Page 1 of 9
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to SectionQUARTERLY REPORT UNDER SECTION 13 orOR 15(d) of the Securities
Exchange Act ofOF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedQuarter Ended March 31, 199542000 Commission File Number 1-5415
A. M. Castle & Co.Co
(Exact name of registrant as specified in its charter.)charter)
Delaware 36-0879160
(State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) 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: 708/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 daysdays.
Yes [X]X No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:practicable date.
Class Outstanding at March 31, 2000
Common Stock, No Par Value - 11,090,00614,048,070 shares
as of April 30, 1995. Page 2 of 9
A. M. CASTLE & CO.
Part I. FINANCIAL INFORMATION
Page
Number
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . 3
Condensed Balance Sheets . . . . . . . . . . . 3
Comparative Statements of Cash Flows . . . . . 3
Comparative Statements of Income . . . . . . . 4
Notes to Condensed Financial Statements. . . . 5
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations . . . . 6 - 7. 6-7
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security
Holders . . . . .Proceedings. . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K.8-K . . . . . . . 8
Page 3 of 9
A. M. CASTLE & CO.
CONDENSED BALANCE SHEETS
(Dollars in thousands except
per share data)
(unaudited)
Mar. 31 Dec. 31 Mar. 31
Assets 1995 1994 1994
Cash. . . . . . . . . . . . . . . . .$ 3,419 $ 976 $ 2,770
Accounts receivable, net. . . . . . . 74,282 58,892 55,510
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 96,990 98,215 94,068
Total current assets . . . . . .$174,691 $158,083 $152,348
Prepaid expenses and other assets . . 12,957 13,854 10,919
Fixed assets, net . . . . . . . . . . 42,220 41,190 40,570
Total assets . . . . . . . . . .$229,868 $213,127 $203,837
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 73,403 $ 61,282 $48,054
Accrued liabilities . . . . . . . . . 11,983 14,704 9,598
Income taxes payable. . . . . . . . . 7,492 2,321 2,946
Current portion of long-term debt . . 3,768 3,831 5,010
Total current liabilities. . . . 96,646 82,138 65,608
Long-term debt, less current portion. 33,837 38,531 54,903
Deferred income taxes . . . . . . . . 7,696 7,772 8,034
Post retirement benefit obligations . 2,558 2,525 2,528
Stockholders' equity. . . . . . . . . 89,131 82,161 72,764
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$229,868 $213,127 $203,837
SHARES OUTSTANDING. . . . . . . . . . 11,081 11,079 10,964*
BOOK VALUE PER SHARE. . . . . . . . .$ 8.04 $ 7.42 $ 6.62*
WORKING CAPITAL . . . . . . . . . . .$ 78,045 $ 75,945 $86,740
WORKING CAPITAL PER SHARE . . . . . .$ 7.04 $ 6.85 $ 7.90*
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Three Months
Ended March 31,
Cash flows from operating activities: 1995 1994
Net income. . . . . . . . . . . . . . . . $ 8,246 $ 3,642
Depreciation. . . . . . . . . . . . . . . 1,092 1,186
Other . . . . . . . . . . . . . . . . . . 1,005 556
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 10,343 5,384
(Increase) decrease in working capital. . 256 (331)
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . 10,599 5,053
Cash flows from investing activities:
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . (2,122) 156
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (2,122) 156
March 31, Dec. 31, March 31,
ASSETS 2000 1999 1999
Cash . . . . . . . . . . . . . . . . $ 2,568 $ 2,578 $ 4,399
Accounts receivable, net . . . . . . 101,197 83,352 89,793
Inventories (principally on last-in,
