Page 1 of 9
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 March 31, 19954
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 - 11,090,006 shares as of April 30, 1995.
Page 2 of 9
A. M. CASTLE & CO.
Part I. FINANCIAL INFORMATION
Page
Number
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . 3
Condensed Balance Sheets . . . . . . . . . . 3
Comparative Statements of Cash Flows . . . . 3
Comparative Statements of Income . . . . . . 4
Notes to Condensed Financial Statements. . . 5
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations . . . . 6 - 7
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 8
Page 3 of 9
A. M. CASTLE & CO.
CONDENSED BALANCE SHEETS
(Dollars in thousands except per share data)
(unaudited) Mar. 31 Dec. 31 Mar. 31
Assets 1995 1994 1994
Cash. . . . . . . . . . . . . . . . .$ 3,419 $ 976 $ 2,770
Accounts receivable, net. . . . . . . 74,282 58,892 55,510
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 96,990 98,215 94,068
Total current assets . . . . . .$174,691 $158,083 $152,348
Prepaid expenses and other assets . . 12,957 13,854 10,919
Fixed assets, net . . . . . . . . . . 42,220 41,190 40,570
Total assets . . . . . . . . . .$229,868 $213,127 $203,837
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 73,403 $ 61,282 $48,054
Accrued liabilities . . . . . . . . . 11,983 14,704 9,598
Income taxes payable. . . . . . . . . 7,492 2,321 2,946
Current portion of long-term debt . . 3,768 3,831 5,010
Total current liabilities. . . . 96,646 82,138 65,608
Long-term debt, less current portion. 33,837 38,531 54,903
Deferred income taxes . . . . . . . . 7,696 7,772 8,034
Post retirement benefit obligations . 2,558 2,525 2,528
Stockholders' equity. . . . . . . . . 89,131 82,161 72,764
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$229,868 $213,127 $203,837
SHARES OUTSTANDING. . . . . . . . . . 11,081 11,079 10,964*
BOOK VALUE PER SHARE. . . . . . . . .$ 8.04 $ 7.42 $ 6.62*
WORKING CAPITAL . . . . . . . . . . .$ 78,045 $ 75,945 $86,740
WORKING CAPITAL PER SHARE . . . . . .$ 7.04 $ 6.85 $ 7.90*
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Three Months
Ended March 31,
Cash flows from operating activities: 1995 1994
Net income. . . . . . . . . . . . . . . . $ 8,246 $ 3,642
Depreciation. . . . . . . . . . . . . . . 1,092 1,186
Other . . . . . . . . . . . . . . . . . . 1,005 556
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 10,343 5,384
(Increase) decrease in working capital. . 256 (331)
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . 10,599 5,053
Cash flows from investing activities:
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . (2,122) 156
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (2,122) 156
Page 4 of 9
Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . (4,757) 3,546
Dividends paid. . . . . . . . . . . . . . (1,331) (876)
Other . . . . . . . . . . . . . . . . . . 54 455
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . (6,034) (3,967)
Net increase (decrease) in cash . . . . . . 2,443 1,242
Cash - beginning of year. . . . . . . . . 976 1,528
Cash - end of period. . . . . . . . . . . $ 3,419 $ 2,770
Supplemental disclosure on cash flow information:
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 1,082 $ 1,372
Income taxes . . . . . . . . . . . . . $ 294 $ 560
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three Months Ended
(Unaudited) March 31,
1995 1994
Net sales . . . . . . . . $169,056 $133,848
Cost of material sold . . 121,757 97,501
Gross profit on sales . 47,299 36,347
Operating expenses. . . . 31,825 28,371
Depreciation expense. . . 1,092 1,186
Interest expense, net . . 747 874
Total . . . . . . . . . . 33,664 30,431
Income before taxes . . . 13,635 5,916
Income Taxes:
Federal . . . . . . . . 4,336 1,836
State . . . . . . . . . 1,053 438
5,389 2,274
Net income. . . . . . . . 8,246 3,642
Net income per share. . . $ .74 $ .33
Financial Ratios:
Return on sales . . . . 4.88% 2.72%
Asset turnover. . . . . 2.94 2.63
Return on assets. . . . 14.35% 7.15%
Leverage factor . . . . 2.80 2.93
Return on opening
stockholders' equity . 40.15% 20.95%
Other Data:
Cash dividends paid . . $ 1,331 $ 876
Dividends per share . . .12 .08*
Page 5 of 9
Average number of shares
outstanding. . . . . . 11,080 10,950*
Tons sold . . . . . . . 94,901 86,734
*Restated to reflect a 50% stock dividend.
