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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995
Commission File Number 1-5415
A. M. Castle & Co.
(Exact name of registrant as specified in its charter.)
Delaware 36-0879160
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3400 North Wolf Road, Franklin Park, Illinois 60131
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone, including area code: 708/455-7111
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock No Par Value - 11,126,383 shares as of July 31, 1995.
Page 2 of 10
A. M. CASTLE & CO.
Part I. FINANCIAL INFORMATION
Page
Number
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . 3
Condensed Balance Sheets . . . . . . . . . . 3
Comparative Statements of Cash Flows . . . . 3
Comparative Statements of Income . . . . . . 4
Notes to Condensed Financial Statements. . . 5
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations . . . . 6 - 7
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . 8 - 9
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 9
Page 3 of 10
A. M. CASTLE & CO.
CONDENSED BALANCE SHEETS
(Dollars in thousands except per share data)
(unaudited) June 30 Dec. 31 June 30
Assets 1995 1994 1994
Cash. . . . . . . . . . . . . . . . .$ 802 $ 976 $ 1,062
Accounts receivable, net. . . . . . . 69,915 58,892 57,459
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 104,257 98,215 87,336
Total current assets . . . . . .$174,974 $158,083 $145,857
Prepaid expenses and other assets . . 16,403 13,854 10,987
Fixed assets, net . . . . . . . . . . 44,153 41,190 41,191
Total assets . . . . . . . . . .$235,530 $213,127 $198,035
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 68,429 $ 61,282 $ 48,915
Accrued liabilities . . . . . . . . . 14,506 14,704 12,332
Income taxes payable. . . . . . . . . 3,372 2,321 1,101
Current portion of long-term debt . . 4,334 3,831 4,835
Total current liabilities. . . . 90,641 82,138 67,183
Long-term debt, less current portion. 39,637 38,531 44,858
Deferred income taxes . . . . . . . . 7,857 7,772 7,971
Post retirement benefit obligations . 2,607 2,525 2,500
Stockholders' equity. . . . . . . . . 94,788 82,161 75,523
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$235,530 $213,127 $198,035
SHARES OUTSTANDING. . . . . . . . . . 11,124 11,079 11,052
BOOK VALUE PER SHARE. . . . . . . . . $ 8.52 $ 7.42 $ 6.83
WORKING CAPITAL . . . . . . . . . . .$ 84,333 $ 75,945 $ 78,674
WORKING CAPITAL PER SHARE . . . . . .$ 7.58 $ 6.85 $ 7.12
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Six Months
Ended June 30,
Cash flows from operating activities: 1995 1994
Net income. . . . . . . . . . . . . . . . $ 15,085 $ 6,995
Depreciation. . . . . . . . . . . . . . . 2,233 2,375
Other . . . . . . . . . . . . . . . . . . (2,047) 622
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 15,271 9,992
(Increase) decrease in working capital. . (9,399) 5,977
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . 5,872 15,969
Cash flows from investing activities:
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . (5,196) (1,654)
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (5,196) (1,654)
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Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . 1,609 (13,766)
Dividends paid. . . . . . . . . . . . . . (2,664) (1,759)
Other . . . . . . . . . . . . . . . . . . 205 744
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . (850) (14,781)
Net increase (decrease) in cash . . . . . . (174) (466)
Cash - beginning of year. . . . . . . . . 976 1,528
Cash - end of period. . . . . . . . . . . $ 802 $ 1,062
Supplemental disclosure on cash flow information:
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 1,563 $ 1,002
Income taxes . . . . . . . . . . . . . $ 8,700 $ 4,644
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three For the Six
Months Ended Months Ended
June 30 June 30
1995 1994 1995 1994
Net sales . . . . . . . . $163,081 $131,821 $332,137 $265,669
Cost of material sold . . 118,297 96,923 240,054 194,424
Gross profit on sales . 44,784 34,898 92,083 71,245
Operating expenses. . . . 31,714 27,330 63,539 55,701
Depreciation expense. . . 1,141 1,189 2,233 2,375
Interest expense, net . . 643 850 1,390 1,724
Total . . . . . . . . . 33,498 29,369 67,162 59,800
Income before taxes . . . 11,286 5,529 24,921 11,445
Income Taxes:
Federal . . . . . . . . 3,595 1,761 7,931 3,597
State . . . . . . . . . 852 415 1,905 853
4,447 2,176 9,836 4,450
Net income. . . . . . . . 6,839 3,353 15,085 6,995
Net income per share. . . $ .62 $ .30 $ 1.36 $ .63
Financial Ratios:
Return on sales . . . . 4.19% 2.54% 4.54% 2.63%
Asset turnover. . . . . 2.77 2.66 2.82 2.68
Return on assets. . . . 11.61% 6.77% 12.81% 7.06%
Leverage factor . . . . 2.87 2.85 2.87 2.85
Return on opening
