<PAGE>
Page 1 of 14 Pages
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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, 1994 Commission File Number: 1-5415
------------------- ------
A. M. CASTLE & CO.
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(Exact name of registrant as specified in its charter)
Delaware 36-0879160
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3400 North Wolf Road, Franklin Park, Illinois 60131
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(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:
Name of each exchange on
Title of each class which registered
- ---------------------------- -------------------------------------
Common Stock - no par value American and Chicago Stock Exchanges
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 3, 1995 was $144,056,445.
The number of shares outstanding of the registrant's common stock on March 3,
1995 was 11,081,265 shares.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS INCORPORATED BY REFERENCE APPLICABLE PART OF FORM 10-K
Annual Report to Stockholders for the Parts I, II and IV
year ended December 31, 1994
Proxy Statement dated March 10, 1995 Part III
furnished to Stockholders in connection with
registrant's Annual Meeting of Stockholders
<PAGE>
PAGE 2 OF 14
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:
1994 1993 1992
---- ---- ----
Carbon and Stainless 78% 77% 73%
Non-Ferrous Metals 22% 23% 27%
--- --- ---
100% 100% 100%
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.
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PAGE 3 OF 14
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 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 1994 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:
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PAGE 4 OF 16
<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
Fairfield, Ohio 72,000
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)
Wichita, Kansas 26,500 (1)
Worcester, Massachusetts 60,000
---------
Total Castle Metals 2,058,700
HY-ALLOY STEELS CO.
Chicago area -
Bedford Park, Illinois 103,700
H-A INDUSTRIES
Hammond, Indiana 123,000 (1)
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)
---------
2,396,800
---------
---------
SALES OFFICES (LEASED)
Buffalo, New York
Detroit, Michigan
Minneapolis, Minnesota
Pittsburgh, Pennsylvania
Phoenix, Arizona
San Diego, California
Tulsa, Oklahoma
<FN>
(1) Leased: See Note 5 in the 1994 Annual Report to Stockholders,
incorporated herein by this specific reference, for information
regarding lease agreements.
</TABLE>
<PAGE>
PAGE 5 OF 14
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.
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PAGE 6 OF 14
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 1994 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 1994 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.
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PAGE 7 OF 14
PART III
Item 10. Directors and Executive Officers of the Registrant.
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AND TITLE AGE BUSINESS EXPERIENCE
Michael Simpson 56 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 59 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 53 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 46 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 49 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 43 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 50 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 61 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 43 Mr. Raney began his employment with the
Vice President - registrant in 1986. Mr. Raney was elected
Advanced Materials Vice President - Midwest Region during 1989,
Group and Vice President - Advanced Materials
Group in 1990.
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PAGE 8 OF 14
NAME AND TITLE AGE BUSINESS EXPERIENCE
Gise Van Baren 63 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
Division 1979. He was elected Vice President - Alloy
Products Group in 1991.
James A. Podojil 52 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 52 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.
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PAGE 9 OF 14
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 10, 1995
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 10, 1995, 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 10, 1995, 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.
<PAGE>
PAGE 10 OF 14
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial statements (incorporated by reference to the 1994 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 1994.
<PAGE>
PAGE 11 OF 14
A. M. CASTLE & CO.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Report of Independent Public Accountants on Schedules. . . . . . . . . . Page 12
Consent of Independent Public Accountants with respect to Form S-8 . . . Page 12
Consolidated Financial Statement Schedules
Valuation and Qualifying Accounts - Schedule II .. . . . . . . . . Page 13
Data incorporated by reference from 1994 Annual Report to Stockholders of A. M.
Castle & Co., included herein -
Consolidated Statements of Income - For the years ended December 31,
1994, 1993, and 1992 . . . . . . . . . . . . . . . . . . . . . . . . Page 10
Consolidated Statements of Reinvested Earnings - For the years ended
December 31, 1994, 1993, and 1992. . . . . . . . . . . . . . . . . . Page 10
Consolidated Balance Sheets - December 31, 1994, 1993, and 1992. . . Page 11
Consolidated Statements of Cash Flows - For the years ended
December 31, 1994, 1993, and 1992. . . . . . . . . . . . . . . . . . Page 12
Notes to Consolidated Financial Statements . . . . . . . . . . . Pages 13-17
Report of Independent Public Accountants . . . . . . . . . . . . . . Page 17
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
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.
