Global Brass & Copper Holdings (BRSS) Q4 2017 Earnings Conference Call Transcript

Global Brass & Copper Holdings (BRSS)
Q4 2017 Earnings Conference Call
March 2, 2018 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Fourth-Quarter 2017 Global Brass and Copper Holdings Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. If anyone should require operator assistance during the conference, please press *, then 0 on your telephone keypad.

As a reminder, today's conference is being recorded. I'd now like to turn the call over to Ms. Anne-Marie D'Angelo, general counsel. Ma'am, you may begin.

Anne-Marie W. D'Angelo -- General Counsel and Secretary

Good morning, everyone, and thank you for joining us to discuss Global Brass and Copper's Fourth-Quarter 2017 Financial Results. My name is Anne-Marie D'Angelo and I'm Global Brass and Copper's general counsel. Joining me on the conference call today are John Wasz, our president and chief executive officer, and Christopher Kodosky, our chief financial officer. For anyone who is not able to listen to these calls, an archived version of this call will be available later this morning.

Please visit the Investor Relations section of our corporate website at www.gbcholdings.com to access the replay. Before beginning our discussion, we want to make you aware that our prepared remarks and response to questions may include forward-looking statements that involve risks and uncertainties. These may include statements about our current expectations or forecasts of market and economic conditions, business activities, prospects, strategies, and future business and financial performance. Actual results could differ materially from any forward-looking statements made by us.

Information concerning factors that could cause actual results to differ from those in the forward-looking statements may be found in Global Brass and Copper Holding's annual report on Form 10-K and the company's quarterly reports on Form 10-Q filed with the SEC under the Risk Factors section of each filing and other filings with the SEC. In addition, our comments today report non-GAAP financial measures such as adjusted EBITDA, adjusted sales, and adjusted diluted earnings per common share. Reconciliations for the most directly comparable GAAP financial measures are provided in our earnings release for the fiscal quarter and year ended December 31, 2017, that will be furnished with the SEC and posted to our website. We believe these non-GAAP measures provide useful information for evaluating our business performance.

These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or as a substitute for related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies. Please be advised the content of this conference call contain time-sensitive information that's effective only at the date of this live broadcast on March 2, 2018. Global Brass and Copper Holdings undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call except as required by law.

Now that we've covered these cautionary comments, I'd like to turn it over to John Wasz

John J. Wasz -- President and Chief Executive Officer

Thank you, Ann-Marie. Good morning, everyone, and thank you for joining us on today's call. Overall, we're pleased with the progress we made in 2017. We delivered a solid financial performance despite the challenging volume environment due to our continued focus on improvements in manufacturing excellence, commercial pricing strategies, and supply chain initiatives.

The dedicated efforts and teamwork of our employees across our company were critical to achieving our 2017 results and have strongly positioned our company for future success. We upgraded IT systems at two of our business units which went live in January of 2017. In July, we refinanced our debt, further right-sizing our capital structure, thus providing flexibility to grow organically and make strategic acquisitions. In November, we acquired Alumet to expand A.

J. Oster's product portfolio and geographically to strengthen our position in the aluminum market. As previously mentioned, we're in industries and markets which require agility and a relentless focus to reduce cost and improve productivity, optimize inventory, price our products appropriately, and create unique value for our customers. We continued to execute in these areas and our two mill operations maintained best-in-class quality and service levels in 2017.

Through our balanced-book philosophy and asset-management practices, our focus remains on generating sustainable profitable growth rather than chasing volume to fill production capacity. We will continue pricing our products to enhance our long-term profitability to achieve an appropriate return on our inventory and production assets and a justified business reinvestment to continue to provide excellent product quality and service to our valued customers.Turning to Olin Brass, 2017's, adjusted EBITDA increased despite a year-over-year volume decline of 6%. This performance-volume down, EBITDA up-is impressive and underscores the value of our asset-management operating philosophy and the incredible impact of engaging an organization around accountability, continuous improvement, and true product profitability. Volumes decreased predominantly in munitions but were partially offset by increased demand on the reroll market.

