<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
(FEE REQUIRED)
For the fiscal year Ended December 31, 1993 Commission File Number: 1-5415
A. M. CASTLE & CO.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-0879160
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
</TABLE>
3400 NORTH WOLF ROAD, FRANKLIN PARK, ILLINOIS 60131
(Address of principal executive offices), (Zip Code)
Registrant's telephone number, including area code (708) 455-7111
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
NAME OF EACH EXCHANGE ON
TITLE OF EACH WHICH REGISTERED
CLASS
Common Stock -- no par value American and Chicago Stock Exchanges
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K X .
The approximate aggregate market value of the registrant's common stock held by
non-affiliates of the registrant on March 4, 1994 was $130,551,000.
The number of shares outstanding of the registrant's common stock on March 4,
1994 was 7,303,150 shares.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS INCORPORATED BY REFERENCE APPLICABLE PART OF FORM 10-K
<TABLE>
<S> <C>
Annual Report to Stockholders for the Parts I, II and IV
year ended December 31, 1993
Proxy Statement dated March 11, 1994 Part III
furnished to Stockholders in connection with
registrant's Annual Meeting of Stockholders
</TABLE>
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<PAGE> 2
PART I
ITEM 1. BUSINESS.
A. M. Castle & Co. is one of North America's largest, independent metals
service center companies. The registrant (Company) provides a complete range of
inventories as well as preprocessing services to a wide variety of customers.
In the last three years, sales mix was approximately as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Carbon and Stainless........................................ 77 % 73 % 70 %
Non-Ferrous Metals.......................................... 23 % 27 % 30 %
---- ---- ----
100 % 100 % 100 %
</TABLE>
These metals are inventoried in many forms including round, hexagon, square
and flat bars; plates; tubing; shapes; and sheet and coil.
Depending on the size of the facility and the nature of the markets it
serves, each of the Company's service centers is equipped as needed with Bar
Saws, Tubing Cut-off Lathes, Close Tolerance Plate Saws, Oxygen and Plasma Arc
Flame Cutting Machinery, Stress Relieving and Annealing Furnaces, Surface
Grinding Equipment, Edge Conditioning Equipment, Sheet Shears and Coil
Processing Equipment. The Company also does specialized fabrications for
customers through pre-qualified subcontractors.
Emphasis on the more highly engineered grades and alloys of metals,
supported by strong service commitments, has earned the Company a leadership
role in filling the needs of users of those metals.
The Company has its main office, and largest distribution center, in
Franklin Park, Illinois. This center serves metropolitan Chicago and,
approximately, a nine state area. In addition, there are distribution centers in
various other cities (see Item 2). The Chicago, Los Angeles and Cleveland
distribution centers together account for approximately one-half of all sales.
The customer base in the Eastern part of the county includes heavy and
light machine tool industries, construction equipment, mining, textile
manufacturing machinery and plastic extrusion machinery. The aerospace market is
also served both directly and through subcontractors.
The Midwest Region serves manufacturers of hydrocarbon processing
equipment, farm implement and construction equipment, food processing equipment
and machine tools. The automotive, marine and aerospace markets are also
included in the Midwest Region customer base.
In the Western area of the country, the Company serves the metal needs of a
wide variety of industries as well as the subcontractors and manufacturers who
serve those industries. The major markets include aircraft and aerospace, both
military and commercial, oil and gas, chemical, petrochemical, farm equipment,
electronics, lumber, and mining.
In Canada, the Company serves a wide range of businesses including
aerospace, pulp and paper, and machinery equipment manufacturing. These markets
are serviced by the Company's Canadian subsidiary A. M. Castle & Co. (Canada)
Inc.
The Company's specialized operating unit is the Hy-Alloy Steels Co.,
located in Bedford Park, Illinois, a Chicago suburb. Hy-Alloy is a distributor
of alloy bars stocked as rounds, squares, hexes, and flats; and of alloy tubing.
It serves a nationwide market, which includes aircraft and aerospace, oil field
equipment, gears and power train components, machine tools, screw machine
products, bearings, construction equipment and agricultural equipment. In 1993 a
value-added bar processing center, H-A Industries, was added. From this
facility, the Company ships quench and tempered alloy bar products to its
customers throughout the United States and Canada.
In general, the Company purchases metals from many producers. In the case
of nickel alloys and titanium, each is single sourced. Satisfactory alternative
sources, however, are available for all metals that the
1
<PAGE> 3
Company buys and its business would not be materially adversely affected by the
loss of any one supplier. Purchases are made in large lots and held in the
distribution centers until sold, usually in smaller quantities. The Company's
ability to provide quick delivery, frequently overnight, of a wide variety of
metal products allows customers to reduce inventory investment because they do
not need to order the large quantities required by producing mills.
The major portion of 1993 net sales were from materials owned by the
Company. The materials required to fill the balance of such sales were obtained
from other sources, such as direct mill shipments to customers or purchases from
other metals distributors. Sales are primarily through the Company's own sales
organization and are made to many thousands of customers in a wide variety of
industries. No single customer is significant to the Company's sales volume.
Deliveries are made principally by leased trucks. Common carrier delivery is
used in areas not serviced directly by the Company's fleet.
The Company encounters strong competition both from other independent
metals distributors and from large distribution organizations, some of which
have substantially greater resources.
The Company has approximately 1200 full-time employees in its operations
throughout the United States and Canada. Approximately 300 of these are
represented by collective bargaining units, principally the United Steelworkers
of America.
ITEM 2. PROPERTIES.
The Company's principal executive offices are at its Franklin Park plant
near Chicago, Illinois. All properties and equipment are well maintained and in
good operating condition and sufficient for the current level of activities.
Metals distribution centers and sales offices are maintained at each of the
following locations, all of which are owned in fee, except as indicated:
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA IN
LOCATION SQUARE FEET
------------------------------------------------------------------------ -------------
<S> <C>
CASTLE METALS
Atlanta, Georgia........................................................ 35,100(1)
Charlotte, North Carolina............................................... 66,700(1)
Chicago area --
Franklin Park, Illinois............................................... 533,600
Cincinnati, Ohio........................................................ 9,300(1)
Cleveland area --
Bedford Heights, Ohio................................................. 381,400
Dallas, Texas........................................................... 78,000
Houston, Texas.......................................................... 109,100
Kansas City, Missouri................................................... 170,000
Los Angeles area --
Paramount, California................................................. 264,900
Milwaukee area --
Wauwatosa, Wisconsin.................................................. 98,000(1)
Philadelphia, Pennsylvania.............................................. 71,600
Salt Lake City, Utah.................................................... 22,500(1)
Stockton, California.................................................... 60,000(1)
Worcester, Massachusetts................................................ 60,000
-------------
Total Castle Metals........................................... 1,960,200
HY-ALLOY STEELS CO.
Chicago area --
Bedford Park, Illinois................................................ 103,700
H-A INDUSTRIES
Hammond, Indiana........................................................ 123,000(1)
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA IN
LOCATION SQUARE FEET
------------------------------------------------------------------------ -------------
<S> <C>
A. M. CASTLE & CO. (CANADA) INC.
Montreal, Quebec........................................................ 25,600(1)
Toronto area --
Mississauga, Ontario.................................................. 57,100(1)
Etobicoke, Ontario...................................................... 8,000(1)
Winnipeg, Manitoba...................................................... 20,700(1)
-------------
2,298,300
-------------
-------------
SALES OFFICES (LEASED)
Buffalo, New York
Detroit, Michigan
Pittsburgh, Pennsylvania
Phoenix, Arizona
San Diego, California
Tulsa, Oklahoma
Wichita, Kansas
</TABLE>
- ---------------
(1) Leased: See Note 5 in the 1993 Annual Report to Stockholders, incorporated
herein by this specific reference, for information regarding lease
agreements.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings other than the ordinary routine
litigation incidental to the business of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
3
<PAGE> 5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required to be filed in Part II (Items 5, 6, and 7) in Form
10-K has been included in the 1993 Annual Report to Stockholders, as required by
the Securities and Exchange Commission, and is included elsewhere in the filing.
Accordingly, the following items required under Items 5, 6, and 7 are
incorporated herein by this specific reference to the 1993 Annual Report to
Stockholders: "Common Stock Information", page 20, "Eleven-Year Financial and
Operating Summary", pages 18 and 19, and "Financial Review", pages 7 and 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Part IV, Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
4
<PAGE> 6
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AND TITLE AGE BUSINESS EXPERIENCE
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Michael Simpson............................ 55 Mr. Simpson began his employment with the
Chairman of the Board registrant in 1968. In 1974 Mr. Simpson was
elected President of Hy-Alloy Steels Co.
Mr. Simpson was elected Vice President --
Midwest Region in 1977. In 1979 Mr. Simpson
was elected Chairman of the Board.
Richard G. Mork............................ 58 Mr. Mork began his employment with the
President and Chief registrant in 1957. In 1977 Mr. Mork was
Executive Officer elected to the position of Vice
President -- Eastern Region and in 1988 to
the position of Senior Vice President and
Chief Operating Officer. In 1990 Mr. Mork
was made President and Chief Executive
Officer.
Edward F. Culliton......................... 52 Mr. Culliton began his employment with the
Vice President and registrant in 1965. Mr. Culliton was
Chief Financial Officer elected Corporate Secretary in 1972 and
Treasurer in 1975. In 1977 he was elected
Vice President of Finance. He is the Chief
Financial Officer.
Sven G. Ericsson........................... 45 Mr. Ericsson began his employment with the
Vice President -- registrant in 1989. Mr. Ericsson was
Plate and Carbon elected to the position of Vice
Products Group President -- Eastern Region in 1989, and
Vice President -- Plate and Carbon Products
Group in 1992.
M. Bruce Herron............................ 48 Mr. Herron began his employment with the
Vice President -- registrant in 1970. Mr. Herron was elected
Western Region to the position of Vice
President -- Western Region in 1989.
Stephen V. Hooks........................... 42 Mr. Hooks began his employment with the
Vice President -- registrant in 1972. Mr. Hooks was elected
Midwest Region to the position of Vice
President -- Midwest Region in 1993.
Richard G. Phifer.......................... 49 Mr. Phifer began his employment with the
Vice President -- registrant in 1990. Mr. Phifer was elected
Eastern Region to the position of Vice President -- Plate
and Carbon Products Group in 1991, and Vice
President -- Eastern Region in 1992.
Thomas D. Prendergast...................... 60 Mr. Prendergast began his employment with
Vice President -- Human the registrant in 1974. Mr. Prendergast was
Resources elected Vice President -- Human Resources
in 1991.
Alan D. Raney.............................. 42 Mr. Raney began his employment with the
Vice President -- registrant in 1986. Mr. Raney was elected
High Tech Products Vice President -- Midwest Region during
Group 1989, and Vice President -- High Tech
Products Group in 1990.
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND TITLE AGE BUSINESS EXPERIENCE
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Gise Van Baren............................. 62 Mr. Van Baren began his employment with the
Vice President -- Alloy registrant's Hy-Alloy Steels Co. (acquired
Products Group and in 1973) in 1954. He became Vice President
President -- Hy-Alloy Steels of Hy-Alloy in 1976 and President in 1979.
Division He was elected Vice President -- Alloy
Products Group in 1991.
James A. Podojil........................... 51 Mr. Podojil began his employment with the
Chief Accounting Officer registrant in 1968. In 1977 he was elected
and Treasurer/Controller to the position of Controller and in 1985
was elected to the additional post of
Treasurer.
Jerry M. Aufox............................. 51 Mr. Aufox began his employment with the
Secretary and Corporate registrant in 1977. In 1985 he was elected
Counsel to the position of Secretary and Corporate
Counsel. He is responsible for all legal
affairs of the registrant.
</TABLE>
All additional information required to be filed in Part III, Item 10, Form
10-K, has been included in the Definitive Proxy Statement dated March 11, 1994
filed with the Securities and Exchange Commission, pursuant to Regulation 14A
entitled "Information Concerning Nominees for Directors" and is hereby
incorporated by this specific reference.
ITEM 11. EXECUTIVE COMPENSATION.
All information required to be filed in Part III, Item 11, Form 10-K, has
been included in the Definitive Proxy Statement dated March 11, 1994, filed with
the Securities and Exchange Commission, pursuant to Regulation 14A entitled
"Management Remuneration" and is hereby incorporated by this specific reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required to be filed in Part I, Item 4, Form 10-K, has been
included in the Definitive Proxy Statement dated March 11, 1994, filed with the
Securities and Exchange Commission pursuant to Regulation 14A, entitled
"Information Concerning Nominees for Directors" and "Stock Ownership of Certain
Beneficial Owners and Management" is hereby incorporated by this specific
reference.
Other than the information provided above, Part III has been omitted
pursuant to General Instruction G for Form 10-K and Rule 12b-23 since the
Company will file a Definitive Proxy Statement not later than 120 days after the
end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A,
which involves the election of Directors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
6
<PAGE> 8
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Financial statements (incorporated by reference to the 1993 Annual Report
to Stockholders) and exhibits are set forth in the accompanying index to
Financial Statements and Schedules. No reports on Form 8-K were filed in the
fourth quarter of 1993.
7
<PAGE> 9
A. M. CASTLE & CO.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<S> <C>
Report of Independent Public Accountants on Schedules.......................... Page
Consent of Independent Public Accountants with respect to Form S-8............. Page
Consolidated Financial Statement Schedules
Property, Plant and Equipment -- Schedule V.................................. Page
Accumulated Depreciation -- Schedule VI...................................... Page
Valuation and Qualifying Accounts -- Schedule VIII........................... Page
Data incorporated by reference from 1993 Annual Report to Stockholders of A. M.
Castle & Co., included herein --
Consolidated Statements of Income -- For the years ended December 31, 1993,
1992, and 1991............................................................ Page
Consolidated Statements of Reinvested Earnings -- For the years ended
December 31, 1993, 1992, and 1991......................................... Page
Consolidated Balance Sheets -- December 31, 1993, 1992, and 1991............. Page
Consolidated Statements of Cash Flows -- For the years ended December 31,
1993, 1992, and 1991...................................................... Page
Notes to Consolidated Financial Statements................................... Pages
Report of Independent Public Accountants..................................... Page
Exhibits:
20 -- Report furnished to security holders..................................... Exhibit A
3 -- Articles of Incorporation and amendments................................. Exhibit B
3 -- By laws of the Company................................................... Exhibit C
10 -- Long term incentive compensation plan.................................... Exhibit D
10 -- 1990 restricted stock and stock option plan.............................. Exhibit E
10 -- Description of management incentive plan................................. Exhibit F
</TABLE>
All schedules and exhibits, other than those listed above are omitted as
the information is not required or is furnished elsewhere in the financial
statements or the notes thereto.
8
<PAGE> 10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To A. M. Castle & Co.:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in the A. M. Castle & Co. 1993 Annual Report
to Stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 4, 1994. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedules listed in
the accompanying index are the responsibility of the company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
Chicago, Illinois,
February 4, 1994.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
WITH RESPECT TO FORM S-8
As independent public accountants, we hereby consent to the incorporation
of our report, incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statement File No. 2-83884 on Form S-8.
Chicago, Illinois,
March 4, 1994
9
<PAGE> 11
SCHEDULE V
A. M. CASTLE & CO.
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS RETIREMENTS END OF
CLASSIFICATION OF PERIOD AT COST AND SALES PERIOD
- ------------------------------------------------------ ---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
1993
Land................................................ $ 4,117 $ -- $ 2 $ 4,115
Buildings........................................... 34,734 141 -- 34,875
Machinery and Equipment............................. 54,833 4,480 2,285 57,028
---------- --------- ----------- ----------
$ 93,684 $ 4,621 $ 2,287 $ 96,018
---------- --------- ----------- ----------
---------- --------- ----------- ----------
1992
Land................................................ $ 4,115 $ 2 $ -- $ 4,117
Buildings........................................... 34,688 46 -- 34,734
Machinery and Equipment............................. 54,653 1,746 1,566 54,833
---------- --------- ----------- ----------
$ 93,456 $ 1,794 $ 1,566 $ 93,684
---------- --------- ----------- ----------
---------- --------- ----------- ----------
1991
Land................................................ $ 4,115 $ -- $ -- $ 4,115
Buildings........................................... 33,893 830 35 34,688
Machinery and Equipment............................. 59,340 2,475 7,162 54,653
---------- --------- ----------- ----------
$ 97,348 $ 3,305 $ 7,197 $ 93,456
---------- --------- ----------- ----------
---------- --------- ----------- ----------
</TABLE>
10
<PAGE> 12
SCHEDULE VI
A. M. CASTLE & CO.
ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE AT
BEGINNING CHARGED RETIREMENTS END OF
CLASSIFICATION OF PERIOD TO INCOME AND SALES PERIOD
- ------------------------------------------------------ ---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
1993
Buildings........................................... $ 14,443 $ 1,082 $ -- $ 15,525
Machinery and Equipment............................. 36,039 3,702 222 39,519
---------- --------- ----------- ----------
$ 50,482 $ 4,784 $ 222 $ 55,044
---------- --------- ----------- ----------
---------- --------- ----------- ----------
1992
Buildings........................................... $ 13,365 $ 1,078 $ -- $ 14,443
Machinery and Equipment............................. 32,676 3,787 424 36,039
---------- --------- ----------- ----------
$ 46,041 $ 4,865 $ 424 $ 50,482
---------- --------- ----------- ----------
---------- --------- ----------- ----------
1991
Buildings........................................... $ 12,166 $ 1,214 $ 15 $ 13,365
Machinery and Equipment............................. 30,417 4,059 1,800 32,676
---------- --------- ----------- ----------
$ 42,583 $ 5,273 $ 1,815 $ 46,041
---------- --------- ----------- ----------
---------- --------- ----------- ----------
</TABLE>
11
<PAGE> 13
SCHEDULE VIII
A. M. CASTLE & CO.
ACCOUNTS RECEIVABLE -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Balance, beginning of year..................................... $ 600 $ 600 $ 600
Add -- Provision charged to income............................. 437 776 418
-- Recoveries............................................. 242 214 373
Less -- Uncollectible accounts charged against allowance....... (679) (990) (791)
----- ----- -----
Balance, end of year........................................... $ 600 $ 600 $ 600
----- ----- -----
----- ----- -----
</TABLE>
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ James A. Podojil
-------------------------------
James A. Podojil, Treasurer and
Controller
(Mr. Podojil is the Chief
Accounting Officer and has been
authorized to sign on behalf of
the registrant.)