<PAGE>
PAGE 12 OF 14
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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. 1994 Annual Report to
Stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 6, 1995. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois,
February 6, 1995
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
WITH RESPECT TO FORM S-8
As independent public accountants, we hereby consent to the incorporation
by reference of the following into the Company's previously filed S-8
Registration Statements Numbers 33-30545 and 33-37818:
1. Our supplemental report dated February 6, 1995 included in this Annual
Report on Form 10-K for the year ended December 31, 1994; and
2. Our report dated February 6, 1995 incorporated by reference in this Annual
Report on Form 10-K for the year ended December 31, 1994.
/s/ Arthur Andersen LLP
Chicago, Illinois,
March 3, 1995
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PAGE 13 OF 14
SCHEDULE II
A. M. CASTLE & CO.
ACCOUNTS RECEIVABLE - ALLOWANCE FOR DOUBTFUL ACCOUNTS
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(Dollars in thousands)
1994 1993 1992
--------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 600 $ 600 $ 600
Add - Provision charged to income 345 437 776
- Recoveries 154 242 214
Less - Uncollectible accounts
charged against allowance (499) (679) (990)
---------- --------- ---------
Balance, end of year $ 600 $ 600 $ 600
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</TABLE>
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PAGE 14 OF 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 3, 1995
----------------
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 /s/ William K. Hall
- ----------------------------------- -----------------------------------
Michael Simpson, William K. Hall, Director
Chairman of the Board March 3, 1995
March 3, 1995
/s/ Richard G. Mork /s/ Robert S. Hamada
- ----------------------------------- -----------------------------------
Richard G. Mork, President - Robert S. Hamada, Director
Chief Executive Officer, and Director Chairman, Audit Committee
March 3, 1995 March 3, 1995
/s/ Edward F. Culliton /s/ John W. McCarter, Jr.
- ----------------------------------- ------------------------------
Edward F. Culliton, Vice President - John W. McCarter, Jr., Director
Chief Financial Officer, and Director March 3, 1995
March 3, 1995
/s/ William J. McDermott
------------------------------
William J. McDermott, Director
March 3, 1995
<PAGE>
Exhibit A
A.M. CASTLE & CO
A NEW ERA IN METALS DISTRIBUTION
1994 Annual Report
<PAGE>
A.M. CASTLE & CO., founded in 1890, is North America's leading industrial
distributor of specialty metals including carbon, alloy and stainless steels;
nickel alloys; aluminum; titanium; copper and brass. We supply metals and a
full range of value-added, leading-edge services to a highly diversified
customer base that includes many Fortune 500 companies as well as thousands of
medium and smaller-sized ones within the $500 billion producer durable equipment
sector. With 26 locations and over 2.3 million square feet of capacity, our
coast-to-coast network of service centers can provide next-day delivery to over
90 percent of the markets we serve, and two-day delivery to virtually all of the
rest. Our common stock trades on the American Stock Exchange under the ticker
symbol CAS.
CORPORATE GOALS:
- Market leadership in all core products
- Supplier of choice to our customers
- World-class quality process
- Consistently competitive returns on capital
- Superior long-term returns to shareholders
TABLE OF CONTENTS
1 FINANCIAL HIGHLIGHTS
In 1994, our sales grew 13% to a record $537 million while our earnings
more than doubled. Net profit per share increased to $1.40 from $0.63 a
year ago.
2 LETTER TO SHAREHOLDERS
Chairman Michael Simpson and Chief Executive Officer Richard Mork report
record results for 1994 and share Castle's vision for the future.
4 A NEW ERA IN METALS DISTRIBUTION
Global market forces expand our opportunities to create systems solutions
to meet our customers' metal sourcing needs.
8 FINANCIAL REVIEW
Strong cash flow funded capital expenditures and debt reduction - setting
the stage for future growth.
10 FINANCIAL STATEMENTS AND NOTES
18 ELEVEN YEAR FINANCIAL AND OPERATING STATEMENTS
20 STOCK AND DIVIDEND INFORMATION
Shareholders realized a 23.5% total return on their investment during 1994,
and benefitted from three separate cash dividend increases.