De-stocking continued in the overall munitions market as a result of the presidential election and we expect this to continue into the first part of 2018. Olin Brass' munitions volumes were also negatively affected by key customer's production outage. Despite these challenges, Olin Brass team made significant progress in reducing cost, increasing productivity, and reducing inventory levels throughout its supply chain and manufacturing excellence initiatives.Regarding A. J.

Oster, their results include both the base A. J. Oster business and the acquisition of Alumet, which occurred on November 1, 2017. Regarding the base business, both volumes and adjusted EBITDA decreased from the prior year, largely due to issues and additional cost stemming from the implementation of a new ERP system in early 2017, which later led to customer-service issues at one of our facilities.

We have addressed these issues and are experiencing much-improved service levels and are winning back business at this location. Further, on November 1, 2017, we completed the acquisition of Alumet, a nationwide industry-leading aluminum, copper, and brass service center and distributor. With a strong brand, experienced management team, and strategically located facilities, Alumet provides exceptional availability, quality, and service consistent with that of A. J.

Oster. We're pleased to report that the Alumet integration is progressing as planned and A. J. Oster team is focused on profitably growing our base business in 2018, and we're excited about the opportunities resulting from the Alumet acquisition.Chase Brass volumes decreased for the year, largely due to specific issues within certain of our building and housing customers.

The team's discipline in appropriately pricing its products along with improved brass spread and improvements in the operation led to the approximately 7% increase in adjusted EBITDA. In light of the challenging volumes, Chase Brass continues to deliver exceptional quality, short lead times, and reliable on-time delivery. Overall, in 2017, we continued to make meaningful progress on numerous areas of strategic focus which will translate into profitable growth in the future. We remain committed to improving the strategic foundations of our business, generating significant cash flows, strengthening our balance sheet, and driving profitable growth by expanding the depth and breadth of our existing businesses and through accretive acquisitions.With that, I'll turn the call over to Christopher Kodosky for a more detailed view of our financials.

Christopher Kodosky -- Chief Financial Officer

Thanks, John. Good morning, everyone. Unless otherwise noted, my comments and discussion will focus on our Q4 2017 and full-year results as compared to Q4 and full-year 2016. I would like to highlight that the 2016 results include the Q2 2016 production outage at Olin Brass and significant losses on debt extinguishments in 2016 due to our refinancing activities that year.

While 2017 results include the Alumet acquisition, a $7.4 million recovery of insurance proceeds related to last year's production outage, and the impact of U.S. tax reform. All of these events make financial comparisons to the prior year more challenging. That said, Q4 volumes increased 6% to 128 million pounds, largely resulting from the 8 million pounds generated by our Alumet acquisition.

Excluding the Alumet impact, volumes decreased, primarily due to reduced munitions buyers. The channel continues to work through inventory that it built up prior to the 2016 presidential election, and we're still feeling the effects of a production outage at one of our key munitions customers. This decline was partially offset by the increased demand in the coinage market and reroll channel. Alumet shipped 8 million pounds in the fourth quarter, mostly in the building and housing market for signage and roofing applications.

Regarding the full year 2017, volumes decreased 3% to 507 million pounds, despite the inclusion of Alumet, due to headwinds in munitions, building and housing, and stamping markets but with some benefit from increases in the reroll channel. Net sales for the quarter increased 28% to $412 million, including $90 million, or 6%, for Alumet, primarily as a result of increased pass-through metal prices and increased scrap metal prices. For the full year, net sales increased by 17% to $1.6 billion, again due to these pass-through commodity costs and sales of unprocessed scrap metal, partially offset by decreased volumes. Metal prices reflect replacement-cost recovery from the customer, whereas the sales prices represent the value-added component of adjusted sales, our non-GAAP revenue measure which we define as the excess of net sales over the metal cost recovery component of net sales.