Date: March 4, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Michael Simpson
- -------------------------------------
Michael Simpson,
Chairman of the Board
March 4, 1994
/s/ Richard G. Mork
- -------------------------------------
Richard G. Mork, President--
Chief Executive Officer, and Director
March 4, 1994
/s/ Edward F. Culliton
- -------------------------------------
Edward F. Culliton, Vice President--
Chief Financial Officer, and Director
March 4, 1994
/s/ William K. Hall
- -------------------------------------
William K. Hall, Director
March 4, 1993
/s/ Robert S. Hamada
- -------------------------------------
Robert S. Hamada, Director
Chairman, Audit Committee
March 4, 1994
/s/ John W. McCarter, Jr.
- -------------------------------------
John W. McCarter, Jr., Director
March 4, 1994
/s/ William J. McDermott
- -------------------------------------
William J. McDermott, Director
March 4, 1994
13
<PAGE> 1
EXHIBIT 99.A
A.M. CASTLE & CO.
Setting
Industry
Standards
for the
Nineties
1993 ANNUAL REPORT
<PAGE> 2
A.M. CASTLE & CO. has come a long way since 1890 when Alfred M. Castle
opened his first warehouse in Chicago, Illinois. Today, we are North America's
leading industrial distributor of higher technology metals including carbon,
alloy and stainless steels; nickel alloys; aluminum; copper; brass and
titanium.
The metals we distribute are used by more than 30,000 customers that
range in size from very small to many of the top Fortune 500 industrial
companies. They include manufacturers within the $440 billion producer durable
equipment sector in end-use industries such as pollution control equipment;
machine tools; agricultural, construction and mining machinery; electric and
power generation equipment; oil and oil-field services; chemical and petroleum
refineries; defense and aerospace.
We differentiate ourselves competitively on a quality and service basis.
Our mission is to set industry standards in these two critical areas--both
today and in the future. A growing number of our customers share this
determination and are implementing a variety of productivity-enhancing programs
ranging from zero inventory management systems to truly interactive on-line
partnerships. Because we acted early and aggressively to develop state-of-the-
art sales and marketing capabilities, distribution facilities, and business
systems, we are a major beneficiary of this trend as well as the upturn in the
capital goods sector of our economy.
In the United States, our coast-to-coast metals service center network
consists of 23 locations with nearly 2.2 million square feet of capacity. In
Canada, we serve customers from three service centers in the provinces of
Manitoba, Ontario and Quebec. Our corporate headquarters are located in the
Chicago suburb of Franklin Park, Illinois.
Our common stock trades on the American Stock Exchange under the ticker
symbol CAS. We have approximately 7.3 million shares of common stock
outstanding and 1,625 shareholders of record.
COVER: TABLE OF CONTENTS
"SELLING INDUSTRY Financial Highlights................................1
STANDARDS FOR THE Letter to Shareholders..............................2
NINETIES"IS MORE Setting Industry Standards for the Nineties.........4
THAN JUST THE SUBJECT Financial Review....................................9
OF THIS YEAR'S ANNUAL Financial Statements and Notes.....................11
REPORT. IT CAPTURES Eleven Year Financial and Operating Standards......22
HOW WE DEFINE AND Stock and Dividend Information.....................24
DIFFERENTIATE OURSELVES Management and General Information..Inside Back Cover
FROM OUR COMPETITORS. IT
IS ALSO THE BASIS FOR OUR
CONFIDENCE IN CASTLE'S FUTURE.
<PAGE> 3
THE YEAR IN BRIEF
(dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
%
1993 1992 Change
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Results Net sales . . . . . . . . . . . . . . . . . . $474,108 $423,913 12%
Gross profit on sales . . . . . . . . . . . . 122,285 110,230 11%
Income before taxes . . . . . . . . . . . . . 11,611 6,088 91%
PER SHARE OF
COMMON STOCK Net income. . . . . . . . . . . . . . . . . . .95 .50 90%
Dividends . . . . . . . . . . . . . . . . . . .40 .40
Stockholders' equity. . . . . . . . . . . . . 9.56 9.00 6%
Average shares outstanding. . . . . . . . . . 7,277 7,276
BALANCE SHEET Total assets. . . . . . . . . . . . . . . . . 204,219 195,205 5%
Total debt. . . . . . . . . . . . . . . . . . 63,459 58,586 8%
Total equity. . . . . . . . . . . . . . . . . 69,543 65,480 6%
Working capital . . . . . . . . . . . . . . . 85,033 75,325 14%
Cash flow*. . . . . . . . . . . . . . . . . . 11,683 8,479 38%
SELECTED RATIOS Return on sales . . . . . . . . . . . . . . . 1.5% 0.8% 88%
Return on assets. . . . . . . . . . . . . . . 3.4% 1.9% 79%
Return on opening equity. . . . . . . . . . . 10.5% 5.6% 88%
Current ratio . . . . . . . . . . . . . . . . 2.3 2.1 10%
Debt to capital ratio . . . . . . . . . . . . 47.7% 47.2% 1%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
*Net income plus depreciation
1
<PAGE> 4
TO OUR SHAREHOLDERS:
THE PAYOFF BEGINS...Over the past few years, we've talked about the actions
we've taken to prepare for a more competitive operating environment and to
differentiate our service approach front that of our competitors. And we've
said that once the economic recovery picked up, we'd be ready.
In 1993, the payoff from all our hard work began. We increased our total
number of tons shipped by more than twice the rate of our industry, reflecting
very significant gains in market share. With strong gross margins and lower
expense ratios, we produced our second straight year of sharply increased
earnings. We further strengthened our balance sheet, improving both our
stockholders' equity and working capital positions. And we are just beginning.
The payoff came because, going back to 1989, we recognized that significant
structural changes were taking place within our marketplace, and we started to
prepare for them. We began by realigning our sales and market organization in
order to sharpen our merchandising focus. We redeployed inventory and
processing equipment throughout our distribution network to speed up
deliveries while reducing handling and transportation costs. We invested in
state-of-the-art systems to strength our leadership in electronic order entry
and date interchanges. We embarked on new initiatives which would set industry
standards in the areas of quality and service. And we worked hard at reducing
costs and eliminating non-essential activities.
1993 RESULTS CAPITALIZE ON OUR OPERATING LEVERAGE..Our total sales for 1993
reached $474 million, up 12% over last year's $424 million, reflecting strong
market share gains and gradually improving business conditions. In fact, the
pick-up in the second half of the year more than offset the seasonal slowdowns
which we normally experience during the summer vacation months and the year-end
holiday period.
Our income from operations doubled, as much of the profit from
incremental sales went directly to the bottom line. Net earnings for 1993 were
$6.9 million, or 95 cents a share, versus $3.6 million, or 50 cents a share, in
1992. The net income figure for 1992 includes the effect of a retroactive
adoption of two accounting rules which contributed $222,000 or 3 cents a share,
to 1992 results. A detailed explanation of 1993 operating results is found in
the Financial Review section of this report beginning on Page 7.
2
<PAGE> 5
SETTING INDUSTRY STANDARDS FOR THE NINETIES... When we began preparing for the
nineties, we made a commitment to go far beyond simply meeting the needs of our
marketplace. We would strive to set standards for our industry in quality and
service--the two critical areas of differentiation in our business.
As an example, we were the first major distributor to obtain
registration to ISO 9002, an intentionally recognized quality standard that we
believe will be a prerequisite for doing business in the nineties. So far, we've
achieved ISO 9002 registration for our three Strategic Product Groups, our
Hy-Alloy Steels division and our flagship Franklin Park facility. This year,
we're widening our quality lead by seeking registration for several additional
locations including our major services centers in Cleveland and Houston. And
within the next few years, we expect to have completed this vital process across
our entire distribution network.
We're also taking innovative steps to enhance our service capabilities. A
recently formed alliance with Los Angeles, California-based Tubesales, the
county's largest distributor of non-ferrous tubes and pipe, leverages our
complementary product offerings, while improving inventory turns and operating
efficiencies. We are very enthusiastic about this alliance, and look forward to
a long and profitable relationship between our two companies.
OUR SECTOR SHOULD OUTPERFORM THE OVERALL ECONOMY. As of this writing, the
consensus forecast calls for GDP to grow at a 3% rate through 1994, down from
the 5.9% rate registered in the fourth quarter, but still very welcome after
three years of anemic growth.
Even better news for Castle--the producer durable equipment sector is
expected to continue its strong economic upturn. The Commerce Department's
latest spending survey, taken in October and November, shows that business
expects to invest 5.4% more on new plant and equipment in 1994 (before
adjustment for inflation), after a 7% rise in 1993.
Productivity and quality are the driving forces behind the capital-spending
push as the U.S. industrial sector continues to build competitive advantage
through greater operating efficiencies and higher levels of customer
satisfaction. On the next several pages, we'll take a closer link at our
exciting industry environment and how the changes that are taking place have
redefined our approach to metals distribution.
THE MARKET RECOGNIZES OUR PERFORMANCE... AND OUR POTENTIAL. We are very
gratified that the stock market has reflected our improved performance, and more
significantly, our potential for future growth. On December 31, 1993, our stock
closed at $17 1/4, up 48% from a year ago, contributing to an 18% compound
annual return to investors (stockholder appreciation plus dividends) over the
fifteen-year period ending with this calendar year.
Dividends continue to be a key component of Castle's investment appeal.
On January 27, 1994, our Board of Directors declared a 20% increase in the
quarterly cash dividend to 12 cents a share. This action underscores the Board's
confidence in our prospects for continued growth as well as our continued
commitment to income and value-oriented investors.
While past performance can't guarantee future results, we are optimistic
that our strong underlying fundamentals, in conjunction with a favorable market
environment for earnings-driven and economically-sensitive stocks, will enable
us to continue upholding a long-standing tradition of superior total returns on
our shareholders' investment in Castle.
WE'RE READY FOR 1994. While there is still much to accomplish, the
enthusiasm as Castle is easy to understand. Our early and thorough preparation
for this decade, combined with our strong leadership in all of our major product
lines, positions us for significant growth in the years ahead.
In closing, we take our hats off to the tenacity of our 1,200 employees.
They've worked hard to meet the challenges presented by a difficult economy
during the past several years. Because of them, and the support of our valued
customers, suppliers and shareholders, we now look forward to an even better
year in 1994.
Sincerely,
Michael Simpson
Chairman
Richard G. Mork
President & C.E.O.
February 25, 1994
3
<PAGE> 6
SETTING INDUSTRY STANDARDS FOR THE NINETIES
OVERVIEW...When our customer base started working almost a decade ago toward
improving its global competitive position, we knew that industrial America was
beginning a process of fundamental change. Radical steps were taken, and are
still being taken,--among them, investment in increasingly sophisticated
systems, improved manufacturing methods, costs cutting and capacity
rationalization--to enhance quality and productivity.
We knew that these changes would redefine the role of the metals distributor,
and that, far beyond simply selling products, future growth would lie in the
ability to identify and create new services that add value for customers. And
we knew that, as THE market leader in higher technology metals, we had the
opportunity to play a central role in the revitalization of industrial America.
We couldn't wait to get started, and we did.
Rather than viewing these changes as problems to be overcome, each development
became an opportunity to set new industry standards. Today, we consider every
aspect of the metals distribution process to be apart of our mandate. On these
pages, we take a closer look at the trends which are influencing our operating
environment, and how we are positioning Castle as the supplier of choice for
customers who require enhanced levels of quality and service.
THE RACE TOWARD INCREASED PRODUCTIVITY. Perhaps more than any other single
market development, our customers' drive to improve productivity has made long-
term relationships with leading-edge distributors like Castle increasingly
valuable. Beginning with just-in-time and zero inventory management programs
and running the gamut all the way to truly interactive on-line partnerships,
our goal is to help each customer improve the performance of their business.
Inventory management programs, for example, while widespread, are still growing
and becoming more sophisticated as companies increasingly implement new
technologies.
4
<PAGE> 7
such as automated order entry and electronic data interchange. Castle
recognized the value of these concepts while they were still in their infancy
and made major investments in state-of-the-art computer hardware and software
systems so that we could assume responsibility for managing and providing all of
a customer's metals requirements, often at multiple locations.
Five years ago, these full-service programs represented only a small portion of
our total business. But today, they area an increasingly important component--
helping us to develop long-term, mutually beneficial partnerships that have set
the standard for our industry.
Pre-production processing represents another opportunity to enhance our
customers' productivity. By processing and delivering metals to their exact
specifications, materials enter our customers' manufacturing process at a point
at which they begin to add real value.
To stay on the leading edge in processing capabilities, we recently
completed the first phase of a long-range plan to develop a value-added bar
processing center in Hammond, Indiana. Named H-A Industries to capitalize on our
Hy-Alloy Steel division's worldwide reputation as THE leading distributor of
carbon alloy bars and tubing, this facility is already contributing to improved
quality and customer service. Phase 1 for this 124,000 square foot facility
involved the purchase and installation of a CNC (computer numerical control)
quench and temper heat treat line to produce alloy bars for distribution
throughout North America. This phase was completed by mid-year and we are now at
work on Phase 2 which is expected to be in full production by this fall.
INCREASING EMPHASIS ON QUALITY CERTIFICATION. Quality is another area where we
believe we are THE industry leader. While the term has been overused, we cannot
emphasize too strongly how vital it will continue to be through the rest of
those decade. In fact, we anticipate that service centers will not be approved
to sell to most major U.S. manufacturers without a documented quality process.
As we mentioned earlier, we've already successfully completed the rigorous ISO
9002 registration process for two of our largest facilities, which, together,
5
<PAGE> 8
account for more than 25% of our total capacity. And by the end of 1994, we
estimate that we will have expanded this registration process to cover nearly
two-thirds of our entire distribution network.
While ISO was in an early stage of development in the U.S. as recently
as a year ago, it is now growing exponentially as companies that sell their
products on a worldwide basis increasingly recognize its value. Again, we are
well ahead of the curve in setting industry standards for quality assurance.
SOURCE CONS0LIDATION. Our customers are also implementing source consolidation
and sole-sourcing strategies to hold down their purchasing costs, reduce
inventories and achieve consistently high levels of quality and service. These
strategies are well documented in the October 1993 survey of purchasing
executives in INDUSTRIAL DISTRIBUTION MAGAZINE which found, not surprisingly,
that in choosing a supplier, quality and service were ranked first and second,
while price was ranked fifth.
The trend toward source consolidation gives our industry a significant
competitive advantage over integrated metal producers and mini-mills because we
have the ability to provide ALL the materials a customer needs...not just the
limited range produced by any single mill; and because we measure lead times in
hours, not the weeks or months typically required by a mill production schedule.
Furthermore, as North America's leading distributor of higher technology metals,
this trend strengthens our competitive position within the metal service center
industry.
WE'LL CONTINUE TO SET INDUSTRY STANDARDS. While many of our competitors are now
scrambling to add technological capabilities and reorganize to a more market-
driven approach, we've staked out a position that puts us well ahead of the
industry.
As the rest of this decade unfolds, we are determined to continue
building on our market leadership in the distribution of higher technology
metals. From the depth and breath of the inventory we carry, the range of
pre-processing services we offer and the speed and flexibility of our delivery
schedules to our product knowledge, computer technologies and communications
systems, we are determined to provide the most consistent overall value to our
customers. And, by continuing to set industry standards in quality and service,
we are determined that no metals distributor will be able to match A.M. Castle &
Co. In delivering total customer satisfaction.
6
<PAGE> 9
FINANCIAL REVIEW
This discussion should be read in connection with the information contained in
the Consolidated Financial Statements and Notes.
OVERVIEW
Castle's 1993 results reflect gradually improving business conditions and
significant market share gains. Activity levels were strong throughout the
year, especially during the second half, with double-digit gains achieved in
both the number of tons shipped and dollar sales. Unit volume (total tons
shipped) increased by more than twice the rate of the industry as a whole,
confirming that Castle's growth is as much a function of its ability to
increase market share as it is of the improved operating environment. The
fourth quarter produced the biggest earnings gain of the year in spite of the
fact that it is usually one of the slowest quarters due to the traditional
holiday seasonal slowdown after Thanksgiving.
The improvement in Castle's business conditions reflects the current
strength of the U.S. manufacturing sector, which continues to lead the
economic upturn. According to the Commerce Department's most recent report,
spending in the $444 billion producer durable equipment sector (Castle's
primary market) increased by 16.2% this past year, versus a 6.9% increase in
1992, and a decline of 3.3% in 1991. By comparison, total gross domestic
product (measured in 1987 constant dollars) rose 2.9% in 1993, improving from
1992's 2.6% rise, and 1991's decline of 0.7%. NOTE: These figures reflect the
most recent revisions made to prior years' data by the Commerce Department's
Bureau of Economic Analysis.
SALES
As a result of these factors, net sales for 1993 totalled $474.1 million, an
increase of 12% from 1992's $423.9 million. Unit volume increased 24% to
307,865 tons. However, the combination of a shift in product mix away from
higher priced aerospace materials and continued price pressure on non-ferrous
metals prevented revenue growth from keeping pace with volume increases. In
1993, carbon and stainless steels generated 77% of total revenues with the
balance provided by non-ferrous metals. On average, pricing in 1993 was about
3.9% below 1992 levels. Currently the Company is seeing some modest price
increases for carbon and alloy steels. Non-ferrous pricing, while not getting
any better, seems to have stabilized at current levels.
In 1992, sales totalled $423.9 million, down 2.9% from 1991's $436.4
million, despite a 6.4% increase in tons sold. The 1992 dollar sales decrease
was primarily due to price deflation at the mill level. Average prices in 1992
were about 6.0% below 1991 levels, and, while there was significant
improvement in volume during the second half of the year, there was no
discernable improvement in pricing. A shift in sales mix towards lower priced
products also contributed to the decline in sales dollars. Carbon and
stainless steels accounted for 73% and 70% of total revenues in 1992 and 1991,
respectively. The second half of 1992 marked the beginning of improving
business conditions, with the fourth quarter producing the Company's highest
quarterly shipment activity of the year.
COST OF SALES
The Company continued to focus on gross margin improvement and cost control
throughout 1993 -- two vital components of its overall strategy to outperform
industry averages and minimize its exposure to business downturns. As a
result, Castle's cost of sales, as a percentage of total sales, increased only
slightly despite significantly higher unit volume during the year. Gross
margin percentage was 25.8%, compared with 1992's 26.0%, reflecting the higher
activity levels and pricing pressures in its marketplace.
