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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1994
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
Incorporation or Organization) Identification No.)
3400 North Wolf Road, Franklin Park, Illinois 60131
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone, including area code: 708/455-7111
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 practical date:
Common Stock No Par Value - 7,367,735 shares as of June 30, 1994.
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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
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 8
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A. M. CASTLE & CO.
CONDENSED BALANCE SHEETS
(Dollars in thousands except per share data)
(unaudited) June 30 Dec. 31 June 30
Assets 1994 1993 1993
Cash. . . . . . . . . . . . . . . . .$ 1,062 $ 1,528 $ 778
Accounts receivable, net. . . . . . . 57,459 49,048 54,053
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 87,336 101,572 91,270
Total current assets . . . . . .$145,857 $152,148 $146,101
Prepaid expenses and other assets . . 10,987 11,088 10,693
Fixed assets, net . . . . . . . . . . 41,191 40,974 42,997
Total assets . . . . . . . . . .$198,035 $204,210 $199,791
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 48,915 $ 49,982 $43,616
Accrued liabilities . . . . . . . . . 12,332 9,494 8,701
Income taxes payable. . . . . . . . . 1,101 1,199 911
Current portion of long-term debt . . 4,835 5,435 5,484
Total current liabilities. . . . 67,183 66,110 58,712
Long-term debt, less current portion. 44,858 58,024 63,849
Deferred income taxes . . . . . . . . 7,971 8,067 7,717
Post retirement benefit obligations . 2,500 2,466 2,099
Stockholders' equity. . . . . . . . . 75,523 69,543 67,414
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$198,035 $204,210 $199,791
SHARES OUTSTANDING. . . . . . . . . . 7,368 7,278 7,277
BOOK VALUE PER SHARE. . . . . . . . .$ 10.25 $ 9.56 $ 9.26
WORKING CAPITAL . . . . . . . . . . .$ 78,674 $ 86,038 $ 87,389
WORKING CAPITAL PER SHARE . . . . . .$ 10.68 $ 11.82 $ 12.01
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands) For the Six Months
Ended June 30,
Cash flows from operating activities: 1994 1993
Net income. . . . . . . . . . . . . . . . $ 6,995 $ 3,367
Depreciation. . . . . . . . . . . . . . . 2,375 2,394
Other . . . . . . . . . . . . . . . . . . 622 (563)
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 9,992 5,198
(Increase) decrease in working capital. . 5,977 (12,238)
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . 15,969 (7,040)
Cash flows from investing activities:
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . (1,654) (2,189)
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (1,654) (2,189)
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Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . (13,766) 10,747
Dividends paid. . . . . . . . . . . . . . (1,759) (1,455)
Other . . . . . . . . . . . . . . . . . . 744 22
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . (14,781) 9,314
Net increase (decrease) in cash . . . . . . (466) 85
Cash - beginning of year. . . . . . . . . 1,528 693
Cash - end of period. . . . . . . . . . . $ 1,062 $ 778
Supplemental disclosure on cash flow information:
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 1,002 $ 2,273
Income taxes . . . . . . . . . . . . . $ 4,644 $ 3,120
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1994 1993 1994 1993
Net sales . . . . . . . . $131,821 $121,042 $265,669 $240,911
Cost of material sold . . 96,923 90,099 194,424 179,915
Gross profit on sales . 34,898 30,943 71,245 60,996
Operating expenses. . . . 27,330 26,122 55,701 51,144
Depreciation expense. . . 1,189 1,206 2,375 2,394
Interest expense, net . . 850 992 1,724 1,981
Total . . . . . . . . . 29,369 28,320 59,800 55,519
Income before taxes . . . 5,529 2,623 11,445 5,477
Income Taxes:
Federal . . . . . . . . 1,761 810 3,597 1,695
State . . . . . . . . . 415 200 853 415
2,176 1,010 4,450 2,110
Net income. . . . . . . . 3,353 1,613 6,995 3,367
Net income per share. . . $ .45 $ .22 $ .95 $ .46
Financial Ratios:
Return on sales . . . . 2.54% 1.33% 2.63% 1.40%
Asset turnover. . . . . 2.66 2.42 2.68 2.41
Return on assets. . . . 6.77% 3.23% 7.06% 3.37%
Leverage factor . . . . 2.85 3.05 2.85 3.05
Return on opening
stockholders' equity . 19.29% 9.85% 20.12% 10.28%
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Other Data:
Cash dividends paid . . $ 883 $ 727 $ 1,759 $ 1,455
Dividends per share . . .12 .10 .24 .20
Average number of shares
outstanding. . . . . . 7,352 7,277 7,330 7,277
Tons sold . . . . . . . 84,214 79,409 170,948 156,526
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 June
30, 1994, and June 30, 1993, must necessarily be based on management's
estimates of expected year 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 $48.0
million, $45.6 million, and $45.1 million at June 30, 1994, December 31,
1993 and June 30, 1993 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, 1993, 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 1994 interim results reported herein may not necessarily
be indicative of the results of operations for the full year 1994.