Fourth-quarter adjusted sales, a non-GAAP financial measure, increased by 7% to $137 million, including $8 million for Alumet, largely due to increased volumes. For the full year, adjusted sales decreased by 1% to $535 million as the impact of decreased volumes is greater than improvements in pricing. Net income attributable to GBC for the quarter was $5.4 million, or $0.24 per diluted share, including $500,000, or $0.02 per diluted share, from Alumet, versus $7.7 million, or $0.35 per diluted share, in 2016. The decrease is due to increased income tax expense as a result of the tax reform, partially offset by increased gross profit and decreased interest expense.

For the full year, net income attributable to GBC was $50.9 million, or $2.30 per diluted share, versus $32.2 million, or $1.49 per diluted share, in 2016. This increase can be attributable to the net of the following events: $23 million in refinancing cost in 2016 compared to $1 million in 2017; the impact of a Q2 2016 [Inaudible] production outage, favorable fluctuations and lower cost to market adjustments to inventory; unfavorable fluctuations in unrealized gains and losses on derivative contracts; increased provision for income taxes due to tax reform and decreased interest expense. Fourth-quarter adjusted EBITDA, a non-GAAP financial measure, increased by 20% to $29 million and included $1.1 million from Alumet. The increase is primarily due to favorable scrap spreads and customer pricing, increased profitability at Olin Brass, and reduced compensation costs mostly related to incentive compensation.

We also believe Alumet had a better-than-expected two months of adjusted EBITDA. Full-year adjusted EBITDA increased 10% to $130 million, primarily due to the following: a $7.4 million recovery of insurance proceeds related to last year's production outage, improved productivity, favorable changes in customer pricing of scrap spreads, and decreased employee and employee-related expenses, partially offset by decreased volumes. Fourth-quarter and full-year adjusted diluted earnings per common share, a non-GAAP financial measure, decreased 37% and increased 4% year over year to $0.29 and $2.45 per share and included approximately $0.02 for Alumet. Along with the factors affecting adjusted EBITDA and their related tax impact, increased income taxes and decreased interest expense also affected the fluctuation in adjusted diluted earnings per share.

An increase in the weighted average shares outstanding negatively affected adjusted diluted EPS by $0.06 per share for the year. We ended the year with $59 million of cash, $316 million outstanding in our term loan facility, and $195 million availability under our asset-based revolving loan facility. During the fourth quarter and full year 2017, we generated $16 million and $49 million respectively of cash from operating activities, as cash earnings were partially offset by increased investments in working capital. Our investments in working capital increased at year-end by $30 plus million due to opportunistic inventory purchases for future needs and intentional strategic increases in production.

Capital expenditures decreased from $34 million for the full year 2016 to $25 million in 2017, due to $7 million left of IT spending. We expect capital expenditures in 2018 to be about $35 million.Looking at our three reportable segments, our performance in the fourth quarter was as follows. Olin Brass volumes were down 5% to 59 million pounds due to the munitions and other issues I mentioned, while adjusted EBITDA increased 22% to $12 million. The increase in adjusted EBITDA was driven by favorable mix impacts primarily due to the shift in volume from the munitions market to the coinage market, partially offset by decreased volumes.

In addition, production was greater in the quarter than has historically been the case, resulting in increased profitability via capitalization of production costs. Chase Brass volumes increased slightly to 51 million pounds due to stronger electronics and electrical components and industrial machinery and equipment buy-ins, but building and housing buy-ins were softer. Adjusted EBITDA increased 14% to $17 million, driven by favorable changes in pricing and scrap spread. A.

J. Oster's volumes increased 44% to 26 million pounds and adjusted EBITDA increased 10% to $4 million. Base business buyers were down 3% to 17 million, primarily due to decreased automotive and electronics and electrical component market volumes. Adjusted EBITDA was down $700,000 due to increased variable convergent cost and lower volumes.