Gross profit for 1993 totalled $122.3 million, up 11% from 1992's level of
$110.2 million, as strong volume increases more than offset the effects of
price deflation and sales mix shifts that occurred throughout the year.
In 1992, cost of sales declined as a percentage of total sales leading to a
significant improvement in gross margin over 1991. Gross margin percent
increased to 26.0% from 24.1% in 1991. This improvement resulted from several
factors including, but not limited to, a shift in product mix towards higher
margin products, advantageous sourcing and enhancements to the Company's
computer-based pricing system.
Gross profit for 1992 totalled $110.2 million, an increase of 4.6% from the
$105.3 million reported in 1991. Improved unit sales volume, along with a
higher margin percentage, helped offset the negative effects of price
deflation experienced throughout the year.
Substantially all inventories are valued using the LIFO (last-in, first-
out) method. LIFO had the effect of increasing Castle's cost of sales by $0.1
million in 1993 and of reducing cost of sales by $5.7 million in 1992 and $6.0
million in 1991 compared with what they would have been on a FIFO (first-in,
first-out) basis.
OPERATING EXPENSES
Total operating expenses for 1993 were $102.1 million, compared with $94.9
million in 1992 and $92.8 million in 1991. As a percentage of sales, operating
expenses were 21.5% in 1993 as compared to 22.4% in 1992 and 21.3% in 1991.
These results reflect successful efforts to control expenses which began in
the fourth quarter of 1990 and have continued throughout this three-year
reporting period. Cost control actions helped produce the improvements in
operational efficiency necessary to keep the Company profitable during the
1990-1992 recessionary climate, and have enabled the Company to capitalize on
1993's more favorable operating environment.
- ------------------------------------------------------------------------------
9
<PAGE> 10
Depreciation expense was relatively unchanged from 1992, which declined 8%
from the 1991 level primarily as the result of sales and leasebacks of assets
occurring in late 1991 and 1992. The resulting rent expense has been included
in the operating expenses discussed above.
Interest expense, net of interest income, decreased 12% from 1992. Lower
interest rates in 1993 were responsible for the reduction. In 1992, interest
expense, net of interest income was 37% lower than 1991. The decrease was the
result of significantly lower rates and debt levels.
TAXES
The Company's Federal income tax rate has remained essentially unchanged since
1991. As indicated in Note 3 to the Company's consolidated financial
statements, the Company has adopted SFAS No. 109, "Accounting for Income
Taxes", effective January 1, 1992. The application of the new standard had the
effect of increasing the Company's net worth by $1.8 million, and contributed
a slight gain to 1992 net income from normal operations.
EARNINGS
Castle generated sharply higher earnings again in 1993. The current year's
gains were primarily due to the strong increase in sales volume and the effect
of the Company's operating leverage on incremental sales as discussed in
previous shareholder reports. Continued tight control over expenses and
inventory levels also contributed significantly to the bottom-line. Earnings
for the year were $6.9 million, or $.95 per share, compared with the $3.6
million, or $.50 per share, recorded for 1992. The 1992 earnings figure
included net income of $222,000, or $.03 per share, due to the adoption of new
accounting methods for postretirement benefits and income taxes.
Castle began a significant turnaround in profitability in 1992 from the
year earlier level in spite of continued mill price erosion. The greatest
contributors to the improved performance were a 6.4% increase in tons sold; a
significantly higher gross margin percent; and continued tight control over
expenses. Net income for 1992 was $3.6 million, or $.50 per share, compared
with 1991 net income of $200,000, or $.03 per share.
CAPITAL EXPENDITURES
Capital expenditures during 1993 and 1992 amounted to $4.6 million and $1.8
million, respectively. Approximately $1.2 million was invested in 1993 for the
addition of a Heat Treat Quench and Temper Line at the newly formed H-A
Industries facility in Hammond, Indiana, with the remaining expenditures aimed
toward improving existing facilities and maintaining property and equipment in
good working order. In 1991, capital expenditures amounted to $3.3 million,
and were also aimed at improving existing facilities and maintaining
property and equipment in good working order. The Company anticipates that
1994 expenditures will approximate 1993 levels.
During the latter half of 1993, 1992, and 1991, the Company sold and leased
back approximately $2.1 million, $1.2 million, and $5.3 million of fixed
assets respectively, which added to cash flow and decreased long-term
borrowing.
LIQUIDITY AND CAPITAL RESOURCES
Castle continued to strengthen its financial position during 1993, with
significant improvement in both its stockholders' equity and working capital
positions. At 1993 year end, stockholders' equity increased to $69.5 million,
or $9.56 per share, compared with $65.5 million, or $9.00 per share in 1992,
and $64.7 million, or $8.89 per share in 1991.
Total borrowings were $63.5 million at 1993 year end, compared to $58.6
million and $69.4 million at 1992 and 1991 year ends, respectively. After
reducing debt levels significantly in 1992, borrowing increased to help
finance the higher level of activity in 1993 at attractive current market
rates. As a result, the debt-to-capital ratio increased slightly to 48% from
last year's 47% ratio, but well below the 1991 ratio of 52%.
Accounts receivable rose in 1993, reflecting the increase in sales levels.
The number of days' sales outstanding decreased slightly in 1993 from 1992,
which showed a similar decline from 1991. Collections were strong, exceeding
the Company's target level for both the fourth quarter and the year. The
Company believes that its net receivables at December 31, 1993 are of a very
good quality.
Working capital increased to $86.1 million at December 31, 1993, compared
with $75.3 million at December 31, 1992 and $79.7 million at December 31,
1991, as investments in inventory and receivables grew to support higher sales
volume.
The Company had unused committed and uncommitted lines of bank credit of
$103.6 million at December 31, 1993, compared with $111.4 million and $94.5
million in 1992 and 1991, respectively. Management believes that funds
generated from operations, existing lines of credit and additional borrowing
capacity will provide adequate funding for current and anticipated business
operations.
OUTLOOK FOR 1994
After growing at a surprisingly strong 5.9% annual rate in the last quarter of
1993, the Commerce Department forecasts that the economy will grow at a 3%
rate during this coming year. More important for Castle, the producer durable
equipment sector it serves is expected to outperform GDP as U.S. manufacturers
continue to invest in equipment which will enhance productivity and quality.
Should this economic scenario prove to be reasonably accurate, the Company
expects to show very favorable year-to-year comparisons again in 1994.
- ------------------------------------------------------------------------------
10
<PAGE> 11
SUPPLEMENTARY SCHEDULES
The Company's LIFO inventory system charges cost of material sold at the
inventory costs of its most recent purchases. The LIFO method matches current
revenues with current costs of inventory. This method more fairly presents
results of operations, whether in periods of inflation or deflation.
The Supplementary Statements of Consolidated Financial Position are
presented for analytical and comparative purposes. They are intended to
display the Company's financial position as if the Company were on a
FIFO-based inventory system rather than the LIFO-based inventory system the
Company actually uses. The statements reflect taxes on the unrecognized
inventory gain at statutory Federal rates and the Company's historical average
state tax rates and give no effect to any supplemental expenses.
SUPPLEMENTARY STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets
Cash.......................................................................................... $ 1.5 $ .7 $ .3
Accounts receivable, net...................................................................... 49.0 45.0 44.6
Inventories, at latest cost................................................................... 147.2 141.9 139.5
------ ------ ------
Total current assets........................................................................ 197.7 187.6 184.4
Less -- current liabilities................................................................... (84.3) (84.9) (73.9)
------ ------ ------
Net current assets.............................................................................. 113.4 102.7 110.5
Fixed and other assets, net..................................................................... 52.1 53.1 57.2
------ ------ ------
Total assets, less current liabilities...................................................... 165.5 155.8 167.7
Long-term debt.................................................................................. (58.0) (53.0) (63.3)
Deferred income taxes........................................................................... (8.1) (7.8) (9.0)
Postretirement benefit obligations.............................................................. (2.5) (2.2) --
Unrecognized inventory gain, net of taxes....................................................... (27.3) (27.3) (30.7)
------ ------ ------
Stockholders' equity............................................................................ $ 69.6 $ 65.5 $ 64.7
------ ------ ------
------ ------ ------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
11
<PAGE> 12
A.M. Castle & Co. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales................................................................................. $474,108 $423,913 $436,441
Cost of material sold..................................................................... 351,823 313,683 331,093
-------- -------- --------
Gross profit on sales................................................................... 122,285 110,230 105,348
-------- -------- --------
EXPENSES
Operating expenses...................................................................... 102,089 94,944 92,848
Depreciation (Notes 1 and 5)............................................................ 4,784 4,865 5,273
Interest expense, net (Notes 2 and 4)................................................... 3,801 4,333 6,848
-------- -------- --------
110,674 104,142 104,969
-------- -------- --------
Income before income taxes and cumulative effect of changes in accounting methods......... 11,611 6,088 379
-------- -------- --------
Income taxes (Notes 1 and 3)
Federal -- currently payable............................................................ 3,926 2,296 298
-- deferred...................................................................... (141) (133) (146)
State................................................................................... 927 533 26
-------- -------- --------
4,712 2,696 178
-------- -------- --------
Net income before cumulative effect of changes in accounting methods...................... 6,899 3,392 201
-------- -------- --------
Cumulative effect of changes in accounting methods (Notes 3 and 6)........................ -- 222 --
-------- -------- --------
Net income................................................................................ 6,899 3,614 201
-------- -------- --------
Net income per share before cumulative effect of changes in accounting methods............ $ .95 $ .47 $ .03
Cumulative effect of changes in accounting methods........................................ -- .03 --
-------- -------- --------
Net income per share (Notes 1 and 7)...................................................... $ .95 $ .50 $ .03
-------- -------- --------
-------- -------- --------
</TABLE>
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF REINVESTED EARNINGS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
- --------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year.............................................................. $ 45,421 $ 44,717 $ 48,443
Net income................................................................................ 6,899 3,614 201
Cash dividends -- $.40 per share in 1993, $.40 per share in 1992 and $.54 per share in
1991 (Note 7)........................................................................... (2,911) (2,910) (3,927)
-------- -------- --------
Balance at end of year.................................................................... $ 49,409 $ 45,421 $ 44,717
-------- -------- --------
-------- -------- --------
</TABLE>
- ------------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral
part of these statements.
- ------------------------------------------------------------------------------
12
<PAGE> 13
A.M. Castle & Co. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------------------
(Dollars in thousands) 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets
Cash (Note 1)........................................................................... $ 1,528 $ 693 $ 331
Accounts receivable, less allowances of $600............................................ 49,048 44,995 44,564
Inventories -- principally on last-in, first-out basis (latest cost higher by
approximately $45,600
in 1993, $45,500 in 1992 and $51,200 in 1991) (Note 1)................................ 101,572 96,368 88,292
-------- -------- --------
Total current assets.............................................................. 152,148 142,056 133,187
-------- -------- --------
Prepaid expenses and other assets (Note 1)................................................ 11,088 9,947 9,813
-------- -------- --------
Property, plant and equipment, at cost (Notes 1 and 5)
Land.................................................................................... 4,115 4,117 4,115
Buildings............................................................................... 34,875 34,734 34,688
Machinery and equipment................................................................. 57,028 54,833 54,653
-------- -------- --------
96,018 93,684 93,456
Less -- accumulated depreciation...................................................... 55,044 50,482 46,041
-------- -------- --------
40,974 43,202 47,415
-------- -------- --------
Total assets.............................................................................. $204,210 $195,205 $190,415
-------- -------- --------
-------- -------- --------
Liabilities and stockholders' equity
Current liabilities
Accounts payable........................................................................ $ 49,982 $ 51,597 $ 37,374
Accrued payroll and employee benefits (Note 6).......................................... 5,982 4,084 3,742
Accrued liabilities..................................................................... 3,512 3,656 3,715
Short-term debt (Note 2)................................................................ -- -- 200
Current and deferred income taxes (Notes 1 and 3)....................................... 1,199 1,801 2,501
Current portion of long-term debt (Note 4).............................................. 5,435 5,593 5,925
-------- -------- --------
Total current liabilities......................................................... 66,110 66,731 53,457
-------- -------- --------
Long-term debt, less current portion (Note 4)............................................. 58,024 52,993 63,278
-------- -------- --------
Deferred income taxes (Notes 1 and 3)..................................................... 8,067 7,837 9,010
-------- -------- --------
Postretirement benefit obligation (Note 6)................................................ 2,466 2,164 --
-------- -------- --------
Stockholders' equity (Note 7)
Common stock, without par value -- authorized 10,000,000 shares; issued and outstanding
7,278,316 in 1993, 7,276,042 in 1992, and 7,276,041 in 1991........................... 21,938 21,813 21,813
Earnings reinvested in the business..................................................... 49,409 45,421 44,717
Cumulative translation adjustment....................................................... 168 101 (5)
Treasury stock, at cost (329,480 shares in 1993, 321,554 shares in 1992, and 321,555
shares
in 1991).............................................................................. (1,972) (1,855) (1,855)
-------- -------- --------
Total stockholders' equity........................................................ 69,543 65,480 64,670
-------- -------- --------
Total liabilities and stockholders' equity................................................ $204,210 $195,205 $190,415
-------- -------- --------
-------- -------- --------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
- ------------------------------------------------------------------------------
13
<PAGE> 14
A.M. Castle & Co. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................................................... $ 6,899 $ 3,614 $ 201
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation............................................................................... 4,784 4,865 5,273
Cumulative effect of accounting changes (Notes 3 and 6).................................... -- (222) --
Gain on sale of facilities/equipment....................................................... (18) (20) (635)
Increase in deferred taxes................................................................. 230 906 728
(Increase) in prepaid expenses and other assets............................................ (1,141) (134) (1,173)
Vested portion of restricted stock awards.................................................. -- -- 64
Increase (decrease) in postretirement benefit obligation................................... 302 (27) --
------- -------- --------
Cash provided from operating activities before changes in current accounts..................... 11,056 8,982 4,458
(Increase) decrease in current assets/liabilities
Accounts receivable........................................................................ (4,053) (431) 4,479
Inventories................................................................................ (5,204) (8,076) 25,601
Accounts payable........................................................................... (1,615) 14,223 (7,541)
Accrued payroll and employee benefits...................................................... 1,898 (58) (1,701)
Accrued liabilities........................................................................ (144) (59) 91
Current deferred income taxes.............................................................. (602) 34 (834)
------- -------- --------
Net (increase) decrease in current assets/liabilities.......................................... (9,720) 5,633 20,095
------- -------- --------
Net cash provided from operating activities.................................................... 1,336 14,615 24,553
Cash flows from investing activities
Proceeds from sales of facilities/equipment (Note 5)......................................... 2,083 1,162 6,012
Capital expenditures......................................................................... (4,621) (1,794) (3,305)
------- -------- --------
Net cash provided from (used by) investing activities.......................................... (2,538) (632) 2,707
------- -------- --------
Cash flows from financing activities
Net borrowing under line-of-credit agreements................................................ -- (200) (11,700)
Proceeds from issuance of long-term debt..................................................... 10,066 -- 201
Repayments of long-term debt................................................................. (5,193) (10,617) (11,830)
Dividends paid............................................................................... (2,911) (2,910) (3,927)
Other........................................................................................ 75 106 25
------- -------- --------
Net cash provided from (used by) financing activities.......................................... 2,037 (13,621) (27,231)
------- -------- --------
Net increase in cash........................................................................... 835 362 29
Cash -- beginning of year...................................................................... 693 331 302
------- -------- --------
Cash -- end of year............................................................................ $ 1,528 $ 693 $ 331
------- -------- --------
------- -------- --------
Supplemental disclosures of cash flow information
Cash paid during the year for --
Interest................................................................................... $ 4,106 $ 4,524 $ 7,340
------- -------- --------
Income taxes............................................................................... $ 5,084 $ 1,754 $ 283
------- -------- --------
</TABLE>
- ------------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral
part of these statements.
- ------------------------------------------------------------------------------
14
<PAGE> 15
A.M. Castle & Co. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Principal accounting policies
Basis of presentation -- The financial statements include A. M. Castle & Co.
(the Company) and its subsidiaries. All intercompany accounts and transactions
have been eliminated.
Cash -- For the purposes of these statements, short-term investments which
have a maturity of 90 days or less are considered cash equivalents.
Inventories -- Substantially all inventories are stated at the lower of
last-in, first-out (LIFO) cost or market. The Company values its LIFO
increments using the costs of its latest purchases during the years reported.
Property, plant and equipment -- Property, plant and equipment are stated at
cost and include assets held under capitalized leases. Major renewals and
betterments are capitalized, while maintenance and repairs which do not
substantially improve or extend the useful lives of the respective assets are
expensed currently. When properties are disposed of, the related costs and
accumulated depreciation are removed from the accounts and any gain or loss is
reflected in income.
The Company provides for depreciation of plant and equipment by charging
against income amounts sufficient to amortize the cost of properties over
their estimated useful lives (buildings -- 12 to 40 years; machinery and
equipment -- 5 to 20 years). Depreciation is provided using the straight-line
method for financial reporting purposes and accelerated methods for tax
purposes. Included in depreciation expense is the amortization of assets under
capital leases.
Income taxes -- Income tax provisions are based on income reported for
financial statement purposes. During 1992, the Company changed its method of
accounting in accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes" (Note 3).
Retirement plan costs -- The Company accrues and funds its retirement plans
based on amounts, as determined by an independent actuary, necessary to
maintain the plans on an actuarially sound basis. The Company also provides
certain health care and life insurance benefits for retired employees. During
1992, the Company adopted on the immediate recognition basis SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions". This
statement requires that the cost of these benefits be recognized in the
financial statements during the employee's active working career. Prior to the
adoption of SFAS No. 106 the cost of these benefits was recognized at the time
that claims were incurred (Note 6).
Stock options -- When stock options are exercised, proceeds from the sale of
common stock issued under those options are credited to common stock. No
charges or credits are made to income for stock options.
Restricted stock awards -- Upon issuance of restricted stock, compensation
expense and the amount charged to stockholders' equity is determined by the
market value at the date of the grant, which is recognized ratably over the
vesting period.
Net income per share -- Net income per share has been computed based on
weighted average common shares outstanding during the year -- 7,276,981 in
1993, 7,276,051 in 1992 and 7,272,821 in 1991.
