Page 1 of 9
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31,June 30, 2000 Commission File Number 1-5415
A. M. Castle & Co
(Exact name of registrant as specified in its charter)
Delaware 36-0879160
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
3400 North Wolf Road, Franklin Park, Illinois 60131
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone, including area code 847/455-7111
None
(Former name, former address and former fiscal year, if changed since last
year)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31,June 30, 2000
Common Stock, No Par Value 14,048,07014,048,052 shares
Page 2 of 9
A. M. CASTLE & CO.
Part I. FINANCIAL INFORMATION
Page
Number
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . 3Statements:
Condensed Balance Sheets .Sheets. . . . . . . . . . . 3
Comparative Statements of Cash Flows .Flows. . . . . 3
Comparative Statements of Income .Income. . . . . . . 4
Notes to Condensed Financial Statements. . . . 55-6
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations . . . . . . 6-7
Part II. Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 8
Page 3 of 9
A. M. CASTLE & CO.
CONDENSED BALANCE SHEETS
(Dollars in thousands except per share data)
(unaudited)
March 31,June 30, Dec. 31, March 31,June 30,
ASSETS 2000 1999 1999
Cash . . . . . . . . . . . . . . . . . $ 2,5684,017 $ 2,578 $ 4,3994,524
Accounts receivable, net . . . . . . 101,197. 99,290 83,352 89,79393,196
Inventories (principally on last-in,
first-out basis) . . . . . . . . . . 175,471184,497 169,618 205,793200,220
Total current assets . . . . . . . $ 279,236$287,804 $255,548 $ 299,985$297,940
Prepaid expenses and other assets. . 63,469. 69,280 60,716 58,37060,713
Fixed assets, net. . . . . . . . . . 95,986. 100,319 97,077 99,210101,068
Total assets . . . . . . . . . . . $ 438,691. $457,403 $413,341 $ 457,565$459,721
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . $ 112,370. $118,628 $102,976 $ 103,048$107,607
Accrued liabilities. . . . . . . . . 15,678. 16,368 17,230 15,98016,728
Income taxes payable . . . . . . . . 7,098. 5,786 4,876 5,3704,632
Current portion of long-term debt . 3,577. 3,914 3,915 3,7023,718
Total current liabilities. . . . . $ 138,723. $144,696 $128,997 $128,100$132,685
Long-term debt, less current portion 138,290. 150,884 122,625 165,831162,976
Deferred income taxes. . . . . . . . 16,692. 16,993 16,356 15,919
Post retirement benefit obligations 2,17917,614
Other liabilities. . . . . . . . . . . 2,217 3,552 3,7672,112
Stockholders' equity . . . . . . . . 142,807. 142,613 141,811 143,948144,334
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . $ 438,691. $457,403 $413,341 $ 457,565$459,721
SHARES OUTSTANDING . . . . . . . . . . 14,048 14,046 14,04414,045
BOOK VALUE PER SHARE . . . . . . . . . $ 10.1710.15 $ 10.10 $ 10.2510.28
WORKING CAPITAL. . . . . . . . . . . $140,513. $143,108 $126,551 $ 171,885$165,255
WORKING CAPITAL PER SHARE. . . . . . . $ 10.0010.19 $ 9.01 $ 12.2411.77
DEBT TO CAPITAL. . . . . . . . . . . 49.8%. 52.0% 47.2% 54.1%
53.6%
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the ThreeSix Months
Ended March 31,
June 30,
Cash flows from operating activities: 2000 1999
Net income . . . . . . . . . . . . . . . . . . $ 3,7666,602 $ 2,7555,889
Depreciation . . . . . . . . . . . . . . . . 4,924 4,865
Other. . 2,438 2,408. . . . . . . . . . . . . . . . . . (6,886) 1,459
Cash provided from operating activities before
working capital changes . . . . . . . . . . . 4,640 12,213
(Increase) decrease in working capital . . . (15,720) 17,584
Net cash provided from (used by) operating activities (11,080) 29,797
Cash flows from investing activities:
Investments and acquisitions . . . . . . . . . (4,050) (3,065)
Capital expenditures, net of sales proceeds. . (5,889) (10,127)