Alumet shipped 8 million pounds in the fourth quarter mostly in the building and housing market due to their sales of signage and roofing products. They generated $1.1 million in adjusted EBITDA.Regarding our outlook for 2018, I'd first like to remind you that we focus on the long term, and our ability to provide guidance is constrained due to our short lead times and the tendency of our shipment volumes to lag published market indicators. Having said that, based on a variety of factors including our 2017 results, industry trends, and our own insight, we are providing the following 2018 guidance: shipment volumes within the range of 570 to 610 million pounds and adjusted EBITDA within the range $127 million to $137 million.With that, John, I'll turn the call back over to you.

John J. Wasz -- President and Chief Executive Officer

Thanks, Christopher. Before we finish, I'd like to comment on the recent environmental accident that occurred at our Somers facility. The facility is in Connecticut, which had been experiencing severe weather. On Saturday, January 20, 2018, due to the continued freezing and thawing that occurred, an outside pipe burst and leaked mineral oil into the sewer system and the neighboring Naugatuck River.

Our team acted immediately to stop the leak and notify the appropriate municipal and environmental authorities. I'm proud of our team's response as they worked with the Waterbury Fire Department, the U.S. EPA, the Connecticut Department of Energy and environmental protection, and remediation contractors to address the situation. At this time, remediation efforts continue but have significantly decreased in scope.

We estimate third-party costs involved with this accident will be less than $1 million and will not affect our long-term financial stability or cash flows. Our 2018 adjusted EBITDA guidance includes this $1 million estimate. It goes without saying that we take these situations very seriously as we look to play an integral role in the communities that we operate. In conclusion, our underlying business continues to improve.

We're excited about the Alumet acquisition and engaged by the early on integration efforts. As you know, we have a strong capital structure and solid consistent cash flow. We're well-positioned to drive growth through our organic initiatives and acquisitions. We're encouraged by the progress of our employees have made in advancing improvements and profitable growth initiatives across the enterprise.

As always, we'll remain focused on driving profitable growth and we'll keep discipline on cost, productivity, margin management, and working capital efficiency. Thank you to the employees of GBC for embracing our culture of accountability and continuous improvement and creating unique value for our customers. We look forward to continuing to serve our customers and shareholders and we thank you for your interest and continued support.Now we're ready to take your questions. Operator, please explain the question-and-answer procedures.

Questions and Answers:

Operator

Yes, sir. Ladies and gentlemen, if you have a question at this point, please press *, then the number 1 key on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press the # key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated.

Once again, to ask a question, *-1. And our first question comes from the line of Daniel Moore from CJ Securities. You may begin.

Daniel Moore -- CJS Securities -- Director of Research

Good morning, John. Good morning, Christopher. Let me start looking forward with the guidance for 2018 implying roughly mid-single-digit volume growth this year. Let me talk about your expectations and outlook for the key markets -- munitions, auto, coinage, housing -- your confidence there, and then are you seeing that type of growth as we start the year early in Q1? And then a quick follow-up.

John J. Wasz -- President and Chief Executive Officer

Sure, we'll take them one by one. First of all, let's cover munitions. As you know, 2017 was a year of destocking. As we move through 2018, we anticipate that destocking to come to a halt, probably more in the second half than the first half, but, nonetheless, we expect our volumes in the munitions segment to be up as compared to 2017.

Automotive, we continue to be encouraged by the efforts of the commercial teams relative to the cost of complexity and their pricing initiative as well as continuing to service and meet customers' needs. We're also encouraged by some of the activities going on regarding the continual electrification of cars with sensors and cameras and the like and the benefits that that brings to us relative to our products being used more in automobiles. We're also very mindful of the current inventory levels in the marketplace regarding automobiles and the projections as far as production rates. From a building and housing standpoint, it's been a story over the last several years of slow and steady growth, and we see that continuing as we move through 2018.

Coinage is always a very volatile market or customer to predict. We are extremely well-positioned with the ability to service the needs of this end user and meet the volatility of the demand. That said, as we look at 2018, we think of coinage as a GVP-type market and anticipate to do better in 2018 as compared to 2017.