Goodwill -- Cost in excess of net assets of acquired companies is amortized on
a straight-line basis over a 40 year period. The unamortized balance at
December 31, 1993 of $753,000 is reflected on the consolidated balance sheets
under prepaid expense and other assets.
Foreign currency translation -- The Company translates the assets and
liabilities of its foreign subsidiary at the rates of exchange in effect at
its year-end. Revenues and expenses are translated using the average exchange
rate in effect during the year. Gains and losses from foreign currency
translation were immaterial in 1993, 1992 and 1991. Foreign currency
transaction gains and losses are included in the consolidated statements of
income.
(2) Short-term debt
Short-term borrowing activity was as follows (in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------
<S> <C> <C> <C>
Maximum borrowed................................. $9,475 $5,725 $14,300
Average borrowed................................. 3,055 2,610 6,402
Average interest rate
During the year............................... 3.4% 3.9% 6.3%
At year-end................................... -- -- 4.5%
</TABLE>
- ----------------------------------------------------------------
(3) Income taxes
Effective January 1, 1992, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by SFAS
No. 109, "Accounting for Income Taxes". As permitted under the new rules,
prior year's financial statements were not restated.
- ------------------------------------------------------------------------------
15
<PAGE> 16
A.M. Castle & Co. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The cumulative prior years' effect of adopting Statement 109 as of January
1, 1992, was to increase net income by $1,799,000, or $.25 per share. This
change in accounting principle had no significant effect on the 1992 expense.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of December 31, 1993
and 1992 are as follows (in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992
----------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation......................................... $5,211 $ 5,213
Inventory, net....................................... 1,675 2,287
Pension.............................................. 2,644 2,251
Other, net........................................... 400 536
------ -------
Net deferred liabilities........................... 9,930 10,287
Deferred tax assets:
Postretirement benefits.............................. 1,132 1,014
------ -------
Net deferred tax liabilities....................... $8,798 $ 9,273
------ -------
------ -------
</TABLE>
- ----------------------------------------------------------------
The Company did not record any valuation allowance against deferred tax
assets at December 31, 1993 and 1992.
The components of the provision (benefit) for deferred Federal income tax,
before the cumulative effect of changes in accounting methods for the years
ended December 31, 1993 and 1992, are as follows (in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992
----------------------------------------------------------------
<S> <C> <C>
Depreciation............................................ $ (56) $(140)
Inventory, net.......................................... (516) (318)
Pension................................................. 342 256
Other, net.............................................. 89 69
----- -----
$(141) $(133)
----- -----
----- -----
</TABLE>
- ----------------------------------------------------------------
A reconciliation between the statutory Federal income tax amount and the
effective amounts at which taxes were actually provided before cumulative
effect of changes in accounting methods is as follows (in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax at statutory rates.......... $3,948 $2,069 $129
State income taxes, net of Federal income tax
benefits...................................... 603 352 18
Net operating loss carry-forward............... 98 283 (11)
Other.......................................... 63 (8) 42
------ ------ ----
$4,712 $2,696 $178
------ ------ ----
------ ------ ----
</TABLE>
(4) Long-term debt
Long-term debt consisted of the following at December 31, 1993, 1992 and 1991
(in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------
<S> <C> <C> <C>
Revolving credit agreement (a) (c)........ $40,678 $30,235 $34,738
9.3% insurance company term loan, due in
equal installments from 1992 through
2000..................................... 11,660 13,330 15,000
Industrial development revenue bonds at
interest rates from 6 1/4% (fixed) to 85%
of prime, due in varying installments
through 2006 (b) (c)..................... 6,342 8,122 9,867
11 1/2% insurance company term loan, due
in equal installments from 1991 through
1995..................................... 3,000 4,500 6,000
Canadian bank term loan at variable rates,
due in equal installments through 1995,
with a final payment in 1996............. 1,605 2,065 2,704
12% notes payable for acquisition of Geo.
F. Blake, Inc., due in equal installments
through 1992............................. -- -- 257
Other..................................... 174 334 637
------- ------- -------
Total..................................... 63,459 58,586 69,203
Less--current portion..................... (5,435) (5,593) (5,925)
------- ------- -------
Total long-term portion................... $58,024 $52,993 $63,278
------- ------- -------
------- ------- -------
</TABLE>
- ----------------------------------------------------------------
The carrying value of long term debt does not differ materially from their
estimated fair value as of December 31, 1993.
(a) The Company has revolving credit agreements of $60 million domestically
and $6.4 million with a Canadian bank. The credit facilities are three-year
revolvers, extended annually by mutual agreement, with a four-year equal
amortization term option. Under these credit arrangements all borrowings are
considered to be long-term debt for balance sheet presentation purposes.
Interest rate options on the domestic facility are based on London
Interbank Offered Rate (LIBOR), Reference Rates or competitive Bid
- ------------------------------------------------------------------------------
16
<PAGE> 17
A.M. Castle & Co. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Rates from four participating banks. The options on the Canadian facility are
available at Canadian and U.S. prime rates, Bankers' Acceptance Rates, Cost of
Fund Rates and LIBOR.
A commitment fee of .375% of the total commitment less amounts borrowed
under the Reference and LIBOR interest rate options is required on the
domestic facility and .25% is required on the unused portion of the Canadian
facility.
(b) The Company has loan and lease agreements with certain municipalities
whereby industrial revenue bonds were issued to finance the purchase of land
and construction of plant and equipment at new and existing service centers.
Under the terms of the agreements, the loan and lease payments made by the
Company are equivalent to the municipalities' debt service requirements on the
bonds.
(c) The more restrictive provisions of the loan agreements require the Company
to maintain minimum earnings to fixed charge ratios, to limit cash dividends
and purchases of the Company's stock to $11 million, plus 70% of net income
since December 31, 1989 (earnings reinvested in the business available for
cash dividends or stock retirements under this provision were $5.9 million at
December 31, 1993), and to limit borrowings. At December 31, 1993, the Company
was in compliance with all restrictive covenants.
The loan agreements also provide limitations on sales of subsidiaries, sale
or lease of assets of the Company, acquisitions and transactions with
affiliates.
(d) Aggregate annual principal payments on the noncurrent portion of long-term
debt (including obligations under capital leases) are due as follows (in
thousands):
1995 $4,604 1996 $3,263 1997 $1,955 1998 $1,870
Total net book value of assets collateralized under financing arrangements
approximated $3.4 million at December 31, 1993.
Net interest expense reported on the accompanying Consolidated Statements
of Income, which includes that associated with both short and long-term debt,
was reduced by interest income of $.1 million in 1993, 1992 and 1991.
(5) Lease agreements
(a) Description of leasing arrangements -- The Company has capital and
operating leases covering certain warehouse facilities, equipment, automobiles
and trucks, with lapse of time as the basis for all rental payments plus a
mileage factor included in the truck rentals.
(b) Capital leases -- Capitalized leased property by major class is summarized
as follows (in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Balances at
December 31
----------------------------
Class of Property 1993 1992 1991
- ----------------------------------------------------------------
<S> <C> <C> <C>
Machinery and equipment...................... $ 737 $ 1,541 $1,499
Less-accumulated depreciation................ (462) (1,141) (846)
----- ------- ------
$ 275 $ 400 $ 653
----- ------- ------
----- ------- ------
</TABLE>
- ----------------------------------------------------------------
Future minimum lease payments for the above assets under capital leases at
December 31, 1993, are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31,
- ----------------------------------------------------------------
<S> <C>
1994............................................................... $ 91
1995............................................................... 84
1996............................................................... 16
----
Total minimum lease payments........................................ $191
Less--amount representing estimated lessor executory costs.......... (18)
----
Present value of net minimum lease payments......................... $173
----
----
</TABLE>
- ----------------------------------------------------------------
(c) Operating leases -- Future minimum rental payments under operating leases
that have initial or remaining noncancelable lease terms in excess of one year
as of December 31, 1993, are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31,
- ----------------------------------------------------------------
<S> <C>
1994............................................................ $ 4,126
1995............................................................ 3,135
1996............................................................ 2,759
1997............................................................ 2,554
1998............................................................ 1,394
Later years..................................................... 3,593
--------
Total minimum payments required.................................. $ 17,561
--------
--------
- ----------------------------------------------------------------
</TABLE>
(d) Rental expense -- Total rental payments charged to expense were $7.0
million in 1993, $6.8 million in 1992 and $6.3 million in 1991.
(e) Sale and leaseback of assets -- During 1993, 1992 and 1991, the Company
sold and leased back equipment under operating leases with terms of seven,
eight and seven years, respectively. The leases allow for a purchase option
after six years of $662,000, $519,000 and $1,947,000, respectively. Annual
rentals are $342,000 for the 1993 lease, $173,000 for the 1992 lease and
$899,000 for the 1991 transaction. The assets were sold at approximately net
book
- ------------------------------------------------------------------------------
17
<PAGE> 18
A.M. Castle & Co. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
value for proceeds of $2,063,000, $1,154,000 and $5,317,000, respectively.
(6) Retirement, profit-sharing and incentive plans
Substantially all employees who meet certain requirements of age, length of
service and hours worked per year are covered by one of two Company-sponsored
retirement plans or a union-sponsored retirement plan. The two
Company-sponsored retirement plans, the A.M. Castle & Co. Salaried Employees'
Pension Plan and the A.M. Castle & Co. Hourly Employees' Pension Plan, are
defined benefit, noncontributory plans. Benefits paid to retirees are based
upon age at retirement, years of credited service and average earnings.
At December 31, 1993 the assumed discount rate, the estimated rate at which
each retirement plan could have settled its liabilities, was 7.75%. The
expected long-term rate of return on plan assets was assumed to be 9.5% per
year, and future salary increases were estimated to be 4.75% per year. At
December 31, 1992 and 1991, the assumed discount rate used was 9.0%, expected
long-term rate of return on plan assets was estimated at 9.5% per year, and
future salary increases were assumed to be 6.0% per year.
The assets of the Company-sponsored plans are maintained in a single trust
account. The majority of the trust assets are invested in common stock mutual
funds, insurance contracts, real estate funds and corporate bonds. The
Company's funding policy is to satisfy the minimum funding requirements of
ERISA.
The net pension credits in 1993, 1992 and 1991 were composed of the
following (in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------
<S> <C> <C> <C>
Normal service cost........................... $ 1,159 $ 1,098 $ 1,115
Interest cost on projected benefit
obligation................................... 3,379 3,180 3,150
Actual return on plan assets.................. (4,203) (3,117) (8,252)
Net amortization and deferral................. (941) (1,838) 3,369
------- ------- -------
Net pension credit............................ $ (606) $ (677) $ (618)
------- ------- -------
------- ------- -------
</TABLE>
- ----------------------------------------------------------------
The status of the plans at December 31, 1993, 1992 and 1991, was as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of vested benefit
obligation................................... $37,752 $31,679 $29,342
Plus--Nonvested benefit obligation........... 3,671 2,092 328
------- ------- -------
Vested and nonvested accumulated benefit
obligation................................. 41,423 33,771 29,670
Plus--Projected salary increases benefit
obligation................................. 5,361 4,983 5,929
------- ------- -------
Projected benefit obligation................. 46,784 38,754 35,599
Plan assets at fair value..................... 48,514 46,757 45,894
------- ------- -------
Plan assets in excess of projected benefit
obligation................................... 1,730 8,003 10,295
Items not yet recognized in earnings
Unrecognized net transitional assets......... (2,927) (3,903) (4,878)
Unrecognized net (gain) loss................. 6,674 1,365 (502)
Unrecognized prior-service cost.............. 1,047 1,017 1,147
------- ------- -------
Pension prepaid recognized on the consolidated
balance sheets at December 31................ $ 6,524 $ 6,482 $ 6,062
------- ------- -------
------- ------- -------
</TABLE>
- ----------------------------------------------------------------
The Company has profit sharing plans for the benefit of salaried and other
eligible employees (including officers). Effective January 1, 1992 the Company
amended its existing profit sharing plan to include features under Section
401(k) of the Internal Revenue Code. The plan modifications included a
provision whereby the Company partially matches employee contributions up to a
maximum of 6% of the employees' salary. The current year's expense under this
provision amounted to $244,000. The plan modifications also included a
supplemental contribution feature whereby a Company contribution would be made
to all eligible employees upon achievement of specific return on investment
goals as defined by the plan. No contributions were made to this plan under
this provision for 1993 and 1992.
The Company has a management incentive bonus plan for the benefit of its
officers and key employees. Incentives are paid to line managers based on
performance, against objectives, of their respective operating units.
Incentives are paid to corporate officers on the basis of total Company
performance against objective. There were no incentives paid to corporate
officers based on total company performance in 1992 and 1991. Amounts accrued
and charged to income under each plan are included as part of accrued payroll
and
- ------------------------------------------------------------------------------
18
<PAGE> 19
A.M. Castle & Co. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
employee benefits at each respective year end. The amounts charged to income
are summarized below (in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------
<S> <C> <C> <C>
Profit sharing and 401-K contribution............. $ 244 $227 $--
------ ---- ---
------ ---- ---
Management incentive.............................. $1,412 $679 $41
------ ---- ---
------ ---- ---
- ----------------------------------------------------------------
</TABLE>
The Company provides declining value life insurance to its retirees and a
maximum of three years of medical coverage to qualified individuals who retire
between the ages of 62 and 65. The Company does not fund these plans.
Effective January 1, 1992, the Company adopted the requirements of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions".
The Company elected to immediately recognize the accumulated liability,
measured as of January 1, 1992, which totalled $2,591,000. The cumulative
prior years' effect of the change in accounting method resulted in a net of
income tax charge to earnings of $1,577,000, or $.22 per share. This change in
accounting principle had no significant effect on the current year's expense.
Net postretirement benefit cost for 1993 and 1992 includes the following
components (in thousands):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992
----------------------------------------------------------------
<S> <C> <C>
Service cost............................................... $129 $147
Interest cost on accumulated postretirement benefit
obligation................................................ 233 224
Amortization of unrecognized prior service cost............ (26) --
Unrecognized net loss...................................... 8 --
---- ----
Net periodic postretirement benefit cost................... $344 $371
---- ----
---- ----
- ----------------------------------------------------------------
</TABLE>
The following is a reconciliation between the plan's funded status and the
accrued postretirement benefit obligation as reflected on the balance sheet as
of December 31, 1993 and 1992 (in thousands):
- ----------------------------------------------------------------
<TABLE>
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $1,491 $ 589
Fully eligible active plan participants.................. 214 374
Other active plan participants........................... 1,560 1,792
------ ------
3,265 2,755
Unrecognized prior service cost.......................... 264 --
Unrecognized net loss.................................... (647) (176)
------ ------
Accrued postretirement benefit obligation................ $2,882 $2,579
------ ------
------ ------
</TABLE>
- ----------------------------------------------------------------
Future benefit costs were estimated assuming medical costs would increase
at a 12 3/4% annual rate for the first year, with annual increases decreasing
by 0.5% per year for five years, and 1% per year thereafter until an ultimate
trend rate of 5 3/4% is reached. A 1% increase in the health care cost trend
rate assumptions would have increased the accumulated postretirement benefit
obligation at December 31, 1993 by $211,000 with no significant effect on the
1993 postretirement benefit expense. The weighted average discount rate used
in determining the accumulated postretirement benefit obligation was 7.75% in
1993 and 9.0% in 1992.
(7) Common stock
Changes in the common and treasury stock accounts during 1993, 1992 and 1991
were as follows (dollars in thousands):
<TABLE>
<CAPTION>
Common Stock Treasury Stock
-------------------------------
Shares
Issued Amount Shares Amount
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1990.................... 7,554,004 $21,364 291,767 $1,495
Stock options exercised............. 43,592 385 29,754 360
Other............................... -- 64 34 --
--------- ------- ------- -------
December 31, 1991.................... 7,597,596 $21,813 321,555 $1,855
Other............................... -- -- (1) --
--------- ------- ------- -------
December 31, 1992.................... 7,597,596 $21,813 321,554 $1,855
Stock options exercised............. 10,200 125 7,806 115
Other............................... -- -- 120 2
--------- ------- ------- -------
December 31, 1993.................... 7,607,796 $21,938 329,480 $1,972
--------- ------- ------- -------
--------- ------- ------- -------
</TABLE>
The Company has long-term stock incentive and stock option plans for the
benefit of officers and key management employees. The 1989 Long-Term Incentive
Plan authorized up to 150,000 shares of common stock for use under the Plan.
Compensation expense under this plan is recognized ratably over the employee's
vesting period as determined by the Plan. No shares were awarded under this
plan in 1993, 1992 or 1991.
The terminated 1982 Restricted Stock and Stock Option Plan authorized the
issuance of up to 351,563 shares of common stock. In 1991, 43,592 shares were
exercised at a price of $8.83 per share. There are no remaining unexpired
options under this plan.
In January 1990 the Board of Directors authorized the issuance of
restricted stock and incentive stock options. Restricted stock awards involve
shares issued immediately, or at a future date, upon fulfillment of stated
conditions. Incentive stock options become exercisable beginning one year from
date of grant and expire five years from date of grant if not exercised. The
1990 Restricted Stock and Stock Option Plan authorizes the issuance of up to
350,000 shares of
- ------------------------------------------------------------------------------
19
<PAGE> 20
A.M. Castle & Co. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
common stock for use under the plan. A summary of plan transactions for 1993,
1992 and 1991 is as follows:
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Option Exercise
Shares Price
- ----------------------------------------------------------------
<S> <C> <C>
December 31, 1991............................ 128,200 10.625 -- 13.25
Granted..................................... 120,400 11.75
Forfeitures................................. (21,600) 13.25
------- ------------------
December 31, 1992............................ 227,000 10.625 -- 13.25
Granted..................................... 8,300 12.25 -- 12.375
Forfeitures................................. (2,800) 11.75 -- 13.25
Exercised................................... (10,200) 10.625 -- 13.25
------- ------------------
December 31, 1993............................ 222,300 11.75 -- 13.25
------- ------------------
------- ------------------
</TABLE>
- ----------------------------------------------------------------
(8) Contingent liabilities
The Company is the defendant in several lawsuits arising out of the conduct of
its business. These lawsuits are incidental and occur in the normal course of
the Company's business affairs. It is the opinion of counsel that no
significant uninsured liability will result from the outcome of the
litigation, and thus there is no material financial exposure to the Company.
The Company was contingently liable as endorser on discounted trade
acceptances aggregating $5.1 million at December 31, 1993. Also, the Company
has $3.2 million of irrevocable letters of credit outstanding to comply with
the insurance reserve requirements of its workers' compensation insurance
carrier.