Net cash used by investing activities. . . . . . (9,939) (13,192)
Cash flows from financing activities:
Long-term borrowings, net. . . . . . . . . . . 28,258 (9,468)
Dividends paid . . . . . . . . . . . . . . . . . (5,484) (5,477)
Other. . . . . . . . . . . . . . . . . . . . . (3,661) 1,725
Cash provided from operating activities before
working capital changes. . . . . . . . . . . . 2,543 6,888
(Increase) decrease in working capital . . . . (14,031) 10,668(316) (90)
Net cash provided from (used by) operating
activitiesfinancing activities. 22,458 (15,035)
Net increase in cash . . . . . . . . . . . . . . . . . . (11,488) 17,556
Cash flows from investing activities:
Capital expenditures, net of sales proceeds. . (1,079) (6,745)
Net cash provided from (used by) investing
activities . . . . . . . . . . . . . . . . . . (1,079) (6,745)
Cash flows from financing activities:
Long-term borrowings, net. . . . . . . . . . . 15,327 (6,545)
Dividends paid . . . . . . . . . . . . . . . . . (2,742) (2,738)
Other. . . . . . . . . . . . . . . . . . . . . (28) (83)
Net cash provided from (used by) financing
activities . . . . . . . . . . . . . . . . . . 12,557 (9,366)
Net increase (decrease) in cash. . . . . . . . . $ (10)1,439 $ 1,4451,570
Cash - beginning of year . . . . . . . . . . . 2,578 2,954
Cash - end of period . . . . . . . . . . . . . $ 2,5684,017 $ 4,3994,524
Supplemental Cash paid/(received)Disclosure
Cash paid during the period
. . . . . . .
Interest. .Interest . . . . . . . . . . . . . . . . . . $ 1,8344,751 $ 2,9995,698
Income taxes. .taxes . . . . . . . . . . . . . . . . $ (253)2,910 $ (553)1,975
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A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three and Six Months Ended March 31,June 30,
(Unaudited)
(Unaudited)For The Three For The Six
Months Ended Months Ended
June 30, June 30,
2000 1999 2000 1999
Net sales. . . . . . . . . . . . . . . . . . . . . $195,239 $183,460$192,278 $179,992 $387,517 $363,452
Cost of material sold. . . . . . . . . . . . . . . 135,945 126,635133,896 122,840 269,841 249,476
Gross profit on sales. . . . . . . . . . . . . . 59,294 56,82558,382 57,152 117,676 113,976
Operating expenses . . . . . . . . . . . . . . . . 48,224 46,86648,729 46,572 96,953 93,436
Depreciation and amortization expense. . . . . . . 2,438 2,4082,486 2,456 4,924 4,865
Interest expense, net. . . . . . . . . . . . . . . 2,304 2,8932,436 2,841 4,740 5,734
Income before taxes . . . . . . . . . . . . . . . 6,328 4,6584,731 5,283 11,059 9,941
Income Taxes:
Federal. . . . . . . . . . . . . . . . . . . . . 2,052 1,5601,552 1,793 3,604 3,353
State. . . . . . . . . . . . . . . . . . . . . . 510 343 2,562 1,903356 853 699
1,895 2,149 4,457 4,052
Net income . . . . . . . . . . . . . . . . . . . . $ 3,7662,836 $ 2,7553,134 $ 6,602 $ 5,889
Net income per share . . . . . . . . . . . . . . . $ .27 $ .20 $ .22 $ .47 $ .42
Diluted income per share . . . . . . . . . . . . . $ .27 $ .20 $ .22 $ .47 $ .42
Financial Ratios:
Return on sales. . . . . . . . . . . . . . . . . 1.93% 1.50%1.47% 1.74% 1.70% 1.62%
Asset turnover . . . . . . . . . . . . . . . . . 1.78 1.601.68 1.57 1.69 1.58
Return on assets . . . . . . . . . . . . . . . . 3.43% 2.41%2.48% 2.73% 2.89% 2.56%
Leverage factor. . . . . . . . . . . . . . . . . 3.09 3.183.23 3.19 3.23 3.19
Return on opening stockholders' equity . . . . . 10.62% 7.65%8.00% 8.70% 9.31% 8.18%
Other Data:
Cash dividends paid. . . . . . . . . . . . . . . $ 2,742 $ 2,7382,739 $ 5,484 $ 5,477
Dividends per share. . . . . . . . . . . . . . . $ .1950.195 $ .1950.195 $ 0.390 $ 0.390
Average number of shares outstanding . . . . . . 14,048 14,04414,045 14,048 14,045
[TEXT]
Inventory determination under the LIFO method can only be made at the end of
each fiscal year based on the inventory levels and costs at that time.