INSIDE BACK COVER MANAGEMENT AND SHAREHOLDER INFORMATION
ABOUT THE COVER
A.M. Castle & Co. was one of the pioneers in the metals distribution industry
more than a century ago. Today, we are leading our industry into an exciting
new era by creating systems solutions to address both the current and future
needs of our customers.
<PAGE>
THE YEAR IN BRIEF
[Graph]
1
<PAGE>
TO OUR SHAREHOLDERS:
[Photo]
MIKE SIMPSON AND DICK MORGAN IN FRONT OF OUR NEW $2.5 MILLION COMPUTER
CONTROLLED QUENCH AND TEMPER HEAT TREAT LINE AT H-A INDUSTRIES, OUR LEADING-EDGE
BAR PROCESSING CENTER. THIS FULLY-AUTOMATED LINE GIVES US A SIGNIFICANT
COMPETITIVE ADVANTAGE IN BEING ABLE TO OFFER IMPROVED SURFACE TO CORE UNIFORMITY
AND UNIQUE HARDNESS CAPABILITIES WHICH ARE CONSISTENTLY REPEATABLE, BAR TO BAR
AND LOT TO LOT. WITH THIS LINE WE HAVE REDUCED PRODUCT LEAD TIMES, INCREASED
OPERATING EFFICIENCY AND IMPROVED OUR INVENTORY UTILIZATION.
By every measure of performance, 1994 was an excellent year. Sales topped the
half billion dollar mark at $537 million, up 13% from 1993's $474 million.
Shipments rose 10% to 337,700 tons reflecting significant gains in market share,
especially in our core product offering.
Earnings more than doubled as much of the variable profit from incremental
sales went directly to the bottom line. For the year, net profit totalled $15.4
million, or $1.40 a share, versus $6.9 million, or $.63 a share, a year ago.
Cash flow from operations, a key measure of liquidity and financial strength,
totalled $28 million. Borrowings were reduced by $21 million during the year
bringing our debt to total capital ratio down to 34%. Most significantly,
return on shareholders'equity rose to 22.2%, up from 10.5% in 1993.
Not only did we achieve major gains in our financial results, we also
enhanced the quality of our performance in three critical areas of operation...
margin improvement, expense management and inventory control. We exceeded
each of the targets which we had set for 1994, and have established even more
challenging goals for 1995. These are discussed in more detail later on in this
report.
Our 1994 results didn't just happen overnight: they were many years in the
making. We laid the foundation back in the late eighties when we correctly
anticipated that our customer base - the U.S. manufacturers of producer durable
equipment - would emerge from an extended period of structural, and sometimes
painful, change in a very strong position to compete effectively in the global
marketplace.
We went through this process with them. We successfully completed several
multi-year "breakthrough" projects such as our sales and marketing realignment
and the redeployment of inventory and processing equipment throughout our
coast-to-coast network of service centers. Behind the scenes, there were also
countless individual initiatives as we took apart all the things we did and then
put them back together again. Each time, our goal was to better serve our
customers by using our resources more intelligently and efficiently.
Today, we have a clear vision and a thorough understanding of our position
in the market. It's not a vision in the usual sense of the word - a catchy
phrase that captures what we aim to be. Instead, it is a framework for
evaluating our progress within a constantly changing global environment. As we
go forward, our success will be measured by our ability to deliver superior
value and quality products and services to our customers; to provide a positive
professional environment for our employees, and to achieve consistent and
superior returns for our shareholders.
2
<PAGE>
. . . Our success will be measured by our ability to deliver superior
value and quality products and services to our customers
. . . a positive professional environment for our employees
. . . and consistent and superior returns for our shareholders.
- -------------------------------------------------------------------------------
We also have a well-defined set of goals and strategies to help us realize
our vision. They include such objectives as attaining market leadership
positions in all of our core products, establishing Castle as the supplier of
choice to all of our customers, maintaining a quality culture that is driven by
management and practiced by every employee, and achieving consistently
competitive rates of return on capital. Finally, our ultimate and overriding
goal is to reward all shareholders with a superior total long-term return on the
investment they have made in our company.
