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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 September 30, 1994
Commission File Number 1-5415
A. M. Castle & Co.
(Exact name of registrant as specified in its charter.)
Delaware 36-0879160
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3400 North Wolf Road, Franklin Park, Illinois 60131
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone, including area code: 708/455-7111
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock No Par Value - 11,072,930 shares as of September 30, 1994.
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 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) Sept 30 Dec. 31 Sept 30
Assets 1994 1993 1993
Cash. . . . . . . . . . . . . . . . .$ 4,485 $ 1,528 $ 722
Accounts receivable, net. . . . . . . 56,168 49,048 52,824
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 97,783 101,572 94,647
Total current assets . . . . . .$158,436 $152,148 $148,193
Prepaid expenses and other assets . . 11,712 11,088 10,901
Fixed assets, net . . . . . . . . . . 42,007 40,974 43,062
Total assets . . . . . . . . . .$212,155 $204,210 $202,156
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 63,694 $ 49,982 $ 45,423
Accrued liabilities . . . . . . . . . 12,582 9,494 8,199
Income taxes payable. . . . . . . . . 1,170 1,199 1,176
Current portion of long-term debt . . 3,944 5,435 5,509
Total current liabilities. . . . 81,390 66,110 60,307
Long-term debt, less current portion. 41,801 58,024 63,726
Deferred income taxes . . . . . . . . 7,988 8,067 7,700
Post retirement benefit obligations . 2,533 2,466 2,239
Stockholders' equity. . . . . . . . . 78,443 69,543 68,184
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$212,155 $204,210 $202,156
SHARES OUTSTANDING* . . . . . . . . . 11,072 10,917 10,915
BOOK VALUE PER SHARE* . . . . . . . .$ 7.08 $ 6.37 $ 6.25
WORKING CAPITAL . . . . . . . . . . .$ 77,046 $ 86,038 $ 87,886
WORKING CAPITAL PER SHARE*. . . . . .$ 6.96 $ 7.88 $ 8.05
*December, 1993 and September, 1993 Restated to Reflect a 50%
Stock Dividend
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Nine Months
Ended Sept 30,
Cash flows from operating activities: 1994 1993
Net income. . . . . . . . . . . . . . . . $ 10,777 $ 4,803
Depreciation. . . . . . . . . . . . . . . 3,527 3,589
Other . . . . . . . . . . . . . . . . . . 259 (501)
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 14,563 7,891
(Increase) decrease in working capital. . 11,607 (12,963)
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . 26,170 (5,072)
Cash flows from investing activities:
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . (3,621) (3,499)
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (3,621) (3,499)
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Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . (17,714) 10,649
Dividends paid. . . . . . . . . . . . . . (2,644) (2,183)
Other . . . . . . . . . . . . . . . . . . 766 84
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . (19,592) 8,550
Net increase (decrease) in cash . . . . . . 2,957 29
Cash - beginning of year. . . . . . . . . 1,528 693
Cash - end of period. . . . . . . . . . . $ 4,485 $ 722
Supplemental disclosure on cash flow information:
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 2,977 $ 3,731
Income taxes . . . . . . . . . . . . . $ 7,057 $ 3,948
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three For the Nine
Months Ended Months Ended
Sept 30, Sept 30,
1994 1993 1994 1993
Net sales . . . . . . . . $132,187 $117,118 $397,856 $358,029
Cost of material sold . . 96,288 86,645 290,712 266,760
Gross profit on sales . 35,899 30,273 107,144 91,269
Operating expenses. . . . 27,662 25,625 83,363 76,769
Depreciation expense. . . 1,152 1,195 3,527 3,589
Interest expense, net . . 804 941 2,528 2,922
Total . . . . . . . . . 29,618 27,761 89,418 83,280
Income before taxes . . . 6,281 2,512 17,726 7,989
Income Taxes:
Federal . . . . . . . . 2,021 864 5,618 2,559
State . . . . . . . . . 478 212 1,331 627
2,499 1,076 6,949 3,186
Net income. . . . . . . . 3,782 1,436 10,777 4,803
Net income per share* . . $ .34 $ .13 $ .98 $ .44
Financial Ratios:
Return on sales . . . . 2.87% 1.23% 2.71% 1.34%
Asset turnover. . . . . 2.49 2.32 2.50 2.36
Return on assets. . . . 7.13% 2.84% 6.78% 3.16%
Leverage factor . . . . 3.05 3.09 3.05 3.09
Return on opening
stockholders' equity . 21.76% 8.77% 20.67% 9.78%
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Other Data:
Cash dividends paid . . $ 885 $ 728 $ 2,644 $ 2,183
Dividends per share*. . .08 .07 .24 .20
Average number of shares
outstanding* . . . . . 11,066 10,915 11,018 10,915
Tons sold . . . . . . . 82,932 75,451 253,880 231,977
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
September 30, 1994, and September 30, 1993, must necessarily be based on
management's estimates of expected year end inventory levels and costs.