first-out basis) . . . . . . . . . . 175,471 169,618 205,793
Total current assets . . . . . . . $ 279,236 $255,548 $ 299,985
Prepaid expenses and other assets. . 63,469 60,716 58,370
Fixed assets, net. . . . . . . . . . 95,986 97,077 99,210
Total assets . . . . . . . . . . . $ 438,691 $413,341 $ 457,565
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . $ 112,370 $102,976 $ 103,048
Accrued liabilities. . . . . . . . . 15,678 17,230 15,980
Income taxes payable . . . . . . . . 7,098 4,876 5,370
Current portion of long-term debt . 3,577 3,915 3,702
Total current liabilities. . . . . $ 138,723 $128,997 $128,100
Long-term debt, less current portion 138,290 122,625 165,831
Deferred income taxes. . . . . . . . 16,692 16,356 15,919
Post retirement benefit obligations 2,179 3,552 3,767
Stockholders' equity . . . . . . . . 142,807 141,811 143,948
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . $ 438,691 $413,341 $ 457,565
SHARES OUTSTANDING . . . . . . . . . 14,048 14,046 14,044
BOOK VALUE PER SHARE . . . . . . . . $ 10.17 $ 10.10 $ 10.25
WORKING CAPITAL. . . . . . . . . . . $140,513 $126,551 $ 171,885
WORKING CAPITAL PER SHARE. . . . . . $ 10.00 $ 9.01 $ 12.24
DEBT TO CAPITAL. . . . . . . . . . . 49.8% 47.2% 54.1%
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Three Months
Ended March 31,
Cash flows from operating activities: 2000 1999
Net income . . . . . . . . . . . . . . . . . . $ 3,766 $ 2,755
Depreciation . . . . . . . . . . . . . . . . . 2,438 2,408
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
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . . . (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) $ 1,445
Cash - beginning of year . . . . . . . . . . . 2,578 2,954
Cash - end of period . . . . . . . . . . . . . $ 2,568 $ 4,399
Cash paid/(received) during period . . . . . . .
Interest. . . . . . . . . . . . . . . . . . . . $ 1,834 $ 2,999
Income taxes. . . . . . . . . . . . . . . . . . $ (253) $ (553)
Page 4 of 9
Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . (4,757) 3,546
Dividends paid. . . . . . . . . . . . . . (1,331) (876)
Other . . . . . . . . . . . . . . . . . . 54 455
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . (6,034) (3,967)
Net increase (decrease) in cash . . . . . . 2,443 1,242
Cash - beginning of year. . . . . . . . . 976 1,528
Cash - end of period. . . . . . . . . . . $ 3,419 $ 2,770
Supplemental disclosure on cash flow information:
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 1,082 $ 1,372
Income taxes . . . . . . . . . . . . . $ 294 $ 560
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three Months Ended
(Unaudited) March 31,
1995 1994
Net sales . . . . . . . . $169,056 $133,848
Cost of material sold . . 121,757 97,501
Gross profit on sales . 47,299 36,347
Operating expenses. . . . 31,825 28,371
Depreciation expense. . . 1,092 1,186
Interest expense, net . . 747 874
Total . . . . . . . . . . 33,664 30,431
Income before taxes . . . 13,635 5,916
Income Taxes:
Federal . . . . . . . . 4,336 1,836
State . . . . . . . . . 1,053 438
5,389 2,274
Net income. . . . . . . . 8,246 3,642
Net income per share. . . $ .74 $ .33
Financial Ratios:
Return on sales . . . . 4.88% 2.72%
Asset turnover. . . . . 2.94 2.63
Return on assets. . . . 14.35% 7.15%
Leverage factor . . . . 2.80 2.93
Return on opening
stockholders' equity . 40.15% 20.95%
Other Data:
Cash dividends paid . . $ 1,331 $ 876
Dividends per share . . .12 .08*
Page 5 of 9
Average number of shares
outstanding. . . . . . 11,080 10,950*
Tons sold . . . . . . . 94,901 86,734
*Restated to reflect a 50% stock dividend.