In the pages that follow, you'll read more about what we're doing to
reinforce our industry leadership. How we're expanding our facilities to offer
new and unique value-added preprocessing capabilities that will help our
customer become even more competitive and cost-efficient. And how, in turn,
that strengthens our relationships with them. How we're rapidly moving to
extend ISO 9002 registration, a prerequisite for serving customers who compete
in the global marketplace, throughout our distribution network. How we're
establishing marketing alliances with other innovative, quality-minded
distributors when it makes sense to do so. How we're establishing a foothold in
new geographic markets. And how we're continuing to keep a watchful eye on our
costs to relentlessly root out all non-essential activities, those that
contribute nothing of value to either our customers or shareholders.
What we're doing, really, is building on our strengths so that we can
better anticipate and serve the needs of North America's producer durable
equipment industries. Our customers are leaders in adopting innovative systems
to improve their competitive position. Having successfully altered the way they
develop, manufacture and market their products, they are now striving to gain a
further competitive advantage by adopting advanced materials management
concepts. These include just-in-time delivery systems, sole-sourcing
relationships, outsourcing and quality assurance . . . all designed to lower
total costs and reduce cycle times. From our perspective, these trends portend
an even greater role for metals distributors, especially those like Castle that
offer full product lines, coast-to-coast reach, state-of-the-art technical
expertise and superior processing capabilities.
We look forward to 1995 as another year of growth. The consensus forecast
is that the rate of output in the durable equipment sector will again
significantly outpace that of the economy as a whole. Should this projection
prove reasonably accurate, as we are confident that it will, we expect to
continue the positive earnings trend we have established over the last three
years.
We are pleased with the stock market's evaluation of our recent performance
and its assessment of our growth potential. Despite it being a difficult year
for stocks, our shareholders realized a total return on their investment in
Castle stock of 23.5%. In addition to strong gains in the market price, our
investors benefitted from three separate increases in the cash dividend. In
January of 1995, our Board of Directors approved a 33% increase, bringing the
cash dividend to 48 cents a share on an annualized basis. This action followed
a 12.5% increase back in October, and a 20% hike in January of 1994. Our Board
also declared a three-for-two stock split in July, which brought our total
number of common shares outstanding up to 11.0 million from 7.4 million.
As we enter 1995, we have a clear vision for our company that will carry us
well into the next century and a set of tough-minded, proven strategies to guide
us. They are being carried out by what we believe to be the most experienced and
empowered team of professionals in our business. They're committed to
each other, our suppliers, our shareholders and, most of all, to our customers.
They're the key to the gains we've achieved over the past three years . . .
and they're the reason we're confident that we will be even more successful in
the future.
Michael Simpson Richard G. Mork
Chairman President & CEO
February 20, 1995
3
<PAGE>
A NEW ERA IN METALS DISTRIBUTION
AS WE BEGIN OUR 105TH YEAR, WE ARE AT THE FOREFRONT OF AN EXCITING NEW ERA IN
METALS DISTRIBUTION. OUR INDUSTRY IS RAPIDLY EVOLVING BEYOND ITS HISTORICAL
FUNCTION OF SUPPLYING METALS AND PRE-PROCESSING SERVICES. LONG REGARDED AS A
SECONDARY SERVICE, WE NOW PLAY AN INTEGRAL ROLE IN OUR CUSTOMERS' CONTINUING
DRIVE TO IMPROVE THEIR QUALITY AND PRODUCTIVITY. THIS MEANS THAT FOR INDUSTRIAL
DISTRIBUTORS LIKE CASTLE, THERE WILL BE INCREASING OPPORTUNITIES TO CREATE TOTAL
SYSTEMS SOLUTIONS DESIGNED TO MEET OUR CUSTOMERS' HIGHER EXPECTATIONS FOR VALUE,
ENHANCED QUALITY AND COST-EFFICIENCY.
In our Letter to Shareholders, we spoke of the importance of the vision
we've established for our company and the strategies that we'll pursue to
achieve it. However, on a day to day basis, it's paying attention to the details
that will determine our success. We are taking apart the basic components of
product, quality, customer satisfaction and cost, and raising them a notch
higher, one step at a time. And we're investing in those projects which will
most benefit our customers and our long-term profitability.