stockholders' equity . 33.30% 19.29% 36.72% 20.12%
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Other Data:
Cash dividends paid . . $ 1,333 $ 883 $ 2,664 $ 1,759
Dividends per share . . .12 .08 .24 .16
Average number of shares
outstanding. . . . . . 11,096 11,028 11,089 10,995
Tons sold . . . . . . . 89,573 84,214 184,474 170,948
Inventory determination under the LIFO method can only be made at the
end of each fiscal year based on the inventory levels and costs at that
time. Accordingly, interim LIFO determinations, including those at June
30, 1995, and June 30, 1994, must necessarily be based on management's
estimates of expected year end inventory levels and costs. Since future
estimates of inventory levels and costs are subject to certain forces
beyond the control of management, interim financial results are subject
to fiscal year end LIFO inventory valuations.
Current replacement cost of inventories exceeds book value by $65.7
million, $51.7 million, and $48.0 million at June 30, 1995, December 31,
1994 and June 30, 1994 respectively. Taxes on income would become
payable on any realization of this excess from reductions in the level
of inventories.
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A. M. CASTLE & CO.
Notes to Condensed Financial Statements
1. Condensed Financial Statements
The condensed financial statements included herein are unaudited,
except for the balance sheet at December 31, 1994, which is
condensed from the audited financial statements at that date. The
Company believes that the disclosures are adequate to make the
information not misleading; however, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. In the
opinion of management, the unaudited statements, included herein,
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position,
the cash flows, and the results of operations for the periods then
ended. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form
10-K. The 1995 interim results reported herein may not necessarily
be indicative of the results of operations for the full year 1995.
2. Common Stock and Per Share Information
Net income per share computations are based on the weighted average
number of shares of common stock outstanding during the respective
periods. On July 28, 1994, the Company declared a 50% stock
dividend, which was effected as a 3 for 2 stock split. The
additional shares were distributed August 28, 1994 to shareholders
of record August 12, 1994. All per share amounts presented have
been restated to reflect the effect of the 50% stock dividend.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations _____________________
Operating results for 1995 continue to be sharply increased over
1994. Earnings for the three and six month periods ended June 30th
were new records for second quarter and first half earnings.
Strong demand and continued improvements in operating margins were
key factors in the Company's improved earnings performance.
Second quarter sales totaled $163.1 million, a 23.7% increase over
the second quarter of 1994's sales of $131.8 million. Through six
months, 1995 sales totaled $332.1 million, an increase of 25.0%
over the $265.7 million recorded for the first six months of 1994.
Sales unit volume, expressed in tons sold, increased by 6.4% over
last year's second quarter and 7.9% over the first half of last
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year. Favorable pricing and sales mix caused the sales increase in
dollars to outpace the increase in tons sold.
Gross margin percentage increased to 27.5% as compared to 26.5% for
the second quarter of last year. For the first half of 1995, gross
margin percentage was 27.7% as compared to 26.8% for the first six
months of 1994. The Company's margin improvement program has
continued to produce favorable results in this area. In terms of
dollars, total gross profit increased by almost $9.9 million over
the second quarter of last year and by $20.8 million over the first
half of 1994. The $9.9 million second quarter increase consisted
of approximately $5.7 million due to higher prices, $2.8 million
due to increased physical volume, and the balance due to changes in
sales mix and cost savings from sourcing arrangements.
Second quarter operating expenses were up by approximately $4.4
million (16.1%) over the comparable period last year. As a
percentage of sales however, second quarter 1995 operating expenses
decreased to 19.4% from 20.7% for the second quarter of 1994. The
expense increase experienced during the quarter occurred in the
volume driven and profit related expense categories. As discussed
above, unit sales volume was up by 6.4%. This increase led to
rises in expense categories such as warehouse wages, overtime,
tucking expenses, commercial freight, and repairs and maintenance.
