but first I would like to share some of the highlights with you.

As we all know, the business environment and commodity pricing has changed substantially since the second quarter. We are dealing with reduced amounts of product, a lower pricing environment, and certainly uncertain economic times. However, our strategy of focusing the business on markets that have strong fundamentals and good long-term growth prospects should serve us well, irrespective of the short-term uncertainty.

For the third quarter, business activity continued at a reasonable pace, albeit slower as the quarter went on. Demand remained steady in aerospace and oil and gas end markets, and weakened in our heavy equipment and general industrial markets. Compared to the prior year quarter, sales volumes were 2.6% higher. In addition, selling prices were also higher than a year ago, chiefly due to higher carbon scrap surcharges.

As a result, our consolidated net sales were a record $388.9 million, an 11% increase over the same period in 2007. Net income for the quarter was $11.5 million or $0.50 per diluted share, as compared to $12.9 million or $0.57 per diluted share for the third quarter of 2007.

This year’s third quarters numbers were impacted by a $0.04 per share charge for legal costs in a settlement related to our 2006 acquisition of Transtar Metals. Year-to-date, net income was $36.5 million, or $1.62 per diluted share, as compared to $45.5 million, or $2.14 per diluted share through the third quarter of 2007. Overall, metal segment volumes were weaker in the third quarter than in the first half of the year.

As we have mentioned in the past, we typically experience some slowdown during the summer months due to typical seasonal factors of fewer shipping days and customer shutdowns. However, this year, after what we considered a normal July, we experienced increasingly weaker demand in the following two months, with third quarter volumes being down 11% compared to the second quarter. Nonetheless, through September 2008, our year-to-date volumes were 5% higher and revenues were 7% higher than the prior year period.

On the pricing front, our average prices were higher as we saw carbon and alloy surcharges rise through the summer, reaching historic highs in August, before falling back in September. These increases were partially offset by declines in pricing for nickel and aluminum. We achieved a meaningful gross margin improvement in the third quarter, with margins rising to 26.0% versus 25.2% in the second quarter.

If you will remember, our second quarter margins were negatively impacted by rapidly-increasing surcharges. We worked diligently in the third quarter to remediate the surcharge impact and more effectively manage our pricing. Our inventory has flattened our over the course of the quarter and we plan to significantly cut back our purchases in the fourth quarter.

Now I would like to give you a bit more color on our business activity by segment and across our end markets. In our metal segments, sales for the third quarter were $360.1 million, which was $39.2 million or 12.2% higher than the third quarter of 2007. Volumes year-over-year were 2.6% higher than the same period in 2007, and 11% lower than the second quarter of 2008.

Our oil and gas business remained strong, driven by global demand for nickel, stainless, and alloy products. Revenues were impacted only slightly by the hurricanes, and our Houston facility escaped significant damage.

The majority of the hurricane impact was felt directly by our employees and some of our customers, many of whom were without power for several weeks. Our oil and gas customers are continuing to outsource the manufacturing processes, which fits favorably with our overall market strategy.

Our international business is very active, and we remain committed to further expanding globally to take advantage of significant growth opportunities. In spite of the reduction in the price of oil, long-term demand indicators remain strong. We did not see a significant impact on the financial markets on our oil and gas business in the third quarter, or through the fourth quarter to date.

Our carbon and alloy plate business, which was very strong in the first half, experienced reduced demand and lower volumes in the third quarter. Certain segments remain strong, like mining equipment and cranes, but there was a general reduction demand from our overall customer base utilizing these products.

Our bar and tubing business, which supports a large variety of end markets, also had a very solid quarter, albeit with lower volumes. In the fourth quarter we anticipate continued softness in demand for these products as customers remain cautious about metal pricing, trends, and the overall economic environment.

The aerospace market remains steady and we did not see any significant impact of the strike at Boeing. It appears that that strike may be over soon, and we anticipate that through the balance of this year and perhaps early into next year, we will see the impact of that strike as the buildup in inventories and manufactured parts work their way through the supply chain.

We still believe that the fundamentals in the aerospace market appear to be strong. In the commercial sector both Boeing and Airbus are sitting atop several years’ backlogs. It is unclear at this time what if any of the impact of the financial markets are going to have. Currently, cancelled slots are filled with backorders that pull forward, so there appears to be sufficient strength in the market to avoid any significant decline in the near-term build rates. And therefore we still expect large aerospace build rates to remain close to current levels.