(9) Selected quarterly data (unaudited)
The unaudited quarterly results of operations for 1993 and 1992 are as follows
(dollars in thousands, except per share data -- Note 7):
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 quarters
Net sales........................ $119,869 $121,042 $117,118 $116,079
Gross profit..................... 30,053 30,943 30,273 31,016
Net income....................... $ 1,754 $ 1,613 $ 1,436 $ 2,096
Net income per share............. .24 .22 .20 .29
1992 quarters
Net sales........................ $109,343 $104,807 $103,731 $106,032
Gross profit..................... 27,795 27,346 27,612 27,477
Net income before cumulative
effect of changes in accounting
methods........................ 1,149 1,007 939 297
Cumulative effects of changes in
accounting methods (Notes 3 and
6)............................. 222 -- -- --
Net income....................... $ 1,371 $ 1,007 $ 939 $ 297
Net income per share before
cumulative effect of changes in
accounting methods............. .16 .14 .13 .04
Cumulative effect of changes in
accounting methods............. .03 -- -- --
Net income per share............. .19 .14 .13 .04
</TABLE>
- ----------------------------------------------------------------
Quarterly results for 1992 have been restated to reflect the cumulative effect
of the accounting method changes in the first interim period of the year as
required by Accounting Principles Board Opinion No. 20.
- ------------------------------------------------------------------------------
20
- ------------------------------------------------------------------------------
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of A.M. Castle & Co.:
We have audited the accompanying consolidated balance sheets of A.M. Castle &
Co. (a Delaware corporation) and Subsidiaries as of December 31, 1993, 1992
and 1991, and the related consolidated statements of income, reinvested
earnings and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of A.M. Castle & Co. and
Subsidiaries as of December 31, 1993, 1992 and 1991, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
As discussed in Notes 3 and 6 to the consolidated financial statements,
effective January 1, 1992, the Company changed its methods of accounting for
postretirement benefits other than pensions and for income taxes.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
February 4, 1994.
- ------------------------------------------------------------------------------
21
<PAGE> 22
A.M. Castle & Co. and Subsidiaries
CONSOLIDATED ELEVEN-YEAR FINANCIAL AND OPERATING SUMMARY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except employee and per share data) 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Tons sold (in thousands).......................................... 308 249 234
Summary of Net sales......................................................... $474.1 $423.9 $436.4
Earnings Cost of sales..................................................... 351.8 313.7 331.1
------ ------ ------
Gross profit...................................................... 122.3 110.2 105.3
Operating expenses................................................ 102.1 94.9 92.8
Depreciation...................................................... 4.8 4.9 5.3
------ ------ ------
Profit from operations............................................ 15.4 10.4 7.2
Interest expense, net............................................. 3.8 4.3 6.8
------ ------ ------
Income before income taxes........................................ 11.6 6.1 .4
Income taxes...................................................... 4.7 2.7 .2
------ ------ ------
Net income........................................................ 6.9 3.41 .2
Cash dividends.................................................... 2.9 2.9 3.9
------ ------ ------
Reinvested earnings............................................... $ 4.0 $ 0.5 $ (3.7)
------ ------ ------
------ ------ ------
- ------------------------------------------------------------------------------
Share Data Number of shares outstanding at year-end (in thousands)........... 7,278 7,276 7,276
(Note 7) Net income per share.............................................. $ .95 $ .47 $ .03
Cash dividends per share.......................................... $ .40 $ .40 $ .54
Book value per share.............................................. $ 9.56 $ 9.00 $ 8.89
- ------------------------------------------------------------------------------
Financial Working capital................................................... $ 86.1 $ 75.3 $ 79.7
Position Property, plant and equipment, net................................ $ 41.0 $ 43.2 $ 47.4
at Year-End Total assets...................................................... $204.2 $195.2 $190.4
Short-term debt................................................... $ -- $ -- $ .2
Long-term debt.................................................... $ 58.0 $ 53.0 $ 63.3
Stockholders' equity.............................................. $ 69.5 $ 65.5 $ 64.7
- ------------------------------------------------------------------------------
Financial Return on sales................................................... 1.5% 0.8% 0.1%
Ratios Asset turnover.................................................... 2.3 2.2 2.3
Return on assets.................................................. 3.4% 1.7% 0.1%
Leverage factor................................................... 3.1 3.0 2.8
Return on opening stockholders' equity............................ 10.5% 5.2% 0.3%
Percent earnings reinvested....................................... 58.0% 14.7% --%
Percent increase (decrease) in equity............................. 6.1% 1.2% (5.3%)
- ------------------------------------------------------------------------------
Other Data Additions to property, plant and equipment........................ $ 4.6 $ 1.8 $ 3.3
Stockholders at year-end.......................................... 1,625 1,670 1,750
Employees at year-end............................................. 1,204 1,196 1,268
Per employee data (in thousands)
Net sales......................................................... $393.8 $354.4 $344.2
Gross profit...................................................... $101.6 $ 92.1 $ 83.0
Operating expenses, including depreciation........................ $ 88.8 $ 83.4 $ 77.4
Profit from operations............................................ $ 12.8 $ 8.7 $ 5.6
- ------------------------------------------------------------------------------
</TABLE>
This schedule is prepared reflecting accounting changes as required or allowed
to more fairly present the results of operations over the eleven-year period.
Statements for years preceding these changes have not been revised to reflect
their retroactive application of these changes. Refer to prior year annual
reports for specific accounting changes.
- -------------------
11992 net income represents the net results from operations before the
cumulative prior years' effect of adopting SFAS No. 106 and SFAS No. 109
(Notes 3 and 6).
- ------------------------------------------------------------------------------
22
<PAGE> 23
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1990 1989 1988 1987 1986 1985 1984 1983
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
248 255 277 258 231 211 230 179
$478.9 $501.1 $499.3 $376.1 $322.9 $307.2 $328.4 $252.8
363.6 380.6 375.1 282.1 240.6 224.0 237.5 182.8
- ------ ------ ------ ------ ------ ------ ------ ------
115.3 120.5 124.2 94.0 82.3 83.2 90.9 70.0
97.5 96.7 92.6 74.9 74.6 70.1 71.0 59.6
5.2 4.4 3.9 3.7 3.6 3.3 3.2 3.3
- ------ ------ ------ ------ ------ ------ ------ ------
12.6 19.4 27.7 15.4 4.1 9.8 16.7 7.1
6.8 5.1 5.1 3.3 4.1 3.1 2.9 2.2
- ------ ------ ------ ------ ------ ------ ------ ------
5.8 14.3 22.6 12.1 0.0 6.7 13.8 4.9
2.7 5.6 8.9 5.5 (0.1) 3.0 6.7 2.2
- ------ ------ ------ ------ ------ ------ ------ ------
3.1 8.7 13.7 6.6 0.1 3.7 7.1 2.7
4.9 4.7 3.5 3.0 3.0 2.8 2.0 1.5
- ------ ------ ------ ------ ------ ------ ------ ------
$(1.8) $ 4.0 $ 10.2 $ 3.6 $(2.9) $ 0.9 $ 5.1 $ 1.2
- ------ ------ ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------
7,262 7,220 7,190 7,137 7,107 7,088 7,044 7,020
$ .43 $ 1.20 $ 1.90 $ .93 $ .01 $ .52 $ 1.01 $ .39
$ .68 $ .64 $ .48 $ .42 $ .43 $ .39 $ .29 $ .21
$ 9.41 $ 9.66 $ 9.11 $ 7.75 $ 7.25 $ 7.65 $ 7.53 $ 6.81
- ------------------------------------------------------------------------------
$ 89.9 $ 75.8 $ 89.0 $ 47.9 $ 47.5 $ 50.5 $ 43.5 $ 41.6
$ 54.8 $ 45.3 $ 39.4 $ 35.7 $ 38.4 $ 35.8 $ 36.7 $ 35.8
$226.6 $202.3 $211.9 $158.7 $145.6 $138.3 $135.0 $116.9
$ 11.9 $ .5 $ -- $ 6.0 $ 14.0 $ 2.0 $ 3.0 $ --
$ 76.7 $ 51.0 $ 61.0 $ 27.8 $ 30.8 $ 30.2 $ 24.4 $ 26.6
$ 68.3 $ 69.7 $ 65.5 $ 55.3 $ 51.5 $ 54.2 $ 53.1 $ 47.8
- ------------------------------------------------------------------------------
0.7% 1.7% 2.7% 1.8% 0.1% 1.2% 2.2% 1.1%
2.1 2.5 2.4 2.3 2.2 2.2 2.4 2.2
1.4% 4.3% 6.5% 4.2% 0.1% 2.7% 5.3% 2.3%
3.3 3.1 3.8 3.1 2.8 2.6 2.8 2.5
4.5% 13.2% 24.7% 12.9% 0.2% 7.0% 14.9% 5.8%
--% 46.3% 74.8% 54.0% --% 24.3% 71.8% 44.4%
(2.0%) 6.4% 18.5% 7.3% (5.0%) 2.1% 11.1% 2.6%
- ------------------------------------------------------------------------------
$ 13.4 $ 10.4 $ 7.8 $ 2.6 $ 6.2 $ 3.1 $ 4.7 $ 2.0
1,730 1,747 1,732 1,750 1,843 1,893 1,873 1,944
1,379 1,371 1,373 1,232 1,227 1,258 1,356 1,272
$347.3 $365.5 $363.7 $305.3 $263.2 $244.2 $242.2 $198.7
$ 83.6 $ 87.9 $ 90.5 $ 76.3 $ 67.0 $ 66.1 $ 67.0 $ 55.0
$ 74.5 $ 73.7 $ 70.3 $ 63.8 $ 63.7 $ 58.3 $ 54.7 $ 49.4
$ 9.1 $ 14.2 $ 20.2 $ 12.5 $ 3.3 $ 7.8 $ 12.3 $ 5.6
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
23
<PAGE> 24
TOTAL RETURN ON AN INVESTMENT IN CASTLE
The accompanying 15-year chart shows the total value generated by an initial
investment of $100 in A.M. Castle & Co., including stock price appreciation and
the reinvestment of dividend payments, compared to an equivalent investment at
returns earned by the Standard and Poor's 500 common stock index and the
inflation rate as measured by the Consumer Price Index.
During 1993, an investment in Castle's stock produced a total return of
51.8% compared with 7.7% for the Standard and Poor's 500 and an inflation rate
of 2.9%.
Over the 15-year period ended December 31, 1993, Castle generated a
compounded annual rate of return of 17.7% compared with 15.6% for the Standard
and Poor's 500 and an annual inflation rate of 5.3%.
CASTLE'S RECORD OF DIVIDEND PAYMENTS
During 1993, Castle continued its 60-year record of consecutive quarterly cash
dividend payments with payouts totaling, $2,911,000, or 40 cents a share.
During the 15-year period ended December 31, 1993, dividend payouts, which
average 61% of after-tax corporate income, have risen at a compound annual rate
of 5.4%.
COMMON STOCK INFORMATION
Symbol CAS; traded on the American and Chicago Stock Exchanges.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDENDS STOCK PRICE RANGE
1993 1992 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First quarter............................................................ $.10 $.10 $11 1/4 $13 1/8 $10 1/2 $12 3/4
Second quarter........................................................... .10 .10 12 12 3/4 11 3/8 13
Third quarter............................................................ .10 .10 12 1/8 13 1/2 11 1/8 12 1/2
Fourth quarter........................................................... .10 .10 12 5/8 17 3/8 11 1/8 12 1/8
---- ----
$.40 $.40
---- ----
---- ----
- ------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
24
<PAGE> 25
CASTLE LOCATIONS
Atlanta, GA
Buffalo, NY
Charlotte, NC
Chicago, IL
Cincinnati, OH
Cleveland, OH
Dallas, TX
Detroit, MI
Houston, TX
Kansas City, MO
Los Angeles, CA
Milwaukee, WI
Philadelphia, PA
Phoenix, AZ
Pittsburgh, PA
Salt Lake City, UT
San Diego, CA
Stockton, CA
Tulsa, OK
Wichita, KS
Worcester, MA
Hy-Alloy Steels Co.; Chicago, IL
H-A Industries; Hammond, IN
A.M. Castle & Co. (Canada), Inc.
Montreal Toronto Winnipeg
- ------------------------------------------------------------------------------
25
<PAGE> 26
DIRECTORS
Daniel T. Carroll
Chairman
The Carroll Group, Inc.
a management consulting firm
Edward F. Culliton
Vice President -- Finance
William K. Hall
President & Chief Executive Officer
Eagle Industries, Inc.
a diversified manufacturing company
Robert S. Hamada
Dean
Graduate School of Business
University of Chicago
John P. Keller
President
Keller Group
an industrial manufacturing & coal mining company
Frederick A. Krehbiel
Chairman and
Chief Executive Officer
Molex Incorporated
an electronic components
manufacturer
John W. McCarter, Jr.
Vice President
Booz, Allen & Hamilton, Inc.
a management consulting firm
William J. McDermott
Retired President
Simpson Estates, Inc.
a private management firm
Richard G. Mork
President and
Chief Executive Officer
Michael Simpson
Chairman of the Board
Richard A. Virzi
Retired President and
Chief Executive Officer
A.M. Castle & Co.
OFFICERS
Michael Simpson
Chairman of the Board
Richard G. Mork
President and
Chief Executive Officer
Edward F. Culliton
Vice President --
Finance
Sven G. Ericsson
Vice President --
Plate & Carbon Products Group
M. Bruce Herron
Vice President --
Western Region
Stephen V. Hooks
Vice President --
Midwest Region
Richard G. Phifer
Vice President --
Eastern Region
Thomas D. Prendergast
Vice President --
Human Resources
Alan D. Raney
Vice President --
High Technology Products Group
Gise Van Baren
Vice President --
Alloy Products Group
James A. Podojil
Treasurer -- Controller
Jerry M. Aufox
Secretary --
Legal Counsel
HY-ALLOY STEELS CO.
Gise Van Baren
President and General Manager
- ------------------------------------------------------------------------------
GENERAL OFFICES
3400 North Wolf Road
Franklin Park, IL 60131
GENERAL COUNSEL
Mayer, Brown & Platt
INDEPENDENT AUDITORS
Arthur Andersen & Co.
TRANSFER AGENT &
REGISTRAR
American Stock Transfer and
Trust Company
COMMON STOCK TRADED
American Stock Exchange
Chicago Stock Exchange
ANNUAL MEETING
Thursday, April 28, 1994, 10:00 A.M.
Corporate Offices
3400 North Wolf Road
Franklin Park, IL 60131
(708) 455-7111
FORM 10-K
A.M. Castle & Co. will be pleased to
make its annual report on Form 10-K,
filed with the Securities and Exchange
Commission, available at no cost to
interested stockholders on written
request to the corporate secretary.
- ------------------------------------------------------------------------------
26
<PAGE> 27
APPENDIX TO A. M. CASTLE & CO.
1993 ANNUAL REPORT
[DESCRIPTION OF GRAPHICS OMITTED FORM EDGAR SUBMISSION]
1. On the cover of the Annual Report are three square photographs in the
center, arranged in the shape of an L:
The photograph at the top left is an end view of a rack of bar products in
pans stacked vertically with a sun starburst to the left of center.
The second photograph, lower left of the center, depicts various machined
products manufactured out of ferrous and nonferrous metals by customers of
the Company.
The picture on the lower right is of flame cutting equipment, burning
shapes out of a plate, with sparks flying.
2. The photograph in the upper left hand corner of page 4 depicts
Richard G. Mork, President and Chief Executive Officer, left; and
Michael Simpson, Chairman of the Board, right, both facing front.
3. The picture on the top left hand corner of page 6 is an enlarged
picture of the picture found on the front page of the Annual Report showing
a vertical rack of products in pans with a sunburst slightly left of
center.
4. On page 7, there are two pictures, one on top of another:
The top picture shows a worker with his back towards the viewer standing in
front of a computer control station of a piece of equipment.
The lower picture shows three machined gears.
5. On page 8, there are two pictures, one on top of another:
The top picture shows a large flame cut part which looks like a rimless
wheel (a hole in the center and radiating metal spokes) standing upright
in front of stacked metal plates.
The lower picture is a duplicate of one of the pictures on the front cover
showing machined parts made from ferrous and nonferrous metal.
6. On page 23, there are two charts:
The first chart which is in the upper third of the page shows the compound
rate of return of Castle stock versus inflation and the S&P Index.
Castle's returns are shown in the form of straight line segments connected
with a solid color beneath from the year 1979 through 1993. The S&P
Index is shown by a dotted line and inflation is shown by a solid line.
The chart depicts inflation over a 15 year period running from slightly
under $200 to $200. The chart shows a steadily upward course of the S&P
Index 500 rising from approximately 200 to somewhere in the neighborhood of
900. The chart shows the solid color, A. M. Castle's compound rate of
return, also rising with some dips and valleys from $200 to slightly under
$1,200.
The second chart which appears on the bottom half of the page shows 15 year
dividend payout in thousands of dollars by year the total amount of
dividend payouts for each year joined by a straight line with the area
beneath the line shaded. The graph commencing at $1,000,000 shows a rise
in total dividends from 1979 to 1982, with a dip from 1982 to 1983, and
then a rise again steadily to 1990 with a decrease in total dividends from
1990 to 1992 and 1992 dividends remaining flat at slightly under
$3,000,000.
<PAGE> 1
EXHIBIT 99.B
CERTIFICATE OF INCORPORATION OF
A. M. CASTLE & CO.
First. The name of the corporation is A. M. Castle & Co.
Second. Its principal office in the State of Delaware is located at No. 100
West Tenth Street, in the City of Wilmington, County of New Castle. The name
and address of its resident agent is The Corporation Trust Company, No. 100
West Tenth Street, Wilmington, Delaware.