Take products for example. Although we carry the broadest and deepest
inventory of highly engineered metals in the market, that alone is no longer
sufficient to earn a growing share of the business available to us. CREATING
WAYS TO ENHANCE THE VALUE OF THESE PRODUCTS SO THAT THE CUSTOMER WANTS TO BUY
FROM CASTLE INSTEAD OF THE COMPETITION IS AN ON-GOING CHALLENGE. IT'S ALSO ONE
OF OUR BIGGEST OPPORTUNITIES.
One important way to add value to metals is to preprocess them so that they
can be put directly into the customer's manufacturing operation. WHETHER
IT'S CUTTING, HEAT TREATING, TEMPERING OR STRAIGHTENING, WE'RE DETERMINED TO
PROVIDE LEADING-EDGE SERVICES THAT WILL GIVE OUR CUSTOMERS BETTER PRODUCT
QUALITY AND SHORTER LEAD TIMES.
4
<PAGE>
With this in mind, we are aggressively expanding our processing
capabilities. As of this writing, we have three major projects underway. When
completed, they will not only significantly benefit our customers, they will
also give us a big boost in winning a greater share of their sourcing
requirements as well as helping us lower our costs and manage our inventory more
efficiently.
In 1993, we launched a new 124,000 square foot 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. Phase I, a unique CNC (computer numerical
control) quench and temper heat treat line which produces alloy bars for
distribution throughout North America, has been up and running for over a year
and a half. During 1994, we doubled its capacity and it is now capable of
treating over 15,000 tons annually.
We are currently hard at work on two additional projects at H-A Industries:
a bar turning and straightening operation, which should be fully operational by
the end of this first quarter; and an annealing line, which has a completion
date of early summer. We are very proud of what we've been able to achieve at
this new facility within such a short period of time.
In addition to H-A Industries, we've begun a massive, three-year expansion
of our North American plate-processing capabilities which, when completed, will
boost our coast-to-coast capacity by more than 40 percent. THIS PROGRAM WILL
STRENGTHEN OUR MARKET LEADERSHIP . . . ESPECIALLY IN THE MORE ADVANCED
APPLICATIONS SUCH AS HIGH DEFINITION PLASMA AND BEVEL CUTTING.
The third major step that we've taken to expand our value-added
capabilities is in bar processing. Increasingly, our customers want us to
deliver their bars pre-cut to their exact specifications as they find
outsourcing this activity more economical than cutting materials in-house. As
manufacturers take advantage of the cost benefits of this and other forms of
preprocessing, our business should grow significantly over the next several
years.
Another area in which we believe we are world class today is quality. This
is vital to us not only from a competitive viewpoint, but as a matter of
personal pride. WE WERE THE FIRST U.S. METALS DISTRIBUTOR TO OBTAIN ISO 9002
REGISTRATION, THE INTERNATIONALLY RECOGNIZED QUALITY STANDARD FOR COMPETING
GLOBALLY. Currently, nearly two-thirds of our capacity and all of our sourcing
are fully certified. Within the next year or so, we expect to complete this
process throughout our entire distribution network.
The evolution of ISO certification typifies how rapidly our operating
environment is changing. As recently as a year ago, ISO was in a very early
stage of development. Today, demand for this registration is rapidly
accelerating as U.S. manufacturers expand their geographic reach into new
international markets. Within the next few years, we anticipate that only
service centers with this certification will be able to serve customers who
compete on a global basis.
Another major change that has taken place over the past few years, not only
within Castle but within many successful companies, is the trend towards
developing strategic business alliances and partnerships. TODAY, WE ENCOURAGE A
CONTINUOUS EXCHANGE OF IDEAS THROUGHOUT OUR COMPANY, WITH OUR CUSTOMERS AND WITH
OUR SUPPLIERS. In fact, we're even teaming up with other innovative,
quality-minded distributors when it makes sense to do so.
Last year, for example, we joined forces with Los Angeles-based Tubesales,
the country's largest distributor of non-ferrous tubes and pipes. With our
shared commitment to world class quality and service, we recognized that an
alliance would enable us to offer our customers the ease of dealing with one
entity while enjoying the combined strengths and complementary product lines of
both companies.
OUR ALLIANCE RECENTLY SCORED ANOTHER BIG SUCCESS WITH THE AWARDING OF A
TOTAL REQUIREMENTS CONTRACT FROM A MAJOR AVIATION COMPANY. To service this
contract, we have opened a jointly operated facility in Wichita, Kansas, devoted
exclusively to serving the commercial aerospace industry. This facility
reflects our commitment to forming interactive, on-line partnerships with our
customers that will enable them to achieve their goals of zero defect,
least-cost manufacturing.