Outside of Boeing and Airbus, demand from general aviation and business aircraft manufacturers remain strong during the quarter. Producers in these markets are also sitting atop several-year backlogs. In addition, the military aerospace market also looks firm, with JFF increasing expected production rates in 2009.

Plastic segment sales were $28.8 million in the quarter, a decrease of $0.7 million, or 2.2% from the third quarter of last year. The strongest markets for our plastics business were in transportation and life sciences. Given the overall economic climate and reduced consumer spending, the boat manufacturing market continues to see a significant decline.

In the third quarter we successfully implemented a new ERP system in our plastics business. I would like to remind you that this is a separate ERP system and is not tied to Oracle. There was minimal impact on the business, though we did incur normal additional expenses for travel and overtime.

The two major initiatives that we have discussed before are our Oracle ERP implementation and expanding our global reach. In the third quarter we made significant progress in our Oracle project. We have taken a number of initiatives to improve performance and mitigate risk for future roll-outs.

As you know, we implemented the new system in our aerospace business in the second quarter, and since then we have made process improvements and system enhancements, which have greatly improved performance and service levels. There is more work to be done, but the business is operating normally as indicated by increased activity processed in the third quarter and enhanced service levels.

In order to help mitigate risk for future roll-outs, we will be converting our Canadian operations separately and before the rest of the business on the Castle legacy system. This allows us to validate the enhancements to the system, new functionality, data conversions, and the improved changed management processes on a smaller scale. We plan to convert Canada early in the new year and the balance of the Castle legacy system 90 days thereafter.

As you know, Castle has taken significant steps to expand its global presence this year. We are in three locations in Europe through the acquisitions of Metals UK. We opened up a service center in Shanghai, and right now we are gearing up on a project to double our capacity in Mexico. We will continue to pursue these global expansion initiatives throughout 2009, as our multinational customers continue to require additional support outside of the United States.

In addition, we see significant opportunities to increase our market share by leveraging these assets across all our businesses. Next year, our focus will be on making incremental investments to our existing global infrastructure, including opening new service centers where we have specific customer demand and requirements. Our current modest leverage and ability to generate strong cash flow affords us the flexibility to analyze these opportunities throughout 2009.

As I said earlier, the third quarter ended just a few weeks ago, but it is a very different business environment today than it was on September 30th for reasons we all know very well. In light of the credit crisis and financial market turmoil, I would like to comment briefly on Castle’s financial position.

Our company has a strong balance sheet and a conservative level of debt. At the end of the third quarter, we had $150 million of debt representing a net debt-to-capital ratio of 26.6%. In addition, we have approximately $150 million of available borrowings on our existing credit facilities. We believe that the competent existing credit arrangements are sufficient to fund our short-and long-term capital needs. Also, the company does not participate in the commercial paper market.

In addition, effective in July of 2008, with a change in the company’s pension plans, the company modified its investment portfolio, resulting in assets that are primarily in corporate fixed income securities. Hence, our pension assets were not exposed to the equity markets and as of September 30th, 2008, the pension plan remains in an over-funded position. The company does not anticipate making any future contributions to the pension plans.

Now just a few comments on our outlook for the fourth quarter. At the end of the last quarter, metals pricing overall was still high. In fact, it was still above second quarter levels on most products. Over the past four weeks, prices and surcharges have fallen dramatically. By the end of November, the market will give up all the carbon scrap surcharges it has garnered through the year. Meanwhile, nickel was trading at a three-year low.

As a reminder, the fourth quarter is traditionally our slowest quarter due to fewer shipping days and customer shutdowns. This year we know pricing will be lower, driven largely by reductions in scrap and nickel surcharges. Additionally, we anticipate that overall volumes may continue to soften.

If you’ve been in the service-centered business for any length of time, you understand that there are cycles and that you have to manage your expenses and working capital very closely when markets go down. We are in one of those situations today, and along with our ERP implementation, they will be our top priorities in the next number of months.

In closing, recently management completed a strategic planning exercise with our board of directors. This process reconfirmed the opportunities in areas that are critical for our company’s continued success, both in the short and long term.

Castle will remain on course to become the foremost value-added distributor of specialty metal products and supply chain services, and we will remain focused on our key end markets on a global basis, specifically aerospace, oil and gas, energy, heavy equipment and infrastructure.