Third. The nature of the business, or objects or purposes to be transacted,
presented or carried on are:
To manufacture, buy, sell, lease, store, distribute, import, export and deal
in and deal with metals and materials of whatever kind and products and
by-products thereof in all forms, and in all articles made therefrom; to
manufacture, mine, produce, buy, sell, lease, store, distribute, import,
export and deal in any articles or materials used in the manufacture,
storage, sale or distribution of metals and materials of whatever kind and
products and by-products thereof in any form, or in the manufacture, storage,
sale or distribution of any article made therefrom;
To manufacture, purchase or otherwise acquire, and to hold, own, store,
distribute, use, sell, lease or otherwise dispose of and deal in and with, at
wholesale, retail or otherwise, goods, wares and merchandise and personal
property of every class and description;
To furnish and provide services of every kind and nature as principal or
agent (including, without limitation, the treating, coating and processing of
any materials, products or other personal property) to any persons, firms,
associations or corporations;
To acquire and pay for in cash, stock or bonds of this corporation or
otherwise, the goodwill, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities, of any
person, firm, association or corporation;
To acquire, hold, use, sell, assign, grant licenses in respect of, mortgage
or otherwise dispose of letters patent of the United States or any foreign
country, patent rights, licenses and privileges, inventions, improvements and
processes, copyrights, trademarks and trade names, relating to or useful in
connection with any business of this corporation;
To acquire by purchase, subscription or otherwise, and to receive, hold, own,
sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or
deal in and with any of the shares of the capital stock, or any voting trust
certificates in respect of the shares of capital stock, scrip, warrants,
rights, bonds, deben-
<PAGE> 2
tures, notes, trust receipts, and other securities, obligations, choses in
action and evidences of indebtedness or interest issued or created by any
corporation, joint stock companies, syndicates, associations, firms, trusts, or
persons, public or private, or by the government of the United States of
America, or by any foreign government, or by any state, territory, province,
municipality or other political subdivision or by any governmental agency, and
as owner thereof to possess and exercise all the rights, powers and privileges
of ownership, including the right to execute consents and vote thereon, and to
do any and all acts and things necessary or advisable for the preservation,
protection, improvement and enhancement in value thereof;
To enter into, make and perform contracts of every kind and description with
any person, firm, association, corporation, municipality, county, territory,
state, body politic or government or colony, possession or dependency
thereof;
To borrow or raise moneys for any of the purposes of the corporation and,
from time to time, without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non- negotiable
instruments and evidences of indebtedness, and to secure the payment of any
thereof and of the interest thereon by mortgage upon or pledge, conveyance or
assignment in trust of the whole or any part of the property of the
corporation, whether at the time owned or thereafter acquired, and to sell,
pledge or otherwise dispose of such bonds or other obligations of the
corporation for its corporate purposes;
To loan to any person, firm or corporation any of its surplus funds, either
with or without security, provided that no loan of money shall be made by the
corporation to any officer or director of the corporation;
To purchase, hold, sell and transfer the shares of its own capital stock;
provided it shall not use its funds or property for the purchase of its own
shares of capital stock when such use would cause any impairment of its
capital except as otherwise permitted by law, and provided further that
shares of its own capital stock belonging to it shall not be voted upon
directly or indirectly;
To have one or more offices, to carry on all or any of its operations and
business and without restriction or limit as to amount to purchase or
otherwise acquire, hold, own, mortgage, sell, convey, or otherwise dispose of
real and personal property of every class and description in any of the
states, districts, territories or possessions of the United States, and in
any and all foreign countries, subject to the laws of such state, district,
territory, possession or country; and
In general, to carry on any other business in connection with the foregoing,
and to have and exercise all the powers conferred by the laws of Delaware
upon corporation formed under the General Corpora-
<PAGE> 3
tion Law of the State of Delaware, and to do any or all the things
hereinbefore set forth to the same extent as natural persons might or
could do.
The objects and purposes specified in the foregoing clauses shall, except where
otherwise expressed, be in novice limited or restricted by reference to, or
inference from, the terms of any other clause in this Certificate of
Incorporation, but the objects and purposes specified in each of the foregoing
clauses of this article shall be regarded as independent objects and purposes.
Fourth. The total number of shares of stock which the corporation shall have
authority to issue is Ten Million (10,000,000) shares of common stock without
par value.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions in respect of the shares of stock
are:
All of the authorized shares shall be designated Common Stock and each
outstanding share of the corporation shall be entitled to one vote on each
matter submitted to a vote at a meeting of stockholders.
No stockholder of this corporation shall by reason of his holding shares of any
class have any preemptive or preferential right to purchase or subscribe to any
shares of any class of this corporation, now or hereafter authorized, or any
notes, debentures, bonds, or other securities convertible into or carrying
options or warrants to purchase shares of any class, now or hereafter
authorized, whether or not the issuance of any such shares, or such notes,
debentures, bonds or other securities, would adversely affect the dividend or
voting rights of such stockholder, other than such rights, if any, as the Board
of Directors, in its discretion from time to time may grant, and at such prices
as the Board of Directors in its discretion may fix; and the Board of Directors
may issue shares of any class of this corporation, or any notes, debentures,
bonds, or other securities convertible into or carrying options or warrants to
purchase shares of any class, without offering any such shares of any class,
either in whole or in part, to the existing stockholders of any class.
Fifth. The minimum amount of capital with which the corporation will commence
business is One Thousand Dollars ($1,000).
Sixth. The names and places of residence of the incorporators are as follows:
Name Residence
---- ---------
S. H. Lovesay .................... Wilmington, Delaware
F. J. Ohara, Jr. ................. Wilmington, Delaware
A. D. Grier ...................... Wilmington, Delaware
Seventh. The corporation is to have perpetual existence.
<PAGE> 4
Eighth. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
Ninth. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created.
By resolution passed by a majority of the whole board, to designate
one or more committees, each committee to consist of two or more
directors of the corporation, which, to the extent provided in the
resolution or in the by-laws of the corporation, shall have and may
exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of
the corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be stated
in the by-laws of the corporation or as may be determined from time to
time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative mote of the holders
of a majority of the stock issued and outstanding having voting power
given at a stockholders' meeting called for that purpose, or when
authorized by the written consent of the holders of a majority of the
voting stock issued and outstanding, to sell, lease or exchange all of
the property and assets of the corporation, including its goodwill and
its corporate franchises, upon such terms and conditions and for such
consideration, which may be whole or in part shares of stock in, and/or
other securities of, any other corporation or corporations, as its
Board of Directors shall deem expedient and for the best interests of
the corporation.
Tenth. In the absence of fraud, no contract or transaction between this
corporation and any other corporation shall be affected by the fact that the
directors of this corporation or any of them are interested in or are directors
or officers of such other corporation, and any director individually may be a
party to, or may be interested in any such contract or transaction of this
corporation; and no such contract or transaction of this corporation with any
person or persons, firm or association, shall be affected by the fact that any
director of this corporation is a party to, or interested in, such contract or
transaction, or in any way connected with such person or persons, firm or
association, provided that the interest in any such contract or transaction of
any such director shall be fully disclosed, and that such contract or other
transaction shall be authorized or ratified by the vote of a sufficient number
of the directors of this corporation not so interested; and each and every
person who may become a director in
<PAGE> 5
this corporation is hereby relieved from any liability that might otherwise
exist from thus contracting with this corporation for the benefit of himself of
any firm, association, or corporation in which in any wise he may be
interested.
Eleventh. Meetings of stockholders may be held without the State of Delaware,
if the by-laws so provide. The books of the corporation may be kept (subject
to any provision contained in the statutes) outside of the State of Delaware at
such place or places as may from time to time be designated by the Board of
Directors or in the by-laws of the corporation. Elections of directors need
not be by ballot unless the by-laws of the corporation shall so provide.
Twelfth. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
Any action required or permitted to be taken by the stockholders of the
Corporation, whether voting as a class or otherwise, must be taken at a duly
called annual or special meeting of the stockholders of the Corporation and may
not be taken by consent in writing of such stockholders.
No amendment shall change, repeal or make inoperative any of the provisions of
this Article Twelfth, unless such amendment receives the affirmative vote of
the holders of 66-2/3% of all shares of voting stock of the Corporation.
Thirteenth. Not used.
<PAGE> 6
Fourteenth.
A. Required Vote. The affirmative vote of the holders of 66-2/3% of
all shares of stock of the Corporation entitled to vote in an election of
directors, considered for the purposes of this Article Fourteenth as one class
(referred to in this Article Fourteenth as "voting stock"), shall be required
for the adoption or authorization of any "extraordinary business transaction"
(as hereinafter defined) with any "interested person" (as hereinafter defined)
if, as of the record date for the determination of stockholders entitled to
notice thereof and to vote thereon or consent thereto, or as of the date of any
such vote or consent, or immediately prior to the consummation of the
extraordinary business transaction, such interested person is the beneficial
owner, directly or indirectly, of at least 5% of the voting stock of the
Corporation; provided, that such 66-2/3% voting requirement shall not be
applicable if the extraordinary business transaction is approved by a
resolution adopted by the Board of Directors and receives the affirmative vote
of a majority of the continuing directors of the Corporation, provided that the
continuing directors constitute a majority of the Board of Directors.
B. Price and Other Requirements. Whether or not a 66-2/3% voting
requirement shall be applicable, the cash, or fair market value (as hereinafter
defined) of other consideration, to be received per share by common
stockholders of the Corporation in an extraordinary business transaction with
an interested person involving a distribution to stockholders must not be less
than the higher of either:
(i) the highest per share price (including brokerage
commissions and/or soliciting dealers' fees) paid by such interested
person in acquiring any of its holdings of the Corporation's Common
Stock during the two year period immediately preceding the first public
announcement of the terms of such extraordinary business transaction;
or
(ii) the book value per share of the Corporation's Common Stock
as shown on the Corporation's then most recently published financial
statements.
Furthermore, when a stockholder vote is required under this Article or
pursuant to Delaware law, a majority of the continuing directors shall select
two independent experts, which experts shall evaluate the terms of any
extraordinary business transaction and determine whether they are fair to the
holders of the outstanding shares of stock of the Corporation which are not
beneficially owned, directly or indirectly, by the interested person. Such
experts in making this evaluation shall take into account whether such
stockholders receive thereby their proportionate share of the economic
benefits which reasonably can be foreseen from the extraordinary business
transaction, as well as such other factors as they deem relevant. The
Corporation shall pay the reasonable fees and expenses associated with the
retention of such experts.
<PAGE> 7
In addition, when a stockholder vote is required under this Article or
pursuant to Delaware law a proxy statement responsive to the requirements of
the Securities Exchange Act of 1934, as amended, shall be mailed to the
common stockholders of the Corporation and shall contain (i) any
recommendations as to the advisability of the extraordinary business
transaction which the continuing directors (as hereinafter defined), or any
of them, may choose to state, and (ii) the opinions received by the Board of
Directors from the two independent experts as to the fairness of the terms of
the extraordinary business transaction.
C. Certain Definitions. As used in this Article Fourteenth, the
following terms shall have the following meanings, respectively.
1. The term "interested person" shall include any corporation,
person or other entity and any other entity with which it or its
"affiliate" or "associate" (as hereinafter defined) has any agreement,
arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of stock of the Corporation,
or which is its "affiliate" or "associate" as those terms are defined
in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, as in effect on January 22, 1986,
together with the successors and assigns of such persons in any
transaction or series of transactions not involving a public offering
of the Corporation's stock within the meaning of the Securities Act of
1933, as amended.
An interested person shall be deemed to be the beneficial owner
of any shares of stock of the Corporation which the interested person
(as defined above) has the right to acquire pursuant to any agreement
or upon the exercise of conversion rights, warrants or options, or
otherwise.
The outstanding shares of any class of stock of the Corporation
shall be deemed to include shares deemed owned through the application
of the preceding paragraph but shall not include any other shares of
stock which may be issuable pursuant to any agreement, or upon exercise
of conversion rights, warrants or options, or otherwise.
2. The term "extraordinary business transaction" shall include
(a) any merger or consolidation of the Corporation with or into any
other corporation; (b) the sale, lease, exchange or other disposition
of all or any substantial part (meaning assets which represent 10% or
more of the total assets of the Corporation as recorded on its books of
account or 10% or more of the going concern value of the Corporation as
determined by the Board of Directors) of the assets of the Corporation;
and (c) the sale or lease to the Corporation or any subsidiary, in
exchange for voting securities (or securities convertible into or
exchangeable for voting securities)
<PAGE> 8
of the Corporation or any subsidiary, of any assets having an aggregate fair
market value of more than $5,000,000.
3. The term "continuing director" shall mean a person who is
not, and has not been during the preceding 5 years, an affiliate or an
associate, as defined above, of an interested person and who was a
member of the Board of Directors of the Corporation prior to the time
that such other entity first acquired more than 5% of the voting stock
of the Corporation (this specifically excludes any entity that owned
such amount of stock prior to January 22, 1986), or a person designated
(whether before or after election as a director) to be a continuing
director by a majority of the continuing directors.
4. The "fair market value" of other consideration referred to
in Section 8 shall be as determined in good faith by the Board of
Directors of the Corporation and concurred in by a majority of the
continuing directors.
5. in the event of a transaction in which the Corporation is
the surviving corporation, the "other consideration to be received" as
used in Section B shall include Common Stock of the Corporation
retained by its existing stockholders.
D. Determination by the Board of Directors. A majority of the
continuing directors shall have the power and duty to determine for the
purposes of this Article Fourteenth, on the basis of information known to them,
whether:
1. such interested person beneficially owns more than 5% of
the outstanding shares of voting stock of the Corporation;
2. another entity is an "affiliate" or "associate" of
interested person;
3. another entity has an agreement, arrangement or
understanding with interested person; or
4. a particular transaction is an "extraordinary business
transaction" for the purpose of this Article Fourteenth.
E. Other Provisions. Nothing contained in this Article Fourteenth
shall be construed to relieve any interested person from any fiduciary
obligation imposed by law. The voting requirements of this Article Fourteenth
shall be in addition to the voting requirements imposed by law or other
provisions of this Certificate of Incorporation in favor of certain classes of
stock.
F. Applicability. The provisions of this Article Fourteenth shall not
apply to any extraordinary business transaction involving an interested person
if the Board of Directors of the Corporation shall by resolution have approved
a memorandum of understanding
<PAGE> 9
with such person of the substantive terms of such extraordinary
business transaction prior to the time such person becomes the
beneficial owner, directly or indirectly, of at least 5% of the voting
stock of the Corporation.
G. Amendments. No amendment shall change, repeal or make
inoperative any of the provisions of this Article Fourteenth, unless
such amendment receives the affirmative vote of the holders of 66-2/3%
of all shares of voting stock of the Corporation.
Fifteenth. A director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach or
fiduciary duty as a director except that this Article Fifteenth shall not
eliminate or limit a director's liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts and
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the Delaware General
Corporation law' or (iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware Corporation Law is hereafter amended to authorize the further
elimination or limitation of the personal liability of directors, then the
liability of a Director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law as so
amended.
Any repeal or modification of the foregoing provisions of this Article
Fifteenth by the stockholders of this Corporation shall not adversely affect
any right or protection of any Director of this Corporation or any act or
occurrence taking place prior to such repeal or modification, or otherwise
adversely affect any right or protection existing at the time of such repeal or
modification.
The provisions of this Article Fifteenth shall not be deemed to limit or
preclude indemnification, to the extent permitted by Delaware Law, of a
director by this Corporation for any liability for a director which has not
been eliminated by the provisions of this Article Fifteenth.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, hereby declaring and
certifying that the facts herein stated are true, and accordingly have hereunto
set our hands and seals this 21st day of April, 1966.
S. H. Lovesay (Seal)
F. J. Ohara, Jr. (Seal)
A. D. Grier (Seal)
<PAGE> 1
EXHIBIT 99.C
BY-LAWS
OF DELAWARE
A. M. CASTLE & CO.
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at the office of the corporation at 3400 North
Wolf Road, Franklin Park, Illinois. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
Section 2. Annual meeting of stockholders, commencing with the year
1988, shall be held on the fourth Thursday of April, if not a legal
holiday, and if a legal holiday, then on the next succeeding business day
at 10:00 a.m., at which time the stockholders shall elect by a plurality
vote a Board of Directors, and transact such other business as may be
properly brought before the meeting.
Section 3. Written notice of the annual meeting shall be given to
each stockholder entitled to vote thereat at least ten days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, or cause to be made, at least ten days
before every election of directors, a complete list of the stockholders
entitled to vote at said election, arranged in alphabetical order, showing
the address of and the number of shares registered in the name of the
stockholder. Such list shall be open to the examination of any
stockholder, during ordinary business hours, for a period of at least ten
days prior to the election, either at a place within the city, town or
village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept
at the time and place of election during the whole time thereof, and
subject to the inspection of any stockholder who may be present.
<PAGE> 2
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman of the board, or the
president and shall be called by the president or secretary at the request
in writing of a majority of the Board of Directors, or at the request in
writing of stockholders owning not less than one-fifth an amount of the
entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting of stockholders,
stating the time, place and object thereof, shall be given to each
stockholder entitled to vote thereat, at least ten days before the date
fixed for the meeting.
Section 7. Business transaction at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders
for the transaction of business except as otherwise provided by statute or
by the certificate of incorporation. If, however, such quorum shall not
be present or represented by any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall
be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 9. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the certificate of incorporation, a different vote is
required, in which case such express provision shall govern and control
the decision of such question.
Section 10. Each stockholder shall, at every meeting of the
stockholders, be entitled to one vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no
proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period, and, except where the transfer books of the
corporation have been closed or a date has been fixed as a record date for
the determination of its stockholders entitled to vote, no share of stock
shall be voted on at any election for directors which has been transferred
on the books of the corporation within twenty days next preceding such
election of directors.
Section 11. Whenever the vote of stockholders at a meeting thereof
is required or permitted to be taken in connection with any corporate
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<PAGE> 3
action by any provisions of the statutes or of the certificate of
incorporation, the meeting and vote of stockholders may be dispensed with,
if all the stockholders who would have been entitled to vote upon the
action if such meeting were held, shall consent in writing to such
corporate action being taken.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall be eleven (11). The directors shall be elected at the annual
meeting of stockholders, except as provided in Section 2 of this Article
III, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, and
the directors so chosen shall hold office until the next annual election
and until their successors are duly elected and shall qualify, unless
sooner displaced.
Section 3. The business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
certificate of incorporation or by these by-laws expressly directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of
Directors shall be held immediately after the adjournment of the annual
meeting of stockholders, and at the place where said annual meeting shall
have been held and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event that such meeting is not
held at the time and place so fixed, such meeting may be held at such time
and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified
in a written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time
be determined by the Board of Directors.
Section 7. Special meetings of the Board may be called by the
chairman of the board or the president on three days' notice to each
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<PAGE> 4
director, by mail or by telegram. Special meetings shall be called by the
president or secretary in like manner and on like notice on the written
request of a director.