Daniel Moore -- CJS Securities -- Director of Research

Very helpful. Maybe switching gears to Alumet. My understanding is they buy most of what they do buy, in terms of aluminum, domestically but either for Alumet and more generally any thoughts about potential impacts of tariffs either directly or indirectly on your business?

John J. Wasz -- President and Chief Executive Officer

Well, we've already experienced some of that because our Alliance facility inside of A. J. Oster actually buys of some of the foil products which already have experienced that and, Dan, it's been my experience that particularly if you think about GBC, if you think about where our aluminum activity is, it's really in the supply chain. It's with the distribution and we're encouraged by this activity because, I think, it will benefit not only the much-needed increases at the mill and production levels, but the pass-through economics of this when you run a balanced book can be very favorable.

The other thing I would say is from an overall just macroeconomic perspective, as prices go up along with interest rates going up, the focus by the OEMs and A. J. Oster services on more effectively managing inventory increases. So, our value and our just-in-time next-day delivery and our short lead times increase as well.

So, we see this as a positive situation.

Daniel Moore -- CJS Securities -- Director of Research

Excellent. Lastly, just housekeeping -- tax rate, with tax reform, what do we expect on a go-forward basis?

John J. Wasz -- President and Chief Executive Officer

In 2018, I'd expect we should probably throw in your model somewhere between 25% and 27%.

Daniel Moore -- CJS Securities -- Director of Research

Perfect. Thanks again for the color.

Operator

And our next question is from the line of Brian Drab from William Blair. You may begin.

Brian Drab -- William Blair and Company -- Analyst

Hey. Good morning, John. Good morning, Christopher. Back on Alumet for a second.

I think that the original guidance assumed 60 million pounds volume and EBITDA of $5 million. Just any update based on what's happened, what you see in the business so far on your expectations there in terms of the numbers?

John J. Wasz -- President and Chief Executive Officer

Yeah, I think the when we did the acquisition, we put out a deck, we're still living by it, roughly 5- to 7-million-pound business depending upon us, on how quickly we can integrate and achieve some of those synergies. So, I think those numbers are still good. With respect to a volume number, we had 8 million pounds of Alumet sales in the fourth quarter and I think for the full-year '18, we're probably looking at 55 of growth on top of that, so put it in the 60s.

Brian Drab -- William Blair and Company -- Analyst

OK, got it. One thing I wanted to ask is, was there any impact from hurricanes in the fourth quarter in any way, pent-up demand or the opposite, I guess, headwind continuing?

John J. Wasz -- President and Chief Executive Officer

First of all, we're pleased to report that our facility in Puerto Rico has power now and cellphone service. It was a long time in coming. The group down there did an absolutely fabulous job in bringing the business back up. I would describe it as, we're closing in on our run-rate volumes, Brian.

There's been a little bit of pull-forward as a result of the island being basically down for 90 days but nothing that's jumping off the charts.

Brian Drab -- William Blair and Company -- Analyst

OK, got it. And then if you could give us an update on how you're thinking about capital allocation going forward. I guess, obviously your focusing on the integration of Alumet at the moment, but should we expect more deals or what are your priorities for capital allocation in the near term?

John J. Wasz -- President and Chief Executive Officer

Our capital-allocation priorities have not changed. We're still continuing to invest in the business. We've iterated on this call that we are going to spend probably about $10 million more in CAPEX this year internally and looking forward to those projects bearing fruition in the long term. After that, yes, we are continuing to work on our acquisition efforts and we hope we find a deal or be able to complete a deal which fits our criteria and if we do, we'll spend money for that, but then last, we've got our dividend, which we increased last year and we'll be looking at that dividend policy in this year.

Christopher Kodosky -- Chief Financial Officer

Three more comments on acquisitions. First of all, we're really encouraged by the integration efforts at Alumet and that's Job 1 right now. We want to be smart and deliberate. The second comment is, as we think about acquisitions, we continue to focus in on the bolt-on acquisition opportunities at both A.