We believe that Castle is well-positioned long-term to serve these large growing global markets at diverse product offering and global reach, wide range in supply side the relationships and an on-going commitment to providing excellent service are important factors in these markets today and will be in the future.

So at this time, I’ll turn things over to Scott to give you a more detailed review of the third quarter numbers.

Scott Stephens

Thank you, Mike. Good morning, everyone. I'll start with the summary of our third quarter financial comparisons, followed with nine-month and year-to-date comparative results, and close with some commentary on our balance sheet and cash results through September 2008.

Third quarter 2008 consolidated sales of $388.9 million were $38.6 million or 11% higher than the third quarter of last year. Sales in our metals segment were $360.1 million for the quarter, which represents 12.2% sales growth year-over-year. In the metals segment, volume levels remain solid as overall tonnage sold in the third quarter was up 2.6% compared to the prior year.

Carbon and alloyed plate products accounted for most of the sales volume increase for the quarter followed by growth in alloyed bar and nickel products. In addition to higher sales volumes in these key product lines, higher average prices for the third quarter in comparison to the prior year resulted in record sales for this quarter.

In the second quarter 2008 webcast this past July, we discussed the negative impact to second quarter operating profits that occurred in conjunction with the Oracle ERP implementation at the domestic aerospace locations. As Mike alluded to in his comments, those system implementation issues were substantially re-mediated throughout the third quarter and do not have a significant impact on aerospace revenues for the third quarter.

Our plastic segment third quarter sales of $28.8 million were 0.7 million or approximately 2% lower than the third quarter 2007.

Metals segment gross margin for the quarter which defined as sales less cost of materials was 25.5% compared to 27.4% in the third quarter of 2007. Products surcharges continued to impact gross margins when compared to the prior year as third quarter 2008 surcharges remained at unprecedented levels. However, gross margins improved sequentially from 24.7% in the second quarter of this year to 25.5% in the most recent quarter due to more effective pricing management.

Third quarter 2008 results included an increase in the LIFO reserve of $6 million compared to a $29 million increase in the second quarter of this year. Third quarter 2007 reflected a LIFO reserve decrease of approximately $15 million.

We estimated the P&L impact of LIFO charges at $19 million for the third quarter of 2008 which is consistent with the second quarter 2008 impact. Consolidated operating expenses in the third quarter were $84.5 million or 21.7% of sales compared to 74.9 million or 21.4% of sales last year.

Approximately $1.1 million of the $9.6 million increase in reported operating expenses relate to the Metals UK which was acquired in January 2008 and does not reflected in the prior year results.

Also, the third operating expenses include 1.4 million of charges related to the settlement of the Transtar purchase arbitration. Excluding the impact of these items, operating expenses were $7.1 million higher than the prior year quarter.

Transportation and warehouse expenses were $3.6 million higher in the quarter, reflecting both higher sales volume and higher fuel cost. In addition, Oracle ERP implementation costs were $1.7 million higher than the prior year period.

Interest expense was $2.8 million for the third quarter 2008, comparable to 2.7 million in the prior year period. Joint venture earnings were $3.3 million for the third quarter compared to $1.4 million in the prior year period. Consolidated EBITDA for the third quarter of 2008 was $25.6 million or 6.6% of net sales compared to 28.6 million or 8.2% of net sales in the third quarter of 2007.

Net income for the third quarter was $11.5 million or $0.50 per diluted share as compared to $12.9 million or $0.57 per diluted share last year.

Now I'll briefly go through our nine month comparative results. Consolidated sales for the first nine months of 2008 were $1.2 billion approximately or $81.2 million and 7.4% higher than last year. Sales in our metals segment for the first nine months were $1 billion and 87.7 million, or 7.6% higher than 2007. Excluding Metal Express and Metals UK, overall tonnage sold was approximately 5% higher in the first nine months of 2008.

Our plastics segment sales for the first nine months of 2008 were $91.8 million, $4.2 million or 5% higher than the first nine months of last year. Our consolidated 2008 gross margin rate through September was 25.7% as compared to the prior year period of 27.8%.

As we discussed earlier in the third quarter results, year-over-year gross margin comparisons for 2008 have been negatively impacted by the extremely high surcharge levels on carbon and alloy products. Consolidated operating expenses for the first nine months of 2008 was $246.6 million or $21.7 million increase from the first nine months of 2007.