2. Common Stock and Per Share Information
Net income per share computations are based on the weighted average
number of shares of common stock outstanding during the respective
periods.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations _____________________
Operating results for 1994 continue to be significantly improved as
compared to 1993. Second quarter 1994 net income was approximately
$3.4 million as compared to $1.6 million for the second quarter of
1993. Year-to-date net income through six months was approximately
$7.0 million as compared to $3.4 million for the first six months
of 1993. The primary reasons for the better quarterly performance
were a stronger economy contributing to a gain in physical sales
volume; an increase in gross margin percentage; and continued
aggressive management of all expenses and asset levels.
Second quarter sales increased by 8.9% as compared to the second
quarter of 1993, while unit volume, expressed in tons sold,
increased by 6.1% over the same period. Year-to-date, sales are up
10.2% in dollars, and up 9.2% in tonnage.
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Gross margin percentage increased to 26.5% from the 25.6% recorded
for the second quarter of last year. The Company has continued to
focus on margin improvement with positive results being generated.
In total, gross profit showed an increase of approximately $4.0
million over the second quarter of 1993. Of this increase, $2.8
million was due to the increased physical sales volume, with the
balance being primarily due to pricing. Gross margin percentage
for the first six months of 1994 was 26.8% as compared with 25.3%
for the first half of 1993. Increase physical volume, pricing
"gains" generated from our margin improvement program, and cost
savings from favorable sourcing arrangements all have contributed
significantly to the increase in gross margin dollars.
Operating expenses continue to be well controlled. Second quarter
1994 operating expenses were up by approximately $1.2 million
(4.6%) over the comparable period last year. The expense increase
for the quarter was almost entirely attributable to increased
provisions in accruals for incentives and profit sharing resulting
from the improved operating results. As a percentage of sales,
second quarter operating expenses decreased to 20.7% from 21.6% for
the second quarter of 1993. Year-to-date expenses are up by
approximately $4.6 million (8.9%) over the first half of 1993. As
a percentage of sales, 1994 operating expenses decreased slightly
to 21.0% from 21.2% for the first half of 1993. Expense increases
occurred in the volume driven and profit related expense categories
due to the increase in physical volume and profitability from last
year.
Depreciation expense continues to remain relatively constant from
last year as capital additions were primarily aimed at improving
existing facilities, and maintaining property and equipment in good
working order.
Second quarter net interest expense decreased by $142,000 (14.3%)
as compared to the second quarter of 1993. Lower debt levels were
responsible for the decrease in expense over the prior year.
Liquidity and Capital Resources _______________________________
The Company has managed to reduce working capital needs in spite of
the overall increase in business activity. Current assets
decreased by $0.2 million as compared to the balance at June 30,
1993. Accounts receivable were up $3.4 million (6.3%) due to the
increased sale volume, while inventories were down by approximately
$4.0 million (4.4%) as the Company continued to reduce inventories
per plan. Total bank and long term borrowing decreased by $19.4
million as compared to June 30, 1993.
The Company has unused committed and uncommitted lines of bank
credit of $113.9 million as of June 30, 1994 as compared to $103.9
million at June 30, 1993.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings other than ordinary
routine litigation incidental to the business of the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of the Registrant was
held on Thursday, April 28, 1994 at 10:00 a.m. local
time, at 3400 North Wolf Road, Franklin Park, Illinois.
(b) The eleven (11) management nominees were elected to the
Board of Directors, and reference is hereby made to the
Proxy Statement and Notice of Annual Meeting filed
pursuant to Rule 14(a)-6 of the Securities and Exchange
Commission.
(c) The Stockholders at the Annual Meeting adopted an
amendment to the Registrant's Certificate of
Incorporation increasing the number of shares of common
stock, no par value, which the Registrant is authorized
to issue to 15,000,000 shares. Reference is hereby made
to the Proxy Statement and Notice of Annual Meeting filed
pursuant to Rule 14(a)-6 of the Securities and Exchange
Commission for details of the amendment. The vote of the
Stockholders on the amendment was 6,430,917 for adoption,
57,090 against adoption and 61,482 abstained.
Shareholders also approved the appointment of Arthur
Andersen & Co. as independent public accountants for the
year 1994.
Item 6. Exhibits and Reports of 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: May 6, 1994 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).