In addition, the record earnings levels resulted in significant
increases in profit related expense categories such as incentive
expense and profit sharing. Year-to-date, operating expenses
increased by $7.8 million (14.1%) over the first half of 1994.
Again, as a percentage of sales operating expenses decreased to
19.1% in first half 1995 as compared to 21.0% for the first six
months of 1994.
Depreciation expense has decreased slightly from 1994 levels (4.0%
for the quarter and 6.0% year-to-date), primarily due to the sale
and leaseback of equipment purchased in 1994 and 1993, which has
the effect of reducing depreciation expense and increasing rental
expense. Rental expense is included in operating expenses which
were discussed above.
Interest expense was down by approximately $0.2 million for the
quarter and by $0.3 million for the first six months due to lower
debt levels. Total funded borrowing was lower by $5.7 million as
compared to the second quarter of 1994. The debt reduction served
to keep interest expense down even though interest rates have
increased significantly due to Federal Reserve rate hikes.
Liquidity and Capital Resources _______________________________
The Company continued to control working capital needs despite the
upward pressure generated from the continued increase in business
activity. Accounts receivable increased by $12.5 million, and net
inventory increased by $16.9 million, due to sharply increased
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sales volume as compared to the second quarter 1994 levels. When
compared to year-end 1994, accounts receivable are up by $11.0
million and net inventory increased by approximately $6.0 million.
Trade payables were up by approximately $19.5 million as compared
to second quarter 1994 due to deferred terms negotiated with
several vendors. As compared to year-end 1994, trade payables are
up by $7.1 million. Total bank and long term borrowing decreased
by $5.7 million compared to the balance of June 30, 1994 and
increased by $1.6 million from December 31, 1994. Net worth has
increased by $19.3 million (25.6%) from June 30, 1994 due to the
strong earnings performance.
The Company has unused committed and uncommitted lines of bank
credit of $129.8 million as of June 30, 1995 as compared to $113.9
million at June 30, 1994.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings other than ordinary
routine litigation incidental to the business of the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of the Registrant was
held on Thursday, April 27, 1995 at 10:00 a.m. local
time, at 3400 North Wolf Road, Franklin Park, Illinois.
(b) The eleven (11) management nominees were elected to the
Board of Directors, and reference is hereby made to the
Proxy Statement and Notice of Annual Meeting filed
pursuant to Rule 14(a)-6 of the Securities and Exchange
Commission.
(c)(1) The stockholders at the Annual Meeting approved and
ratified the adoption of the 1995 Directors Stock Option
Plan of the company, which authorized the issuance of up
to One Hundred Fifty Thousand (150,000) shares of common
stock of the Company. Reference is hereby made to the
Proxy Statement and Notice of Annual Meeting filed
pursuant to Rule 14(a)-6 of the Securities and Exchange
Commission for details of the proposal. The vote of the
shareholders on the proposal was 9,927,921 for; 200,494
against; 106,906 abstaining; and 844,324 not voting.
(2) The stockholders at the Annual Meeting approved and
ratified the appointment of Arthur Andersen & Co. as the
independent public accountants for the year 1995.
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The vote of the shareholders on the proposal was
10,254,134 for; 6,477 against; 9,666 abstaining; and
809,368 not voting.
(c)(3) The voting on Director nominations was as follows:
Not
Director For Withheld Voting
Daniel T. Carroll 10,262,851 7,427 809,367
Edward F. Culliton 10,259,869 10,409 809,367
William K. Hall 10,262,869 7,409 809,367
Robert S. Hamada 10,262,869 7,409 809,367
John P. Keller 10,262,869 7,409 809,367
John W. McCarter, Jr. 10,262,869 7,409 809,367
William J. McDermott 10,262,869 7,409 809,367
Richard G. Mork 10,257,732 12,546 809,367
John W. Puth 10,262,633 7,645 809,367
Michael Simpson 10,259,801 10,477 809,367
Richard A. Virzi 10,259,805 10,473 809,367
Item 6. Exhibits and Reports of Form 8-K
(a) None
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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SIGNATURES __________
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. M. Castle & Co.
(Registrant)
Date: August 11, 1995 By: /ss/ J. A. Podojil
J. A. Podojil
Treasurer/Controller
(Mr. Podojil is the Chief Accounting
Officer and has been authorized to
sign on behalf of the Registrant).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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