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three Months Ended March 31,
(Unaudited) 2000 1999
Net sales. . . . . . . . . . . . . . . . . . . . . $195,239 $183,460
Cost of material sold. . . . . . . . . . . . . . . 135,945 126,635
Gross profit on sales. . . . . . . . . . . . . . 59,294 56,825
Operating expenses . . . . . . . . . . . . . . . . 48,224 46,866
Depreciation and amortization expense. . . . . . . 2,438 2,408
Interest expense, net. . . . . . . . . . . . . . . 2,304 2,893
Income before taxes . . . . . . . . . . . . . . . 6,328 4,658
Income Taxes:
Federal. . . . . . . . . . . . . . . . . . . . . 2,052 1,560
State. . . . . . . . . . . . . . . . . . . . . . 510 343
2,562 1,903
Net income . . . . . . . . . . . . . . . . . . . . $ 3,766 $ 2,755
Net income per share . . . . . . . . . . . . . . . $ .27 $ .20
Diluted income per share . . . . . . . . . . . . . $ .27 $ .20
Financial Ratios:
Return on sales. . . . . . . . . . . . . . . . . 1.93% 1.50%
Asset turnover . . . . . . . . . . . . . . . . . 1.78 1.60
Return on assets . . . . . . . . . . . . . . . . 3.43% 2.41%
Leverage factor. . . . . . . . . . . . . . . . . 3.09 3.18
Return on opening stockholders' equity . . . . . 10.62% 7.65%
Other Data:
Cash dividends paid. . . . . . . . . . . . . . . $ 2,742 $ 2,738
Dividends per share. . . . . . . . . . . . . . . $ .195 $ .195
Average number of shares outstanding . . . . . . 14,048 14,044
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 March 31, 1995,2000,
and March 31, 1994,1999, 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 $58.1
million, $51.7$45.2 million
and $46.0$46.4 million at March 31, 1995, December
31, 19942000 and March 31, 19941999, respectively. Taxes
on income would become payable on any realization of this excess from
reductions in the level of inventories.
Page 65 of 9
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, 1994,1999, 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.10-K. The 19952000 interim results reported herein may not
necessarily be indicative of the results of operations for the full year
1995.2000.
2. Common Stock andEarnings Per Share
Information
Net incomeIn accordance with SFAS No. 128 "Earnings per Share" below is a
reconciliation of the basic and diluted earnings per share computationscalculations
for the periods reported (dollars and shares in thousands):
First Quarter
2000 1999
Net Income $ 3,766 $ 2,755
Weighted average common shares outstanding 14,048 14,044
Dilutive effect of outstanding employee and
directors' common stock options - 7
Diluted common shares outstanding 14,048 14,051
Basic earnings per share $ .27 $ .20
Diluted earnings per share $ .27 $ .20
Outstanding employee and directors'
common stock options having no
dilutive effect 89 536
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
identifiable business segment as approximately 95% of all revenues are
based onderived from the weighted average
numberdistribution of sharesits specialty metals products. These
products are purchased, warehoused, processed and sold using essentially
the same systems, facilities, sales force and distribution network.
Page 6 of common stock outstanding during the respective
periods. On July 28, 1994, the Company declared a 50% stock
dividend, which was effected as a 3 for 2 stock split. The
additional shares were distributed August 28, 1994 to shareholders
of record August 12, 1994. All per share amounts presented have
been restated to reflect the effect of the 50% stock dividend.9
Item 2. Management's Discussion andAnd Analysis ofOf Financial Condition andAnd
Results Of Operations.
Results of Operations
Results of Operations _____________________
The first quarter of 1995 was a record quarter for A. M. Castle &
Co. Net income of $8.2 million exceeded the Company's "previous
best" of $4.6 million generated in the second quarter of 1988. A
strong economy provided a positive environment for a significant
upturn in prices and an increased level of sales activity. Other
factors which had a major impact on earnings were an increase in
gross margin percentage and continued aggressive management of all
expenses.
First quarter 1995 sales totaled a record $169.1 million, a 26.3%
increase over the first quarter of 1994's sales of $133.8 million.
Sales unit volume, expressed in tons sold, increased by 9.4% over
Page 7 of 9
the same period. Favorable pricing and sales mix caused the sales
increase in dollars to outpace the increase in tons sold.