We're also continuing to set industry standards in customer satisfaction -
the ultimate measure of everything we do.
5
<PAGE>
Today's manufacturers not only want higher-quality products, they want suppliers
who can help them reduce their operating expenses and improve their
productivity. It's our challenge to stay ahead of that curve, to provide our
customers with leading edge technology that will give them maximum flexibility.
Several years ago, we made major investments in our computer hardware and
software to gear up for EDI and to integrate our customers' production planning
and scheduling into our inventory and materials management systems. And we
continue to enhance our computer capabilities to ensure that we can meet, and
exceed, our customers' needs now and on into the future.
WITH THE PASSAGE OF NAFTA, WE'RE ALSO LOOKING AT OPPORTUNITIES TO FURTHER
EXPAND OUR GEOGRAPHIC REACH THROUGHOUT NORTH AMERICA. Within the borders of the
United States, we're already exceptionally well positioned as a result of the
recent strategic redeployment of inventory and processing equipment. In Canada,
we achieved an immediate and significant presence through the 1990 acquisition
of one of that country's leading metals distributors. Since then, we've seen
steady growth in both sales and profitability. And we are optimistic that NAFTA
will fuel further opportunities for expansion there.
Now, we've turned our attention toward Mexico, establishing a joint venture
which became fully operational as of January 1st of this year. Located
in Monterey, the country's most advanced industrialized area, our partner has
the distinction of being the first Mexican company to receive ISO 9000
certification. Our new joint-venture, called Castle de Mexico, S.V. de C.V.,
gives us a foothold in what we believe will be an important market as our two
economies become more integrated, and as their producer durable equipment sector
continues to develop.
Equal in importance to our progress in expanding our market reach are the
sustainable improvements we've achieved in all areas of our operations. The
results are evident in the three critical measures we use to track the quality
of our performance.
First, WE HAVE CONSISTENTLY INCREASED OUR GROSS MARGINS. In 1994, margins
rose to 27.1% compared with 25.8% last year and 24.1% just three years ago. We
did this primarily by expanding the level of value-added services we provide to
customers. Second, we made significant strides in improving our operating
efficiency. As recently as 1991, our operating expenses consumed approximately
88% of our gross profit. We recognized that, if we wanted to create a cost
structure that would enable us to grow earnings at a much faster rate than
sales, we would have to make major advances in this area. And we have. With
steady, yearly improvement, we reduced this ratio to 77% by the end of last
year. Now, we've challenged our employees to reduce it further to 75% in 1995.
Another significant contributor to our success so far has been our
initiative to identify and eliminate activities which do not contribute to
better meeting the needs of our customers. IN THE LAST YEAR ALONE, WE REMOVED
$1 MILLION OF ANNUAL OPERATING EXPENSE FROM OUR COST STRUCTURE. But, we believe
there are further opportunities to improve the way we do our work. We'll
continue to build aggressively on the accomplishments we've made in this area.
Finally, we've worked hard to increase our inventory "turn and earn". In
1991, we made about 65 cents of gross profit for every dollar invested in
inventory. BY THE END OF 1994, WE WERE GETTING NEARLY 90 CENTS AND, FOR 1995,
WE'VE SET A GOAL OF INCREASING IT TO A DOLLAR OR BETTER.
In closing, we're currently enjoying the rewards of the fundamental changes
that have taken place within our company over the past several years. But we
aren't taking anything for granted. We can do better - and we will - as we
continue to move ahead with a clear vision of who we are and who we want to be,
with long-term strategies to guide us, and WITH AN EMPLOYEE TEAM THAT HAS ONE
EYE FOCUSED ON OUR CUSTOMERS' NEEDS AND THE OTHER FIXED FIRMLY ON THE BOTTOM
LINE.
6
<PAGE>
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 1994, an investment in Castle's stock produced a total return of
23.5% compared with 1.3% for the Standard and Poor's 500 and an inflation rate
of 2.7%.
Over the 15-year period ended December 31, 1994, Castle generated a
compounded annual rate of return of 17.0% compared with 14.5% for the Standard
and Poor's 500 and an annual inflation rate of 4.6%.