However, 3.9 million of this increase is related to the January 2008 acquisition of Metals UK, and 2.2 million is related to the Transtar arbitration settlement cost excluding these items which did not occur in 2007 the remaining $15.5 million operating expense increase is related to 10.9 million of higher plant and transportation costs in conjunction with higher sales volume as well as $4.3 million for increases in the Oracle implementation cost.

Interest expense through September of 2008 was $7 million versus $11.2 million for the first nine months of 2007. Joint venture earnings for the nine months of 2008 were $8 million versus $3.7 million for the prior. Consolidated EBITDA was $82.1 million and 7% of sales for the nine months ended September 30, 2008 compared to $99 million and 9% of sales for the first nine months of 2007.

Net income year-to-date in 2008 was $36.5 million or $1.62 per diluted share as compared to $44.5 million or $2.14 per diluted share for the first nine months of last year. In May 2007, equity offering has a $0.16 per share diluted effect on earnings per share for the nine months ended September 30, 2008.

On to the balance sheet and cash receivable, DSO or day sales outstanding was 46.5 days at the end of September compared to 45.1 days at year end 2007. Although we did not observe any significant changes in customer payment patterns during the third quarter as a result of the financial market turmoil, we will monitor a receivable status closely for the remainder of 2008 and ended 2009.

Inventory DSI or day sales and inventory for the nine months ended September was 125 days versus 132 days at year-end 2007. Capital expenditures through September were $18.4 million including $7.9 million for the Oracle ERP implementation which compares to 13.2 million of total CapEx for the first nine months of 2007. Total capital expenditures for the full year 2008 is expected to be approximately $20 million.

Our total debt as of September 30, 2008 was approximately $150 million corresponding to a debt to capital ratio of 26.6% compared to 18.3% at year-end 2007, with the increase primarily reflecting the funding of the January 2008 acquisition of Metals UK. We expect meaningful reductions in working capital levels in the fourth quarter due to seasonal order patterns. As a result, we expect debt levels to continue to decline through the balance of this year.

The company had additional borrowing capacity of approximately $150 million on its $230 million revolving credit facility at the end of September. With the working capital and related debt reductions anticipated to recur over the balance of this year and the borrowing capacity on the company’s existing credit facilities, we’re comfortable with the liquidity position of the business in the near term.

With that said, we plan to utilize free cash flow in the short-term primarily for debt reduction. As a result, the bar would be raised for capital expenditure project approvals and only the most meaningful projects would be funded in the near term.

Currently, we’re anticipating 2009 capital expenditure level at approximately half the $20 million that will spent in 2008, including the anticipated completion of the Oracle implementation in 2009. In addition, we’ll continue to focus on improving our working capital position.

And now, we’ll open up the call for any questions you may have.

Question-and-Answer Session


Alright, thank you sir. (Operator Instructions)

And our first question is from the line of Mark Parr with Keybanc Capital Markets. Please go ahead.

Mark Parr - Keybanc Capital Markets

Hey, good morning. I had a question on aerospace and Michael, I think I heard you say you expect pull through of backlog, is that right?

Michael Goldberg

Well that’s what we’ve seen so far. I think the—I think I said as we know that there’s a big backlog and so at this -

Mark Parr - Keybanc Capital Markets

At least one or two planes, right?

Michael Goldberg

Yes, at least one or two. So at this time though - our best estimate is that we’re anticipating that the build rates would be somewhat close to where they have been. I think it’s unknown as to what the financial credit market impact is going to be.

So, we’re going to also keep a very close eye on this but we haven’t heard of anything yet which suggests that the planes aren’t going to be built. All of the customers are kind of pulling away so, at this stage our best information is that should this—with the conclusion that the good rates should remain pretty solid.

Mark Parr - Keybanc Capital Markets

Okay, and so a minute here we’re just talking about the commercial side, how much of a pick up are you expecting out of JSF program at this point?

Michael Goldberg

I think I’ve outplayed these numbers talk about the kind of doubling of the production for that. You could—

Mark Parr - Keybanc Capital Markets

What does that mean for you guys, as far as revenues are concerned?

Michael Goldberg

It’s our - approximately taking our revenues from about 3 million to about 10 from ’08 to ’09. So it’s about $7 million increment as that build occurs, I think, based on a build of about 21.