Since future estimates of inventory levels and costs are subject to
certain forces beyond the control of management, interim financial
results are subject to fiscal year end LIFO inventory valuations.
Current replacement cost of inventories exceeds book value by $49.9
million, $45.6 million, and $45.4 million at September 30, 1994,
December 31, 1993 and September 30, 1993 respectively. Taxes on income
would become payable on any realization of this excess from reductions
in the level of inventories.
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A. M. CASTLE & CO.
Notes to Condensed Financial Statements
1. Condensed Financial Statements
The condensed financial statements included herein are unaudited,
except for the balance sheet at December 31, 1993, which is
condensed from the audited financial statements at that date. The
Company believes that the disclosures are adequate to make the
information not misleading; however, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. In the
opinion of management, the unaudited statements, included herein,
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position,
the cash flows, and the results of operations for the periods then
ended. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form
10-K. The 1994 interim results reported herein may not necessarily
be indicative of the results of operations for the full year 1994.
2. Common Stock and Per Share Information
Net income per share computations are based on the weighted average
number of shares of common stock outstanding during the respective
periods. 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 1994 continue to improve. Third quarter 1994
net income was approximately $3.8 million as compared to $1.4
million for the third quarter of 1993. Year-to-date net income
through nine months was approximately $10.8 million as compared to
$4.8 million for the first nine months of 1993. The primary
contributions to the improved earnings were a stronger economy; an
increase in gross margin percentage; aggressive management of all
expenses; and an upward trend in price levels. Prices for the
third quarter were up an average of 6.4% over the comparable
quarter last year.
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Third quarter sales increased by 12.9% as compared to the third
quarter of 1993, while unit volume, expressed in tons sold,
increased by 9.9% over the same period. Year-to-date, sales are up
11.1% in dollars, and up 9.4% in tonnage.
Gross margin percentage increased to 27.2% from the 25.8% for the
third quarter of last year. The Company's focus on margin
improvement was primarily responsible for the increased percentage.
In total, gross profit increased by approximately $5.6 million over
the third quarter of 1993. Of this amount, $3.3 million was due to
the higher physical sales volume, and $2.3 million was due to
higher pricing. Year-to-date, total gross profit is up by
approximately $15.9 million. The gross margin percentage for the
first nine months of 1994 is 26.9% as compared with 25.5% for the
first three quarters of 1993. Increased physical volume, pricing
"gains" generated from our margin improvement program, and cost
savings from favorable sourcing arrangements all have contributed
significantly to the increase in gross margin dollars.
Operating expenses have been aggressively controlled. Third
quarter 1994 operating expenses were up by approximately $2.0
million (7.9%) over the comparable period last year. As a
percentage of sales, however, third quarter operating expenses
decreased to 20.9% from 21.9% in the third quarter of 1993. The
higher expenses for the quarter were attributable to increases in
volume-driven expense categories such as overtime, truck expenses,
commercial freight, sales, discounts taken, and repairs and
maintenance. In addition, profit related expense categories, such
as incentive and profit sharing expense, showed significant
increases due to the higher earnings level.
Operating expenses are up by approximately $6.6 million (8.6%) over
the first three quarters of 1993. As a percentage of sales, 1994
operating expenses decreased slightly to 21.0% from 21.4% for the
first nine months of 1993. As with the third quarter comparison,
expense increases occurred in the volume-driven and profit related
expense categories due to the increase in physical volume and
profitability from last year.
Depreciation expense continues to remain relatively constant from
last year as capital additions were primarily aimed at improving
existing facilities, and maintaining property and equipment in good
working order.
Third quarter net interest expense decreased by $137,000 (14.6%) as
compared to the third quarter of 1993. Lower debt levels were
responsible for the decrease in expense over the prior year.
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Liquidity and Capital Resources _______________________________
The Company has managed to reduce working capital needs despite the
upward pressure generated from the increase in business activity.
Accounts receivable were up $3.3 million (6.3%) due to the
increased sales volume, while inventories were down by
approximately $3.1 million (3.3%). Total accounts payable
increased by $18.3 million as a result of deferred terms negotiated
with several vendors. Total bank and other long term borrowings
decreased by $23.5 million as compared to September 30, 1993.
The Company has unused committed and uncommitted lines of bank
credit of $117.0 million as of September 30, 1994 as compared to
$100.0 million at September 30, 1993.
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 6. Exhibits and Reports of Form 8-K
(a) None
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. M. Castle & Co.
(Registrant)
Date: May 6, 1994 By: /ss/ J. A. Podojil
J. A. Podojil
Treasurer/Controller
(Mr. Podojil is the Chief Accounting
Officer and has been authorized to
sign on behalf of the Registrant).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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