Gross margin percentage increased to 28.0% as compared to 27.2%Operating results for the first quarter of 2000 were up 37% compared to 1999's
first quarter. The Company earned $3.8 million ($.27 per share) as compared
to $2.8 million ($.20 per share) in the comparable quarter last year. Results
were favorably affected by an easing of pricing pressures versus last year's
first quarter during which market conditions were relatively depressed. The
Company's margin improvement
program has continueddecreased interest expense noted below also had a favorable affect.
Quarterly sales totaled $195.2 million, representing a 6.4% increase from the
first Quarter of 1999 sales of $183.5 million. The increase was due
primarily to produce favorable results. In terms of
dollars,an 11% increase in tons sold offset by a 2% decrease in average
selling prices.
Gross profit for the quarter increased by $2.5 million (4.3%) to $59.3
million due mainly to sales volume increases which where offset by a decrease
in the total gross profit increased by almost $11.0 million over
the first quarter of last year. Of this amount, approximately $5.7
million wasmargin percentage from 31.0% to 30.4%. Although mill
prices are stronger,there is some expected short-term market compression due
to higher prices, $3.8 million due to increased
physical volume and the balance due to changes in sales mix and
cost savings from sourcing arrangements.
Operatingfairly rapid price increase.
First quarter operating expenses were up by approximately $3.4$1.4 million (12.0%)
over the comparable period last year. As a percentage of sales,
however, first quarter 1995 operating expenses decreased to 18.8%
from 21.1% for the first quarter of 1994. The expense increases
experienced during the quarter were in volume driven and profit
related expense categories. Expenses that increased due to the
9.4% rise in physical volume were warehouse wages, overtime,
trucking expenses, commercial freight, and repairs and maintenance.
Accruals for incentive and profit sharing expense were up
significantly due to our record profits.
Depreciation expense decreased to $0.1 million (7.9%(2.9%) as compared to the
first quarter of 1994 primarilylast year. The increases are due to increased volume related
expenses and payroll related expenses due to the salereorganization of one of the
Company's facilities.
First quarter depreciation and leaseback of equipment purchased in 1994 and 1993, which had the
effect of reducing depreciation expense and increasing rental
expense. Rentalamortization expense is included in operating expenses, which
were discussed above.
Interestcomparable to last year.
Net interest expense was down byfor the first quarter decreased approximately $0.1$.6 million
due(20.4%) as compared to
lower debt levels. Total funded borrowing decreased by $22.3
million since the first quarter of 1994.1999. The debt reduction serveddecline reflects the
Company's ongoing initiative to keep interest expenseuse cash flow to pay down even though interest rates have
increased due to Federal Reserve rate hikes.debt.
Liquidity and Capital Resources
_______________________________
The Company has managed to control working capital needs despite
the upward pressure generatedAccounts receivable increased by $11.4 million from the continued increase in
business activity. Accounts receivable rose by $18.8 millionfirst quarter of last
year mainly due to the sharply increased sales volume. Net inventory however, was
only updecreased by $2.9$30.3
million as the Company continued its effortscompared to hold inventory levels down despite thelast year's values due to increased sales volume.
Trade payables were up by approximately $25.3 million as a result
of deferred terms negotiated with several vendors.activity and
programmed reductions. Total bank and
long term borrowinglong-term debt decreased by $22.3$27.5 million as
compared to the balanceMarch 31, 1999. The decrease was mainly the result of the
inventory reduction mentioned above. The Company's debt to capital ratio was
49.8% as of March 31, 2000 compare to 54.1% at March 31, 1994.1999. Net worth
decreased $1.1 million from the prior year's quarter. Although the Company has
remained profitable 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 9
The Company has unused committed and uncommitted lines of bank credit of
$137.0$135.5 million as of March 31, 1995 as2000 compared to $104.2$121.5 million asat March 31,
1994.1999.
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 4. Submission of Matters to a Vote of Security Holders
(a) None
Item 6. Exhibits and Reports ofon Form 8-K
(a) None
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
Page 9 of 9
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: May 5, 19957, 2000 By: /ss// ss/J.A. Podojil
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).Registrant.)