Mark Parr - Keybanc Capital Markets

Okay, alright. And in the - could you talk a little bit about the inventory accounting that’s going to emerge in ’09 with the new ERP system, are things going to become more transparent from - as far as LIFO is concerned?

Scott Stephens

Yes, Mark, we expect that they will and we’ve got the conversion right now planned for early next year. And we’ll anticipate providing you more details as we start the conversion. But yes, in the net effect, better transparency on the historicals on LIFO and the impact of LIFO on our results.

Mark Parr - Keybanc Capital Markets

Okay, are there going to be any sort of year-end adjustments required to get ready for this or is the balance sheet in a condition where it will be to seamlessly make this transition?

Scott Stephens

We don’t like to - relative to the conversion and things that are contemplated in the conversion, no we don’t expect any significant year-end adjustments for that. Of course as it relates to LIFO, being a snapshot at year-end as the critical factor in the final calculation, the pricing levels being in flux at the moment and inventory levels as well significantly in flux in the fourth quarter, we’ll have to factor those in. But those are sort of the typical components over and above that we don’t expect any adjustments required as it relates to the pending system conversion.

Mark Parr - Keybanc Capital Markets

Okay, alright. Okay, terrific. Thanks for all the commentary on the call today. It was very helpful.

Scott Stephens

Thanks Mark.


Alright, thank you. (Operator Instructions)

Tim Hayes from Davenport & Company, please go ahead with your question.

Tim Hayes - Davenport & Company

Hey, good morning. Just a question on the cash flows, I mean, what year-to-date cash flow from operations? Do you have that number?

Scott Stephens

We do. Bare with me one second, I’ll dig it out here. It’s slightly negative. It’s $15 million negative including all the working capital adjustments and it’s predominantly the - at least through September, predominantly the investments in inventory receivables that have resulted in a net use of cash through September. Obviously that will start to unwind itself here in the fourth quarter.

Tim Hayes - Davenport & Company

Actually that's my next question. What was the year-to-date change in working capital?

Scott Stephens

Without adding it all up here, the net is on or about $90 million through September.

Tim Hayes - Davenport & Company

And that’s a negative right?

Scott Stephens


Tim Hayes - Davenport & Company

Okay. Thank you.

Scott Stephens

Thank you.


Alright, thank you. And our next question is from the line of Nat Kellogg with Next Generation Equity Research. Please go ahead.

Nat Kellogg - Next Generation Equity Research

Hi guys. How are you doing?

Scott Stephens

Good. How are you?

Mike Goldberg

Good morning.

Nat Kellogg - Next Generation Equity Research

Just a couple of points. It looks like G&A was a little bit lower in the third quarter from the second quarter. Is there anything specific going on there or significantly is the rate that we can use going forward to project what that should be on the next couple of quarters?

Scott Stephens

Well, the CapEx is—no, there’s nothing unusual in the quarter. So the CapEx trends being what they are still with Oracle coming in but those are going to change. But as we mentioned, we anticipate the 2009 CapEx level to be quite a bit lower so it’s going to change again.

Nat Kellogg - Next Generation Equity Research

Okay. Alright, that’s helpful and then just an update on the Oracle ERP, it’s obviously in the Transtar business, is it in the plastics business or is it that going to be last?

Mike Goldberg

No. the plastics business is - has converted to a completely different ERP system. So that's behind them. They did that in August. So that’s separate.

Nat Kellogg - Next Generation Equity Research

Okay. So we’re basically looking at the Canadian business which will be in the first three months of the New Year and then the remainder of the Castle Metals business which should be hopefully by June or is that too optimistic? By the end of June or is that too optimistic?

Mike Goldberg

No. Here’s the plan. The Canadian business will convert early in the New Year. The balance of the Castle legacy system will be 90 days after that and then there are a number of other systems that we have.

We have another part of the aerospace could go on without the European aerospace business. We have a Mexican business to convert. So that follows after the Castle legacy system a number of smaller waves of switch over. So you got to put a couple of months in between each of those. So that kind of takes us through the basically this time next year. And that’s the plan to have.

The original plan was to have all those existing businesses on through mid-'09. It’s going to take a little longer in that now. So hopefully by the end of third quarter, we’ll have our original plan executed.

Nat Kellogg - Next Generation Equity Research

Okay. And then just on inventory. I’m just trying to get a sense of it. Can you guys give us a sense of how much it's changed on a tonnage basis?