J. Oster and within Olin Brass' fab products. We continue to be excited and encouraged by some of the recent activities as it pertains to industry consolidation, both globally and domestically, in the rolled-products business and looking for ways to exploit our current capabilities of Chase Brass, particularly Eco Brass. So, as we think about profitable growth acquisitions as well organic activity, is the focus that we're going to be driving through 2018.

Brian Drab -- William Blair and Company -- Analyst

OK, perfect, that's great detail. And then one last question. So, you think about modeling. Is there any insight or guidance you can give us around the progression that you would think about through the quarters this year? Maybe two sub-questions to that in terms of growth rates, maybe quarters where you're expecting, whether it's on easy comps or otherwise, outside growth? And then the other sub-question here would be on EBITDA per pound, any quarters that stand out or seasonality that we should keep in mind as we're modeling?

John J. Wasz -- President and Chief Executive Officer

Sure. Yeah, I think we'll probably stay away from kind of commenting on EBITDA per pound in quarters and such like that. We're kind of sticking to our annual numbers but with regards to how the year would progress, 2017 was a bit of an odd year in the sense that the third quarter was the lowest quarter for the year and traditionally our second quarter and third quarter are the highest quarters for the year. So, we would expect, the fourth quarter, if you look back on 2017, the fourth quarter was a little bit skewed because you got 8 million pounds of Alumet there.

So, if you look at 2018, we would probably expect patterns to mirror our normal seasonal patterns and the fact that Q2 and Q3 numbers will probably be the highest, Q3 probably a little bit higher than Q2, but I think that's where we would envision the year going.

Brian Drab -- William Blair and Company -- Analyst

OK, got it. That's very helpful. Thanks.

Operator

And our next question comes from the line of Tyler Kenyon from KeyBanc Capital. You may begin.

Tyler Kenyon -- KeyBanc Capital Markets -- Analyst

Good morning, John and Christopher. So, Christopher, I think you mentioned that production in the fourth quarter just exceeded your shipment level and I think it was just related or it sounds like it was related to strategic build in inventory. Just kind of wondering where that was specifically from an end-market perspective and if there was any way to perhaps dice out what the conversion cost benefit was from that dynamic in the fourth quarter.

Christopher Kodosky -- Chief Financial Officer

Yeah, I appreciate your question and I'm probably not going to discuss the specifics of the dollar impact, but safe to say the guidance for 2018 includes that effect. We made some strategic decisions. We have difficulties managing the plant oftentimes with fluctuating headcounts, etc. So, we made some strategic decisions to keep some of that workflow even and level throughout the period.

Traditionally, the fourth quarter, especially in the month of December, we have a shutdown, we still had a shutdown but not as from a manning and production level as significant as we had in previous years. So, that wound up benefiting the quarter.

Tyler Kenyon -- KeyBanc Capital Markets -- Analyst

OK, got it.

Christopher Kodosky -- Chief Financial Officer

And I think, Tyler, just from a strategic perspective, not necessarily a modeling perspective that, as you know, we don't operate a push system. We operate a pull system and we really have made good progress over the last several years in being very agile from a production standpoint, which creates the opportunities for us to more effectively manage these things.

Tyler Kenyon -- KeyBanc Capital Markets -- Analyst

OK. And then just in full appreciation of the balanced-book approach, just curious if you could kind of walk us through some of the marginal impacts from fluctuations in copper pricing versus some of the discounts that we've kind of seen out there just with brass mill scrap and any way to think about if that benefited you in 2017 and kind of where we are right now maybe on a run-rate basis.

John J. Wasz -- President and Chief Executive Officer

Yeah. I mean, we operate the balanced book tied and true as evidenced by our EBITDA per pound through a lot of commodity fluctuation with copper, with zinc, and with some of the other elements that we put into our products. So, we do watch and our situation does change in two areas as a result of rising or falling copper prices and we brought this up before. The first is in our melt loss, which is basically the amount of metal that goes up the flue when we melt it and as copper prices are higher, the expense of that is more significant.