Section 8. At all meetings of the Board of Directors, a majority of
directors shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the Board or of such committee as the
case may be, and such written consent is filled with the minutes of
proceedings of the Board or committee.
Section 10. At any meeting of the Board of Directors, at which all
of the directors shall be present, any business may be transacted,
regardless of whether such business falls within the purpose or purposes
for which said meeting may have been called, and regardless of the fact
that no notice whatever was given of the holding of such meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees,
each committee to consist of two or more of the Directors of the corporation,
which, to the extent provided in the resolution, shall have and may
exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. At any
meeting of a committee, a majority of the committee members shall
constitute a quorum for the transaction of business and the act of a
majority of the members of the committee present at any meeting at which
there is a quorum shall be the act of the committee, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of a
committee, the committee members present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
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<PAGE> 5
COMPENSATION OF DIRECTORS
Section 13. The Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a
stated salary as Director. No such payment shall preclude any Director
from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Section 14. The Board of Directors may appoint such retired members
of the Board of Directors to the nonvoting position of Director emeritus
and/or honorary chairman as it shall deem necessary who shall thereafter
hold their offices or agencies, as the case may be, for such term and
shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 15. Directors emeritus and honorary chairmen may be paid
their expenses of attendance at such meetings of the Board of Directors
and/or committees of the Board as they attend and such allowances or
expenses as may be incurred while performing duties or responsibilities as
directed by the Board of Directors.
ARTICLE IV
NOTICES
Section 1. Notices to Directors and stockholders shall be in writing
and delivered personally or mailed to the Directors or stockholders at
their addressed appearing on the books of the corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed.
Notice to Directors may also be given by telegram.
Section 2. Whenever any notice is required to be given
under the provisions of the statutes or of the certificate of incorporation
or of these by-laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice either before or after the time stated
therein, shall be deemed equivalent to such notice.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be elected by the
Board of Directors and shall be a chairman of the board, a president, one
or more vice presidents, a secretary, a treasurer, a controller and, if
deemed advisable by the Board of Directors, an assistant secretary/law.
Two or more offices may be held by the same person except that where the
office of president and secretary are held by the same person, such person
shall not hold any other office.
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Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders, shall elect a chairman of the board, a
president, one or more vice presidents, a secretary, a treasurer, a
controller, and if it deems advisable, an assistant secretary/law.
Section 3. The Board of Directors may appoint such other officers,
including without limitation, one or more assistant secretaries, assistant
secretary-law, assistant treasurers, assistant controllers and such agents
as it shall deem necessary who shall hold their offices or agencies, as
the case may be, for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of
Directors.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed
by the Board of Directors may be removed at any time by the affirmative
vote of a majority of the Board of Directors then in office. Any vacancy
occurring in any office of the corporation shall be filled by the Board of
Directors.
6
<PAGE> 7
THE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board shall preside at all meetings
of the Board of Directors and shall have such other duties and powers as
may be assigned to him by the Board of Directors from time to time.
THE PRESIDENT
Section 7. The president shall be the chief executive officer of the
corporation and shall exercise general supervision over the business and
fiscal affairs and policy of the corporation, and shall have such other
duties and powers as may be assigned to him by the Board of Directors from
time to time. He shall preside at all meetings of the stockholders and,
in the absence, death or other inability to act of the chairman of the
board, he shall have and exercise the powers and duties of the chairman of
the board.
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than one,
the vice presidents, in the order determined by the Board of Directors,
shall, in the absence or disability of the president, perform the duties
and exercise the powers of the president and shall perform such other
duties and have such other powers as the Board of Directors may from time
to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the Board of
Directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause
to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as
may be prescribed by the Board of Directors, the chairman of the board or
the president, under whose supervision he shall be. He shall have custody
of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument
requiring it, and when so affixed it may be attested by his signature or
by the signature of such assistant secretary. The Board of Directors may
give general authority to any other officer to affix the seal of the
corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one,
the assistant secretaries, in the order determined by the Board of
Directors, shall, in the absence or disability of the secretary, perform
the duties and exercise the powers of the secretary and shall perform such
other duties and have such other powers as the Board of Directors may from
time to time prescribe.
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<PAGE> 8
Section 11. The assistant secretary-law shall, in addition to the
duties of assistant secretary as afore-described, give legal advice and
assistance as called upon to do so by any officer of the corporation and
shall generally oversee and supervise the legal affairs of the corporation
as the Board of Directors from time to time may prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the corporate
funds and securities and shall deposit all monies and other valuable
effects in the name and to the credit of this corporation, in such
depositories as may be designated by the Board of Directors; he shall
review the disbursement of funds of this corporation in the manner
specified by the Board of Directors, making certain that there are proper
vouchers supporting such disbursements, and shall render to the chairman
of the board, the president and the Board of Directors, whenever required,
an accurate account of all his transactions as treasurer; he shall give
this corporation a bond, if required by the Board of Directors, in a sum
and with one or more sureties satisfactory to the Board, for the faithful
performance of the duties of his office and for the restoration to this
corporation in case of his death, resignation, retirement or removal from
office, of all papers, vouchers, money and other property of whatever kind
in his possession or under his control belonging to this corporation.
Section 13. In the absence or disability of the treasurer, the
duties and powers of the treasurer shall be performed and exercised by
such assistant treasurer elected or appointed by the Board of Directors as
shall be determined by the Board of Directors.
THE CONTROLLER AND ASSISTANT CONTROLLERS
Section 14. The controller shall have the custody of the books and
accounting records belonging to the corporation; he shall disburse the
funds of the corporation in the manner specified by the Board of
Directors, preparing proper vouchers for such disbursements and shall
render to the chairman of the board, the president and to the Board of
Directors, whenever required, an accurate account of all his transactions
as controller and a statement of the financial condition of this
corporation; he shall give the corporation a bond, if required by the
Board of Directors, in a sum and with one or more sureties satisfactory to
the Board, for the faithful performance of the duties of his office and
for the restoration to this corporation, in the case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers and other property of whatever kind in his possession or under
his control belonging to this corporation.
Section 15. In the absence or disability of the controller, the
duties and powers of the controller shall be performed and exercised by
such assistant controller elected or appointed by the Board of Directors
as shall be determined by the Board of Directors.
ARTICLE VI
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CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the
corporation, by the chairman of the board or the president or a vice-
president and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation, certifying the number of
shares owned by him in the corporation.
Section 2. If a certificate is countersigned (a) by a transfer agent
other than the corporation or its employee or (b) by a registrar other
than the corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any
such certificate or certificates shall cease to be such officer or
officers of the corporation, whether because of death, resignation or
otherwise, before such certificate or certificates have been delivered by
the corporation, such certificate or certificates may nevertheless be
adopted by the corporation and be issued and delivered as though the
person or persons who signed such certificate or certificates or whose
facsimile a signature or signatures have been used thereon had not ceased
to be such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate
or certificates, or his legal representative, to advertise the same in
such manner as it shall require and/or to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have
been lost or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or any transfer agent
of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificates
and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 5. The Board of Directors may close the stock transfer books
of the corporation for a period not exceeding fifty days preceding the
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date of any meeting of stockholders or the date for payment of any
dividend or the date for the allotment of rights or the date when any
change or conversion or exchange of capital stock shall go into effect or
for a period not exceeding fifty days, in connection with obtaining the
consent of stockholders for any purpose. In lieu of closing the stock
transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding fifty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for
the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection
with obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and
any adjournment thereof, or entitled to receive payment of any such
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to
give such consent, and in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed,
shall be entitled to such notice of, and to vote at, such meeting any
adjournments thereof, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, or to give
such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the corporation after any such record date fixed as
aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the
owners of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to any provisions of the certificate of incorporation, may be
declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares
of the capital stock, subject to the provisions of the certificate of
incorporation and the laws of Delaware.
CORPORATE OBLIGATIONS
Section 2. All contracts, deeds, mortgages, leases or instruments
that require the corporate seal of the corporation to be affixed thereto
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shall be signed by the chairman of the board or by the president (or, in
their absence or inability to act, by such officers as may be designated
by the Board of Directors) and by the secretary or an assistant secretary;
provided, however, that the Board of Directors may authorize any other
officer or officers, agent or agents, to enter into any contract or
execute and deliver any instrument in the name of, and on behalf of, the
corporation, and such authority may be general or confined to specific
instance.
Section 3. All checks, drafts or other orders for the payment of
money, bonds, notes or other evidence of indebtedness issued in the name
of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation, and in such manner as shall from time to time,
be determined by resolution of the Board of Directors.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall begin on the
first day of January in each year.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation and the words "Corporate Seal, Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
-11-
<PAGE> 12
ARTICLE VIII
INDEMNIFICATION
Section 1. Any person made a party to or involved in any litigation
(which term shall include any actual or threatened civil, criminal or
administrative action, claim, suit, proceeding or appeals therefrom) by
reason of the fact that he at any time was or is a director, officer or
employee of the corporation, or of any other corporation or organization
which he served as such at the request of the corporation and in which the
corporation owns shares of capital stock or of which it is a creditor,
shall (to the fullest extent permitted by law) be indemnified by the
corporation against all liabilities and all expenses reasonably incurred
by his arising out of or in connection with such litigation, except in
relation to matters as to which (a) it shall be finally adjudged in such
litigation that such person breached his duty to the corporation (or to
such other corporation or organization) or (b) such person failed to act
in good faith for a purpose which he reasonably believed to be in the best
interests of the corporation (or such other corporation or organization),
or, in the case of criminal litigation, such person had reasonable cause
to believe that his conduct was unlawful.
Section 2. Except as provided in Section 1 above, the termination of
any litigation by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that a
director, officer or employee did not meet the applicable indemnification
standard set forth in Section 1 above.
Section 3. Except where a person has been wholly successful on the
merits with respect to said litigation, any indemnification hereunder
shall be made only after:
(a) the Board of Directors (acting by a quorum consisting of
Directors who are not involved in such litigation) determines that
such person has met the applicable indemnification standard set forth
in Section 1 above; or
(b) the Board of Directors determines, based upon the written
opinion of independent legal counsel, that such person has met said
indemnification standard.
Section 4. Advances may be made by the corporation against costs,
expense and fees at the discretion of, and upon such terms as may be
determined by, the Board of Directors.
Section 5. The right of indemnification provided hereunder shall not
be deemed exclusive of any other right to which any person may be
entitled, or of any other indemnification which may lawfully be granted to
any person in addition to the indemnification provided hereunder.
Indemnification provided hereunder shall, in the case of death of a
director, officer or employee, inure to the benefit of his heirs,
executors or other lawful representatives.
-12-
<PAGE> 13
ARTICLE IX
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any regular
meeting of the Board of Directors or at any special meeting of the Board
of directors if notice of such alteration or repeal be contained in the
notice of such special meeting. No change of the time or place of the
meeting for the election of directors shall be made within sixty days next
before the day on which such meeting is to be held, and in case of any
change of such time or place, notice thereof shall be given to each stock-
holder in person or by letter mailed to his last known post-office address
at least twenty days before the meeting is held.
-13-
<PAGE> 1
EXHIBIT 99.D
A. M. CASTLE & CO.
LONG TERM INCENTIVE COMPENSATION PLAN
1. History, Purpose and Effective Date. A. M. Castle & Co., a
Delaware corporation (the "Company"), has established this Long Term Incentive
Compensation Plan (the "Plan") to aid the Company in attracting and retaining
senior executives and other key management employees of outstanding ability,
motivating superior effort and performance levels by plan participants,
providing the Company with an effective tool for directing and focusing senior
executives on longer-term challenges, reinforcing a desired management culture
of teamwork and cooperation, and rewarding achievement of increases in
shareholder value superior to those of United States industry. The effective
date of the Plan is January 1, 1989.
2. Administration. The Plan shall be administered and
interpreted by the Human Resources Committee of the Company's Board of
Directors (the "Committee"). Any interpretation of the Plan and any decision
on any matter within the Committee's discretion made by it in good faith shall
be binding on all persons.
3. Participation and Maximum Award Percentages. For each
Performance Cycle (as described in paragraph 4), the Committee shall designate
the senior executives and key management employees of the Company who shall be
Participants in the Plan and shall establish a Maximum Award Percentage with
respect to each such Participant for such Performance Cycle.
4. Performance Cycles. Incentive compensation payable under the
Plan shall be determined on the basis of Performance Cycle, each of which shall
be a three-consecutive-calendar-year period. Performance Cycles shall commence
on January 1 occurring on or after January 1, 1987.
5. Performance Awards. Subject to the terms and conditions of
the Plan, each Participant in the Plan for any Performance Cycle shall be
entitled to a Performance Award if the annual compounded total return (based
upon stock appreciation and deemed reinvestment of dividends) on the Company's
common stock for that Performance Cycle equals or exceeds 1.5% plus the annual
compounded total return on the common stock of the Standard & Poor's 500
Industrials for such period. Subject to the terms and conditions of the Plan,
a Participant's Performance Award for a Performance Cycle shall be an amount
equal to the product of (i) the Participant's Base Salary (as defined below)
multiplied by (ii) his Maximum Award Percentage determined under Paragraph 3
and further multiplied by (iii) the applicable Attainment Percentage for that
Performance Cycle determined under the following Schedule (using straight line
interpolation for total returns between the maximum and minimum returns shown):
Company's Total Return Attainment Percentage
---------------------- ---------------------
<PAGE> 2
S & P 500 + 1.500% 33%
S & P 500 + 3.500% 67%
S & P 500 + 5.500% 100%
A Participant's "Base Salary" for the Performance Cycles beginning on January
1, 1987 and January 1, 1988 shall be equal to his base salary rate in effect on
December 31, 1988. For each other Performance Cycle, a Participant's Base
Salary shall be equal to his base salary rate in effect on the June 30th of the
second year of the Performance Cycle or, if earlier, the June 30th immediately
preceding his death or retirement.
6. Limitations on Performance Awards. Notwithstanding the
provisions of paragraph 5, no Performance Award shall be made for any
Performance Cycle if the Company's earnings for the last year of that
Performance Cycle are less than the highest annual dividend paid by the Company
in any of the three calendar years immediately preceding the last year of the
Performance Cycle.
7. Payment of Awards. A Participant's Performance Award for any
Performance Cycle shall be payable as soon as practicable after the end of that
Performance Cycle in the form of shares of the Company's common stock with a
fair market value equal to the amount of the Participant's Performance Award,
subject to the following:
(a) fractional shares shall be disregarded;
(b) fifty percent of the shares awarded to a Participant for any
Performance Cycle shall be restricted in accordance with
subparagraph (c) below until the first anniversary of the last
day of the Performance Period, and the balance shall be so
restricted until the second anniversary of the last day of the
Performance Cycle;
(c) during the period for which it is restricted under
subparagraph (b) above (the "Restricted Period"), any share of
common stock awarded to a Participant under the Plan may not
be sold, transferred, pledged or otherwise assigned or
encumbered and shall be subject to forfeiture in accordance
with paragraph 8;
(d) each certificate issued with respect to such shares shall be
registered in the name of the Participant and deposited with
the Company until the end of the applicable Restricted Period;
and
(e) subject to the provisions of paragraph 8, each share of common
stock awarded to a Participant under the Plan shall be
distributed to him, free of all restrictions, promptly after
the termination of the applicable Restricted Period.
For purposes of the Plan, the fair market value of a share of the Company's
common stock shall be determined on the basis of the closing price of a share
of the Company's common stock on the last day of the Performance Cycle as
quoted on the American Stock exchange Composite
<PAGE> 3
Transactions or other principal market quotation selected by the Committee.
8. Termination of Employment.
(a) Generally. If a Participant's employment with the Company
terminates for any reason other than Death or Retirement (as
defined below), the Participant shall not be entitled to a
Performance Award for any Performance Cycle during which such
termination occurs, and he shall forfeit all shares of common
stock previously awarded to him under the Plan with respect to
which the Restricted Period has not terminated.
(b) Retirement. If a Participant's employment with the Company
terminates by reason of his Retirement, the Participant shall
be entitled to a Performance Award for each Performance Cycle
during which his Retirement occurs as if he continued in the
employ of the Company through the last day of the Performance
Cycle; provided, however, that the Committee may reduce any
such award to the extent it deems such reduction appropriate
to reflect the portion of the Performance Cycle elapsed prior
to his Retirement; and provided, further, that if the retired
Participant at any time performs any services as a consultant
or employee or otherwise for a competitor of the Company, he
shall forfeit any Performance Award not yet paid to him and
any common stock previously awarded under the Plan for which
the applicable Restricted Period has not terminated. For
purposes of the Plan, the term "Retirement" means retirement
on or after attainment of early retirement age under any
applicable retirement plan of the Company.
(c) Death. If a Participant's employment with the Company
terminates by reason of his Death, the Participant's estate
shall be entitled to a Performance Award for each Performance
Cycle during which such Death occurs as if the Participant
continued in the employ of the Company through the last day of
the Performance Cycle; provided, however, that the Committee
may reduce any such award to the extent it deems such
reduction appropriate to reflect the portion of the
Performance Cycle elapsed prior to the Participant's Death;
and provided, further, that any shares so awarded shall be
free of any restrictions under paragraph 7. The remaining
Restricted Period of any shares of common stock awarded to a
Participant prior to his Death shall terminate as of the date
of his Death and such shares shall be distributed to the
Participant's estate free of all restrictions.
9. Adjustments. Notwithstanding the foregoing provisions of the
Plan, in the event of any corporate change which would materially and unjustly
affect the Attainment Percentage for any Performance Cycle, the Committee shall
make such equitable adjustments under the Plan as it determines are consistent
with the purpose of the Plan, and will fairly preserve the benefits of the Plan
to the Participant and the Company. Corporate changes for purposes of the
preceding sentence shall include,
<PAGE> 4
but are not limited to, changes in the Company's accounting policies,
acquisitions and divestitures.
10. Withholding. Any payment under the Plan is subject to
withholding for payment of all applicable taxes. In the discretion of the
Committee, the Company shall retain that portion of any Performance Award which
is equal to the amount required for withholding of income taxes.
11. Nontransferability. The interests of Participants under the
Plan are not subject to the claims of their creditors and may not be
voluntarily or involuntarily assigned, alienated or encumbered.
12. Applicable Law. The Plan shall be construed and administered
in accordance with the internal laws of the State of Illinois.
13. Successors. The Plan shall be binding upon any assignee or
successor in interest to the Company whether by merger, consolidation or the
sale of all or substantially all of the Company's assets.