Inventory determination under the LIFO method can only be made at the
end of each fiscal year based on the inventory levels and costs at that
time. Accordingly, interim LIFO determinations, including those at
March 31, 1995, and March 31, 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 $58.1
million, $51.7 million, and $46.0 million at March 31, 1995, December
31, 1994 and March 31, 1994 respectively. Taxes on income would become
payable on any realization of this excess from reductions in the level
of inventories.
Page 6 of 9
A. M. CASTLE & CO.
Notes to Condensed Financial Statements
1. Condensed Financial Statements
The condensed financial statements included herein are unaudited,
except for the balance sheet at December 31, 1994, 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 _____________________
The first quarter of 1995 was a record quarter for A. M. Castle &
Co. Net income of $8.2 million exceeded the Company's "previous
best" of $4.6 million generated in the second quarter of 1988. A
strong economy provided a positive environment for a significant
upturn in prices and an increased level of sales activity. Other
factors which had a major impact on earnings were an increase in
gross margin percentage and continued aggressive management of all
expenses.
First quarter 1995 sales totaled a record $169.1 million, a 26.3%
increase over the first quarter of 1994's sales of $133.8 million.
Sales unit volume, expressed in tons sold, increased by 9.4% over
Page 7 of 9
the same period. Favorable pricing and sales mix caused the sales
increase in dollars to outpace the increase in tons sold.
Gross margin percentage increased to 28.0% as compared to 27.2% for
the first quarter of last year. The Company's margin improvement
program has continued to produce favorable results. In terms of
dollars, total gross profit increased by almost $11.0 million over
the first quarter of last year. Of this amount, approximately $5.7
million was due to higher prices, $3.8 million due to increased
physical volume and the balance due to changes in sales mix and
cost savings from sourcing arrangements.
Operating expenses were up by approximately $3.4 million (12.0%)
over the comparable period last year. As a percentage of sales,
however, first quarter 1995 operating expenses decreased to 18.8%
from 21.1% for the first quarter of 1994. The expense increases
experienced during the quarter were in volume driven and profit
related expense categories. Expenses that increased due to the
9.4% rise in physical volume were warehouse wages, overtime,
trucking expenses, commercial freight, and repairs and maintenance.
Accruals for incentive and profit sharing expense were up
significantly due to our record profits.
Depreciation expense decreased to $0.1 million (7.9%) as compared
to the first quarter of 1994 primarily due to the sale and
leaseback of equipment purchased in 1994 and 1993, which had 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 $0.1 million due to
lower debt levels. Total funded borrowing decreased by $22.3
million since the first quarter of 1994. The debt reduction served
to keep interest expense down even though interest rates have
increased due to Federal Reserve rate hikes.
Liquidity and Capital Resources _______________________________
The Company has managed to control working capital needs despite
the upward pressure generated from the continued increase in
business activity. Accounts receivable rose by $18.8 million due
to the sharply increased sales volume. Net inventory, however, was
only up by $2.9 million as the Company continued its efforts to
hold inventory levels down despite the increased sales volume.
Trade payables were up by approximately $25.3 million as a result
of deferred terms negotiated with several vendors. Total bank and
long term borrowing decreased by $22.3 million as compared to the
balance at March 31, 1994.
The Company has unused committed and uncommitted lines of bank
credit of $137.0 million as of March 31, 1995 as compared to $104.2
million as March 31, 1994.
Page 8 of 9
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) None
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.
Page 9 of 9
SIGNATURES __________
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. M. Castle & Co.
(Registrant)
Date: May 5, 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).