Accordingly, interim LIFO determinations, including those at MarchJune 30, 2000,
December 31, 2000,1999 and March 31,June 30, 1999, must necessarily be based on
management's estimates of expected year-endyear end inventory levels and costs.
Since future estimates of inventory levels and costs are subject to certain
forces beyond the control of management, interim financial results are
subject to fiscal year end LIFO inventory valuations.
Current replacement cost of inventories exceeds book value by $45.2$47.4 million,
$36.9 million and $46.4$43.9 million at MarchJune 30, 2000, December 31, 20001999 and
March 31,June 30, 1999, respectively. Taxes on income would become payable on any
realization of this excess from reductions in the level of inventories.
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A. M. CASTLE & CO.
Notes to Condensed Financial Statements
1. Condensed Financial Statements
The condensed financial statements included herein are unaudited, except
for the balance sheet at December 31, 1999, which is condensed from the
audited financial statements at that date. The Company believes that the
disclosures are adequate to make the information not misleading; however,
certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission. In the opinion
of management, the unaudited statements, included herein, contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position, the cash flows, and the results of
operations for the periods then ended. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report on Form 10-K. The 2000 interim results reported herein may not
necessarily be indicative of the results of operations for the full year
2000.
2. Earnings Per Share
In accordance with SFAS No. 128 "Earnings per Share" below is a
reconciliation of the basic and diluted earnings per share calculations
for the periods reported (dollars and shares in thousands):
First QuarterFor The Three For The Six
Months Ended Months Ended
June 30, June 30,
2000 1999 2000 1999
2000 1999
Net IncomeIncom $2,836 $ 3,766 $ 2,7553,134 $6,602 $5,889
Weighted average common shares
outstanding 14,048 14,044 14,048 14,044
Dilutive effect of outstanding
employee and directors' common
stock options - 7-- 10 -- 9
Diluted common shares outstanding 14,048 14,05114,054 14,048 14,053
Basic earnings per share $ .27.20 $ .20.22 $ .47 $ .42
Diluted earnings per share $ .27.20 $ .20.22 $ .47 $ .42
Outstanding employee and directors'
common stock options having no
dilutive effect 89809 536 809 536
3. Segments
The Company has reviewed the business activities of its divisions and
subsidiaries in accordance with the requirements of SFAS No. 131. The
Company has concluded that its business activities fall into one 6 of 9
identifiable business segment as approximately 95% of all revenues are
derived from the distribution of its specialty metals products. These
products are purchased, warehoused, processed and sold using essentially
the same systems, facilities, sales force and distribution network.
Page 64. The Company's subsidiary Total Plastics, Inc. acquired a 90% interest in
Aftech on May 1, 2000. The acquisition has been accounted for as a
purchase and accordingly the results of 9operations of Aftech have been
included in the Company's consolidated financial statements as of May 1,
2000. Pro-forma results are not required since the amounts do not
significantly differ from historical results.
Item 2. Management's Discussion Andand Analysis Of Financial Condition Andand
Results Of Operations.
Results of Operations
Operating results before taxes, depreciation, amortization and interest
expense for the firstsecond quarter of 2000 were up 37%down 8.8% compared to 1999's
firstsecond quarter. The Company earned $3.8$2.8 million ($.27.20 per share) as compared
to $2.8$3.1 million ($.20.22 per share) in the comparable quarter last year.
Results were favorably affectednegatively impacted by an easinga reduction in gross margins primarily
due to the inability to fully recover mill price increases on a timely basis.