I realize obviously the mix makes a big difference for you guys because some of your inventory is much more highly priced than other stuff, but I’m just trying to a sense of how much the inflation of inventory we see on your balance sheet. Is it due to the cost versus pounds or tons?

Mike Goldberg

It’s predominantly inflation. I’m just looking at some tonnage number here and there’s some mix issues but there’s a balance compared to the end. If we compare September to the end of say, December of last year, it's most probably about 12% more volume but we’d expect our volumes to kind of come down through the fourth quarter.

So I would anticipate by the end of the year, there’ll be a little bit more tonnage in our inventory than compared to the end of last year and so the difference is primarily around price. We have got plans to reduce our inventory.

It’s too high. And we’re making every effort to do that as well. We’re not happy where our inventory is currently. And we have plans to bring that down.

Nat Kellogg - Next Generation Equity Research

Okay. Obviously in areas where there is a surcharge which is leading to some of the increase pricing. My guess is that comes back pretty quickly on some of the other products where the pricing maybe a little bit more opaque. I’m just wondering if you could talk a little bit about the competitive environment.

I’m asking because I imagine because of the price declines have been relatively rapid for all these commodities. My guess is that you guys and a lot of other guys are stuck to probably some inventory that’s a little bit more highly priced than they would like.

And so I’m just curious about what the competitive environment out there you’re seeing on the pricing side? How much discipline you’re seeing and what sort of a market place and how it looks like?

Mike Goldberg

It’s a tough environment out there because demand is weak and you're right that people have got a full inventory of one price and it's now replaceable at another. And so we've seen—I would kind of—I wouldn't characterize the market though as going crazy and people dumping their inventory. We haven't seen that through the first two or three weeks of October.

It's competitive but it doesn't appear to be in a state of disarray if you want to put it that way. I think people who had been expecting this they have been trying to keep their inventories under control. Pricing is going down and the surcharges are coming off.

We know that and so you still got to try and make your margin and turn your inventory to balance that. Everybody is trying to achieve. So it is competitive out there but I haven't seen it kind of—haven't heard any indications that it's kind of collapsing on the market.

Nat Kellogg - Next Generation Equity Research

Okay, that's helpful and thanks as always for the color, guys. I really appreciate it. I think that's all I got for now. Okay, thanks.


Alright, thank you. (Operator instructions)

Tom Spiro of Spiro Capital, please go ahead with your question.

Tom Spiro - Spiro Capital

Yes. Tom Spiro, Spiro Capital. Good morning.

Scott Stephens

Good morning.

Mike Goldberg

Good morning.

Tom Spiro - Spiro Capital

Michael, I believe in your opening commentary, you referred to a strategic review of the Board you'd recently undertaken and I was curious, number one, what occasion is the review? Is that an annual event or something more far reaching?

And two, was there any particular conclusions or insights with that review you'd like to share with us?

Mike Goldberg

Yes. The term strategic review can have some connotations which we certainly didn't intend. We have a part of our normal board calendar. We have every July an off-site strategic review of the business. And so, three years ago, pretty nearly three years ago when we set forth a kind of new strategic path.

We involved the board all along with the direction that we were going and to make sure that obviously they were in support and aligned with management. And so, we have a regularly set strategic review every year with the board. And that's what I was referring to as the we hold it in conjunction with our July board meeting.

And we had all the commercial unit leadership there outlining their plans and sorts for their particular parts of the business and allows the Board to ask questions and probe and then basically, we can all hold hands and agree to march in the same direction. The direction is unchanged.

We want to focus in on the specialty products and the supply chain services and we're looking at the coming maximal market focused. I think we mentioned the markets in the commentary, and aligned with that is an increased kind of global perspective. So we're seeking to be the specialist provider of metals to keep the markets which we think are growing faster or have long term faster growth and many of those markets are international in nature.

So the combination of those elements really the cornerstone of our strategy and that's we really what we go through with the board.

Tom Spiro - Spiro Capital

Thank you.


Alright, thank you. There are no further questions at this time please continue with any closing comments.

Mike Goldberg

I appreciate everybody's interest and we will be reporting back in the New Year, so goodbye and thanks for your time.


Alright, thank you. Ladies and gentlemen, this concludes the A.M. Castle & Company's third quarter 2008 conference call. (Operator instructions)

Have a very pleasant rest of your day.

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