And the second area is in scrap spread and generally scrap spreads widen when metal prices go up and subsequently narrow when metal prices go down. So, you have these two variables that to a large extent or to some extent offset one another. Metal prices go up, we're going to take a little bit more cost up the flue, but we're also going to be experiencing wider scrap spreads than we had otherwise. Unlike the aluminum industry, scrap spreads are not extremely volatile and extremely wide.

That said, we have seen scrap spreads widen as we move through 2017 and that's beneficial to Chase and to Olin Brass, more Chase than Olin Brass because they use more of the lower-grade scraps.

Tyler Kenyon -- KeyBanc Capital Markets -- Analyst

That's helpful. Thank you. I think that's it for me.

Operator

And as a reminder, ladies and gentlemen, that's *-1 for questions, *-1. Our next question comes from the line of Daniel Moore from CJ Securities. You may begin.

Daniel Moore -- CJS Securities -- Director of Research

Thanks again. It's a little backward-looking but the cash flow from operations toward the end of the year, you mentioned the strategic decision to build inventory, that's probably part of it there. Receivables picked up a little bit. How much of that was Alumet versus just a general uptick? And any comments around cash flow from operations normalizing next year.

John J. Wasz -- President and Chief Executive Officer

Sure. Thanks for the question. You're correct that the inventory was a piece of that through some of those strategic decisions we made, but specific with accounts receivable, one of the things that we do for some of our customers who toll is we procure the toll metal for them and sell it to them, and we had a very large transaction at the end of the year, which inflated the accounts receivable because we sold them that sort of metal right at year-end there. So, we would expect that to turn and that's the major driver behind the increase in accounts receivable at year-end.

And then with respect to what to expect from a cash perspective next year, obviously with the increase in CAPEX and our expected working capital turnaround, we're probably going to be somewhere between the high 50s, low 60s, or mid-50s, low 60s, free-cash flow basis from cash from earnings and working capital minus CAPEX.

Daniel Moore -- CJS Securities -- Director of Research

Very helpful. Appreciate it. And lastly, if you feel [Crosstalk], go ahead. Sorry, didn't mean to cut you off.

John J. Wasz -- President and Chief Executive Officer

Key to that too would be in mid-2017 we refinanced and reduced our interest rate. So, next year we're probably going to be 5.5% interest throughout the year.

Daniel Moore -- CJS Securities -- Director of Research

Yep. And cash taxes similar to that, mid-25%, 27% rate per book?

Christopher Kodosky -- Chief Financial Officer

Yes. We'll have roughly less than $10 million, more than $4 million, part of our benefit in 2018 from the reduced rate.

Daniel Moore -- CJS Securities -- Director of Research

Got it. And lastly, since you're building my model so well, G&A, any guide there would be helpful, and thanks again.

Christopher Kodosky -- Chief Financial Officer

The only guidance I would give you on G&A is, obviously you've seen it increase every year. Our CAPEX continues to either be roughly or equal at previous years' levels. The biggest anomaly here is the fact that in 2017 when the company was formed, we would offer a fixed asset. And so depreciation and amortization continue to increase and work their way up eventually to level off with CAPEX levels.

But we're not there yet and we would look to historical trends to moderate an increase for the current year.

Operator

And I'm showing no further questions at this time. I'd now like to turn the call back over to Ms. Anne-Marie D'Angelo for closing remarks.

Anne-Marie W. D'Angelo -- General Counsel and Secretary

Thank you, everyone, for joining us today and for your continued interest and support of Global Brass and Copper Holdings. We look forward to speaking with you again during our first-quarter conference call. Thanks again, and have a great day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.

Duration: 49 minutes

Call Participants:

Anne-Marie W. D'Angelo -- General Counsel and Secretary

John J. Wasz -- President and Chief Executive Officer

Christopher Kodosky -- Chief Financial Officer

Daniel Moore -- CJS Securities -- Director of Research

Brian Drab -- William Blair and Company -- Analyst

Tyler Kenyon -- KeyBanc Capital Markets -- Analyst

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