14. Amendment and Termination. The Plan may be amended or
terminated at any time by resolution of the Company's Board of Directors or its
Human Resources Committee.
<PAGE> 1
EXHIBIT 99.E
A. M. CASTLE & CO.
1990 RESTRICTED STOCK AND STOCK OPTION PLAN
I. GENERAL
1. Purpose. The A. M. Castle & Co. 1990 Restricted Stock and Stock Option
Plan (the "1990 Plan") has been established by A. M. Castle & Co. (the
"Company") to:
(a) attract and retain key executive, managerial, supervisory and
professional employees;
(b) motivate participating employees to put forth their maximum effort for
the continued growth of the Company and its Subsidiaries;
(c) further identify Participants' interests with those of the Company's
shareholders; and
(d) provide incentive compensation opportunities which are competitive with
those of other corporations;
and thereby promote the long-term financial interest of the Company and its
Subsidiaries, including the growth in value of the Company's equity and
enhancement of long-term shareholder return.
2. Effective Date. The 1990 Plan shall become effective upon the
ratification by the holders of the majority of those shares present in person
or by proxy at the Company's 1990 annual meeting of its shareholders; provided,
however, that any awards that may be made under the Plan after adoption of the
1990 Plan by the Board but within the 12 month period preceding the Effective
Date shall be contingent on approval of the Plan by the shareholders of the
Company. The 1990 Plan shall be unlimited in duration and, in the event of
plan termination, shall remain in effect as long as any awards under it are
outstanding.
3. Definitions. The following definitions are applicable to the 1990 Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Human Resources Committee, or such other committee as
may be designated from time to time by the Board comprising of at least three
or more members of the Board who would be classified as "disinterested
persons" within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended.
"Fair Market Value" of any Stock means, as of any date, the closing market
composite price for such Stock as reported for the American Stock
Exchange-Composite Transactions on that date or, if Stock is
<PAGE> 2
not traded on that date, on the next preceding date on which Stock was traded.
"Participant" means any employee of the Company or any Subsidiary who is
selected by the Committee to participate in the 1990 Plan.
"Related Company" means any corporation during any period in which it is a
Subsidiary, or during any period in which it directly or indirectly owns 50%
or more of the total combined voting power of all classes of stock of the
Company that are entitled to vote.
"Restricted Period" has the meaning ascribed to it in part IV.
"Restricted Stock" has the meaning ascribed to it in Part IV.
"Stock" means A. M. Castle & Co. common stock.
"Stock Option" means the right of a Participant to purchase Stock pursuant to
an Incentive Stock Option or Non-Qualified Option awarded pursuant to the
provisions of Part II or Part III.
"Subsidiary" means any corporation during any period in which 50% or more of
the total combined voting power of all classes of stock entitled to vote is
owned, directly or indirectly, by the Company.
4. Administration. The authority to manage and control the operation and
administration of the 1990 Plan shall be vested in the Committee. Subject to
the provisions of the 1990 Plan, the Committee will have authority to select
employees to receive awards of Stock Options and Restricted Stock, to determine
the time or times of receipt, to determine the types of awards and the number
of shares covered by the awards, to establish the terms, conditions,
performance criteria, restrictions and other provisions of such awards
(including but not limited to the authority to provide that in the event of
certain changes in the beneficial ownership of the Company's Stock or certain
changes in the composition of the Board, Options and Restricted Stock shall
automatically become fully exercisable and/or vested), and to cancel or suspend
awards. In making such award determinations, the Committee may take into
account the nature of services rendered by the respective employee, his or her
present and potential contribution to the Company's success, and such other
factors as the Committee deems relevant. Notwithstanding the foregoing, with
respect to awards proposed to be made to officers of the Company, all such
awards must be approved and ratified by the Board.
The Committee is authorized to interpret the 1990 Plan, to establish, amend,
and rescind any rules and regulations relating to the 1990 Plan, to determine
the terms and provisions of any agreements made pursuant to the 1990 Plan, and
to make all other determinations that may be necessary or advisable for the
administration of the 1990 Plan. Any interpretation of the 1990 Plan by the
Committee and any decision made by it under the 1990 Plan is final and binding
on all persons.
<PAGE> 3
5. Participation. Subject to the terms and conditions of the 1990 Plan, the
Committee shall determine and designate, from time to time, the key executive,
managerial, supervisory, and professional employees of the Company and its
Subsidiaries who will participate in the 1990 Plan. In the discretion of the
Committee, an eligible employee may be awarded Stock Options or Restricted
Stock, or both, and more than one award may be granted to a Participant.
Except as otherwise agreed to by the Company and the Participant, any award
under the 1990 Plan shall not affect any previous award to the Participant
under the 1990 Plan or any other plan maintained by the Company or its
Subsidiaries.
6. Shares Subject to the 1990 Plan. The shares of Stock with respect to
which awards may be made under the 1990 Plan shall be either authorized and
unissued shares or issued and outstanding shares (including, in the discretion
of the Board, shares purchased in the market). Subject to the provisions of
paragraph I.10, the number of shares of Stock which may be issued with respect
to awards under the 1990 Plan shall not exceed 350,000 shares in the aggregate.
If, for any reason, any award under the 1990 Plan otherwise distributable in
shares of Stock, or any portion of the award, shall expire, terminate or be
forfeited or cancelled, or be settled in cash pursuant to the terms of the 1990
Plan and, therefore, any such shares are no longer distributable under the
award, such shares of Stock shall again be available for award to an eligible
employee (including the holder of such former award) under the 1990 Plan.
7. Compliance With Applicable Laws and Withholding of Taxes. Notwithstanding
any other provision of the 1990 Plan, the Company shall have no liability to
issue any shares of Stock under the 1990 Plan unless such issuance would comply
with all applicable laws and the applicable requirements of any securities
exchange or similar entity. Prior to the issuance of any shares of Stock under
the 1990 Plan, the Company may require a written statement that the recipient
is acquiring the shares for investment and not for the purpose or with the
intention of distributing the shares. In the case of a Participant who is
subject to Section 16(a) and 16(b) of the Securities Exchange Act of 1934, the
Committee may, at any time, add such conditions and limitations to any election
to satisfy tax withholding obligations through the withholding or surrender of
shares of Stock as the Committee, in its sole discretion, deems necessary or
desirable to comply with Section 16(a) or 16(b) and the rules and regulations
thereunder or to obtain any exemption therefrom. All awards and payments under
the 1990 Plan are subject to withholding of all applicable taxes, which
withholding obligations may be satisfied, with the consent of the Committee,
through the surrender of shares of Stock which the Participant already owns, or
to which a Participant is otherwise entitled under the 1990 Plan.
8. Transferability. Stock Options and, during the period of restriction,
Restricted Stock awarded under the 1990 Plan are not transferable except as
designated by the Participant by will or by the laws of descent and
distribution. Stock Options may be exercised during the lifetime of the
Participant only by the Participant.
<PAGE> 4
9. Employment and Shareholder Status. The 1990 Plan does not constitute a
contract of employment, and selection as a Participant will not give any
employee the right to be retained in the employ of the Company or any
Subsidiary. No award under the 1990 Plan shall confer upon the holder thereof
any right as a shareholder of the Company prior to the date on which he
fulfills all service requirements and other conditions for receipt of shares of
stock. If the redistribution of shares is restricted pursuant to paragraph 17,
certificates representing such shares may bear a legend referring to such
restrictions.
10. Adjustments to Number of Shares Subject to the 1990 Plan. In the event
of any change in the outstanding shares of Stock of the Company by reason of
any stock dividend, split, spinoff, recapitalization, merger, consolidation,
combination, exchange or shares or other similar change, the aggregate number
of shares of Stock with respect to which awards may be made under the 1990
Plan, and the terms and the number of shares of any outstanding Stock Options
or Restricted Stock shall be equitably adjusted by the Committee and all such
adjustments shall be conclusive upon all persons.
11. Agreement With Company. At the time of any awards under the 1990 Plan,
the Committee will require a Participant to enter into an agreement with the
Company in a form specified by the Committee, agreeing to the terms and
conditions of the 1990 Plan and to such additional terms and conditions, not
inconsistent with the 1990 Plan, as the Committee may, in its sole discretion,
prescribe.
12. Amendment and Termination of 1990 Plan. Subject to the following
provisions of this paragraph 12, the Board may at any time and in any way
amend, suspend, or terminate the 1990 Plan. No amendment of the 1990 Plan and,
except as provided in paragraph I.10, no action by the Committee shall, without
further approval of the shareholders of the Company, increase the total number
of shares of Stock with respect to which awards may be made under the 1990
Plan. No amendment, suspension or termination of the 1990 Plan shall alter or
impair any Stock Option or Restricted Stock previously awarded under the 1990
Plan without the consent of the holder thereof.
II. INCENTIVE STOCK OPTIONS
1. Definition. The award of an Incentive Stock Option under the 1990 Plan
entitles the Participant to purchase shares of Stock at a price fixed at the
time the option is awarded, subject to the following terms of this Part II.
2. Eligibility. The Committee shall designate the Participants to whom
Incentive Stock Options, as described in section 422a(b) of the Code or any
successor section therein, are to be awarded under the 1990 Plan and shall
determine the number of option shares to be offered to each of them. In no
event shall the aggregate Fair Market Value (determined at the time the option
is awarded and taking options into account in the order granted) of Stock with
respect to which Incentive Stock Options are exercisable for the first time by
an individual during any
<PAGE> 5
calendar year (under all plans of the Company and all Related Companies) exceed
$100,000.
3. Price. The purchase price of a share of Stock under each Incentive Stock
Option shall be determined by the Committee; provided, however, that in no
event shall such price be less than the greater of (a) 100% of the Fair Market
Value of a share of Stock as of the date the option is granted (110% of Fair
Market Value with respect to Participants who at the time of the award are
deemed to own at least 10% of the voting power of the Company), or (b) the par
value of a share of Stock on such date. To the extent provided by the
Committee, the full purchase price of each share of Stock purchased upon the
exercise of any Incentive Stock Option shall be paid in cash or in shares of
stock (valued at Fair Market Value as of the day of exercise), or in any
combination thereof, at the time of such exercise and, as soon as practicable
thereafter, a certificate representing the shares so purchased shall be
delivered to the person entitled thereto. Notwithstanding the foregoing
provisions of this paragraph 3, the Committee may, in its sole discretion, by
the terms of the Agreement granting Incentive Stock Options to a Participant,
or thereafter, determine that the Company (or a Subsidiary) shall offer a
Participant a loan for all or a portion of the option price. The terms of such
loan, including the interest rate, security to be provided to the lender, and
the terms of repayment, shall be established by the Committee. The Committee
may also permit Incentive Stock Options to be exercised by a Participant
through one or more loans from a stock brokerage firm upon assurance from the
brokerage firm that any such loans shall be made in accordance with applicable
margin requirements.
4. Exercise. The Committee may impose such rules relating to the time and
manner in which Incentive Stock Options may be exercised as the Committee deems
appropriate; provided, however, that no Incentive Stock Option may be exercised
by a Participant (a) prior to the date on which he completes one continuous
year of employment with the Company or any Related Company after the date of
the award thereof, or (b) after the Expiration Date applicable to that option.
5. Option Expiration Date. The "Expiration Date" with respect to an
Incentive Stock Option or any portion thereof awarded to a Participant under
the 1990 Plan means the earliest of:
(a) the date that is 10 years after the date on which the Incentive Stock
Option is awarded (5 years with respect to Participants who at the time
of the award are deemed to own at least 10% of the voting power of the
Company);
(b) the date, if any, on which the Participant's continuous employment with
the Company and all Related Companies terminates, if such continuous
employment terminates prior to the first anniversary of the date of the
award of the option; or
(c) the date established by the Committee, or the date determined under a
method established by the Committee, at the time of the award.
<PAGE> 6
All rights to purchase shares of Stock pursuant to an Incentive Stock Option
shall cease as of such option's Expiration Date.
III. NON-QUALIFIED STOCK OPTIONS
1. Definition. The award of a Non-Qualified Stock Option under the 1990 Plan
entitles the Participant to purchase shares of Stock at a price fixed at the
time the option is awarded, subject to the following terms of this Part III.
2. Eligibility. The Committee shall designate the Participants to whom
Non-Qualified Stock Options are to be awarded under the 1990 Plan and shall
determine the number of option shares to be offered to each of them.
3. Price. The purchase price of a share of Stock under each Non-Qualified
Stock Option shall be determined by the Committee; provided, however, that in
no event shall such price be less than the greater of (a) 100% of the Fair
Market Value of a share of Stock as of the date the option is granted, or (b)
the par value of a share of such Stock on such date. To the extent provided by
the Committee, the full purchase price of each share of Stock purchased upon
the exercise of any Non-Qualified Stock Option shall be paid in cash or in
shares of Stock (valued at Fair Market Value as of the day of exercise), or in
any combination thereof, at the time of such exercise and, as soon as
practicable thereafter, a certificate representing the shares so purchased
shall be delivered to the person entitled thereto. Notwithstanding the
foregoing provisions of this paragraph 3, the Committee may, in its sole
discretion, by the terms of the Agreement granting Non-Qualified Stock Options
to a Participant, or thereafter, determine that the Company (or a Subsidiary)
shall offer a Participant a loan for all or a portion of the option price. The
terms of such loan, including the interest rate, security to be provided to the
lender, and the terms of repayment, shall be established by the Committee. The
Committee may also permit Non-Qualified Stock Options to be exercised by a
Participant through one or more loans from a stock brokerage firm upon
assurance from the brokerage firm that any such loans shall be made in
accordance with applicable margin requirements.
4. Exercise. The Committee may impose such rules relating to the time and
manner in which Non-Qualified Stock Options may be exercised as the Committee
deems appropriate; provided, however, that no Non-Qualified Stock Option may be
exercised by a Participant (a) prior to the date on which the Participant
completes one continuous year of employment with the Company or any Related
Company after the date of the award thereof, or (b) after the Expiration Date
applicable to that option.
5. Option Expiration Date. The "Expiration Date" with respect to a
Non-Qualified Stock Option or any portion thereof awarded to a Participant
under the 1990 Plan means the earliest of:
(a) the date that is 10 years after the date on which the Non-Qualified
Stock Option is awarded;
<PAGE> 7
(b) the date, if any, on which the Participant's continuous employment with
the Company and all Related Companies terminates, if such continuous
employment terminates prior to the first anniversary of the date of the
award of the option; or
(c) the date established by the Committee, or the date determined under a
method established by the Committee, at the time of the award.
All rights to purchase shares of Stock pursuant to a Non-Qualified Stock Option
shall cease as of such option's Expiration Date.
IV. RESTRICTED STOCK
1. Definition. Restricted Stock awards are grants of Stock to Participants,
the vesting of which is subject to a required period of employment and any
other conditions established by the Committee.
2. Eligibility. The Committee shall designate the Participants to whom
restricted Stock is to be awarded, and the number of shares of Stock that are
subject to the award.
3. Terms and Conditions of Awards. All shares of Restricted Stock awarded to
Participants under the 1990 Plan shall be subject to the following terms and
conditions and to such other terms and conditions, not inconsistent with the
1990 Plan, as shall be prescribed by the Committee in its sole discretion and
as shall be contained in the Agreement referred to in paragraph I.11.
(a) Restricted Stock awarded to Participants may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as hereinafter
provided, for a period determined by the Committee after the time of the
award of such stock (the "Restricted Stock"). Except for such
restrictions, the Participant as owned of such shares shall have all the
rights of a shareholder, including but not limited to the right to vote
such shares and, except as otherwise provided by the Committee, the
right to receive all dividends paid on such shares.
(b) The Committee may, in its discretion, at any time after the date of the
award of Restricted Stock, adjust the length of the Restricted Period to
account for individual circumstances of a Participant or group of
Participants, but in no case shall the length of the Restricted Period
be less than one year.
(c) Except as otherwise determined by the Committee in its sole discretion,
a Participant whose employment with the Company and all Related
Companies terminates prior to the end of the Restricted Period for any
reason shall forfeit all shares of Restricted Stock remaining subject to
any outstanding Restricted Stock Award.
<PAGE> 8
(d) Each certificate issued in respect of shares of Restricted Stock awarded
under the 1990 Plan shall be registered in the name of the Participant
and, at the discretion of the Committee, each such certificate may be
deposited in a bank designated by the Committee. Each such certificate
shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the A. M. Castle & Co. 1990 Restricted
Stock and Stock Option Plan and an agreement entered into between the
registered owner and A. M. Castle & CO. A copy of such plan and
agreement is on file in the office of the Secretary of A. M. Castle &
Co., 3400 North Wolf Road, Franklin Park, Illinois 60131."
(e) At the end of the Restricted Period for Restricted Stock, such
Restricted Stock will be transferred free of all restrictions to a
Participant (or his or her legal representative, beneficiary or heir).
4. Substitution of Cash. The Committee may, in its discretion, substitute
cash equal to the Fair Market Value (determined as of the date of distribution)
of Stock otherwise required to be distributed to a Participant in accordance
with paragraph IV.3.
<PAGE> 1
EXHIBIT 99.F
DESCRIPTION OF MANAGEMENT INCENTIVE PLAN
Under the Management Incentive Plan, an incentive is earned after the Company
exceeds an established rate of return on net worth after taxes. The objectives
are established each year for districts, regions, specialty product groups and
the Company as a whole. Historically the goal has been set based upon the
median and upper quartile industry performance as measured by pre-tax return on
assets. These measurements are then converted to an after tax return on
investment standards using the corporate policy leverage target of 2.5. The
return on investment goals are then in turn applied to estimated year-end net
worth to establish the Company's profit goals. For 1993, the Board and
management established the cut-in point for payment of management incentive at
a rate of return equivalent to eighty cents ($.80) per share, which is twice
the annual dividend payout at current levels. The maximum incentive level
would be reached at a rate of return after the equivalent to One Dollar Forty
Cents ($1.40) per share.
For districts, regional and special product group plan participants, cut-in
goals and maximum incentives are proportionate. The plan is structured such
that an earning corridor is established and all plan participants will receive
a proportionate share of their incentive payout as the Company progresses along
the profit corridor. This would result in all plan participants reaching fifty
percent (50%) of their possible incentive payout when the Company has reached
fifty percent (50%) toward its maximum profit objective, and all plan
participants will reach one hundred percent (100%) of incentive payout when the
maximum incentive level/rate of return is realized.