Operating expenses also increased chiefly driven by a 7.5% increase in the
physical volume of pricing pressures versusshipments to customers. Earnings for the first six months
of $6.6 million ($.47 per share) were up 12.1% from last year's first quarter during which market conditions were relatively depressed. The
decreased interest expense noted below also had a favorable affect.$5.9 million
($.42 per share).
Quarterly sales totaled $195.2totalled $192.3 million, representing a 6.4%6.8% increase from the
first Quartersecond quarter of 1999 sales of $183.5$180 million. The increase was due primarily to
an 11%the 7.5% increase in tons sold offset bysold. For the first six months of 2000 total
revenues were $387.5 million as compared to $363.5 million in 1999, a 2% decrease in average
selling prices.6.6%
increase.
Gross profit for the quarter increased by $2.5$1.2 million (4.3%(2.2%) to $59.3$58.4
million due mainly to sales volume increases which wherewere offset by a decrease
in the total gross margin percentage from 31.0%31.8% to 30.4%. AlthoughThe decrease in
margin was caused primarily by a lag between a rapid succession of mill price
increases and surcharges and the adjustment of selling prices are stronger,there is some expected short-term market compression due
to our
customers. For the fairly rapid price increase.
Firstfirst six months of 2000 total gross profit increased 3.3%
to $117.7 while the gross margin percentage decreased from 31.4% to 30.4%.
Second quarter operating expenses were up $1.4$2.2 million (2.9%(4.6%) as compared to
the firstsecond quarter of last year. The increases arewere mainly due to increased
volume related expenses. Increased fuel costs and additional costs incurred
in the consolidation of two remote warehouse facilities into the Franklin
Park, Illinois location also contributed to expense increases. Year-to-date
operating expenses were up by $3.5 million (3.8%).
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Second quarter and payroll related expenses due to the reorganization of one of the
Company's facilities.
First quarteryear-to-date depreciation and amortization expense is
comparable to last year.
Net interest expense for the firstsecond quarter decreased approximately $.6$.4
million (20.4%(14.3%) as compared to the firstsecond quarter of 1999. The decline
reflects the Company's ongoing initiative to use cash flow to pay down debt.
Year-to-date this expense decreased by $1.0 million (17.3%)
Liquidity and Capital Resources
Accounts receivable increased by $11.4$6.1 million from the firstsecond quarter of last
year mainly due to the increased sales volume. Net inventory decreased by
$30.3$15.7 million compared to last year's valuesyear due to increased sales activity and
programmed reductions. Total long-termLong-term debt, less current portion, decreased by
$27.5$12.1 million aswhen compared to the March 31, 1999.June 30, 1999 balances. The decrease was
mainly the result of a reduction in net working capital, partially offset by
the inventory reduction mentioned above.acquisition of Aftech by the Company's Total Plastics subsidiary. The
Company's debt to capitaldebt-to-capital ratio was 49.8% as of March 31,52.0% at June 30, 2000 comparecompared to 54.1% at March 31,53.6%
on June 30, 1999. Net worth decreased $1.1$1.7 million from the prior year's
quarter. Although the Company has
remained profitablequarter, due to dividends exceeding earnings over the past four quarters, the depressed economic
conditions in 1999 resulted in dividends exceeding earnings for this period. A
turnaround in this condition has occurred in the first quarter of this year
with net worth increasing by $1.0 from the December 31,1999 value.
Page 7 of 9quarters.
The Company has unused committed and uncommitted lines of bank credit of
$135.5$121.2 million as of March 31,June 30, 2000 compared to $121.5$120.4 million at March 31,June 30,
1999.
Year-2000 Issues
There have been no significant systems or other Year 2000 problems suffered
during the first quarter of 2000 and there are no significant problems
anticipated in the future, either internally or from third parties.
Although many 1999 technology projects were deferred, it is not anticipated
that the resumption of project work will have a material adverse affect on
the Company's liquidity requirements.
Page 8 of 9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings other than ordinary routine
litigation Incidentalincidental to the business of the Registrant.
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. M. Castle & Co.
(Registrant)
Date: MayAugust 7, 2000 By: / ss/J.A. Podojil
J. A. Podojil - Treasurer/Controller
(Mr. Podojil is the Chief Accounting Officer
and has been authorized to sign on behalf of
the Registrant.)