[Graph]
CASTLE'S RECORD OF DIVIDEND PAYMENTS
During 1994, Castle continued its 61-year record of consecutive quarterly cash
dividend payments with payouts totalling $3,641,000, or 33 cents a share.
During the 15-year period ended December 31, 1994, dividend payouts, which
average 56.3% of after-tax corporate income, have risen at a compound annual
rate of 5.7%.
[Graph]
<TABLE>
<CAPTION>
COMMON STOCK INFORMATION
Symbol CAS; traded on the American and Chicago Stock Exchanges.
- -------------------------------------------------------------------------------
DIVIDENDS* STOCK PRICE RANGE*
1994 1993 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First quarter. . . . .08 $.067 11 1/8 13 5/8 7 1/2 8 3/4
Second quarter . . . .08 .067 12 3/8 15 1/4 8 8 1/2
Third quarter. . . . .08 .067 12 16 3/8 8 1/8 9
Fourth quarter . . . .09 .067 12 1/8 14 3/4 8 3/8 11 5/8
----- -----
$ .33 $.268
----- -----
----- -----
- -------------------------------------------------------------------------------
<FN>
*Restated to reflect a 50% stock dividend
</TABLE>
<PAGE>
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.
Senior 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-
Advanced Materials 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 27, 1995, 10:00 A.M.
Corporate Offices
3400 North Wolf Road
Franklin Park, IL 60131
(708) 455-7111
FORM10-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.
- -------------------------------------------------------------------------------
CASTLE LOCATIONS
Atlanta, Buffalo, Charlotte, Chicago, Cincinnati, Cleveland, Dallas, Detroit,
Houston, Kansas City, Los Angeles, Milwaukee, Minneapolis, Philadelphia,
Phoenix, Pittsburgh, Salt Lake City, San Diego, Stockton, Tulsa, Wichita,
Worcester
Hy-Alloy Steels Co., Chicago; H-A Industries, Hammond; A.M. Castle & Co.
(Canada), Inc., Montreal, Toronto, Winnipeg; Castle de Mexico, S.V. de C.V.,
Monterey
<PAGE>
<TABLE>
<CAPTION>
The Year in Brief
(dollars and shares in thousands except per share amounts)
- ------------------------------------------------------------------------------------------
1994 1993 %
Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Results Net sales...................... $536,568 $474,108 13%
Gross profit on sales.......... 145,182 122,285 19%
Income before taxes............ 25,294 11,611 118%
Net income..................... 15,410 6,899 123%
Per Share of Net income..................... 1.40 .63 122%
Common Stock Dividends...................... .33 .27 22%
Stockholders' equity........... 7.42 6.37 16%
Average shares outstanding..... 11,033 10,917 1%
Balance Sheet Total assets................... 213,127 204,210 4%
Total debt..................... 42,362 63,459 (33%)
Total equity................... 82,161 69,543 18%
Working capital................ 75,945 86,038 (12%)
Cash flow*..................... 20,013 11,683 71%
Selected Ratios Return on sales................ 2.9% 1.5% 93%
Return on assets............... 7.2% 3.4% 112%
Return on opening equity....... 22.2% 10.5% 111%
Current ratio.................. 1.9 2.3 (17%)
Debt to capital ratio.......... 34.0% 47.7% (29%)
- ------------------------------------------------------------------------------------------
<FN>
* Net income plus depreciation
- ------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
- --------------------------------------------------------------------------------
Financial Review
This discussion should be read in connection with the information contained in
the Consolidated Financial Statements and Notes.
Overview
1994 was an excellent year for Castle. Both sales and net income were the
highest in our Company's history. Improved business conditions along with
significant market share gains, higher gross margins and continued cost
controls all contributed to the record earnings level. Activity levels were
strong throughout the year with the third and fourth quarters producing the
largest earnings gains. This is especially noteworthy because they are,
traditionally, slower quarters due to plant shutdowns during the summer
vacation months and year-end holiday season.
The improvement in demand reflects the strength of our targeted customer
base -- the U.S. producers of durable equipment. According to Data Resources,
output in our primary market (estimated at $519 billion in 1987 constant
dollars) increased by 17% this past year, after growing by 18% in 1993 and 7%
in 1992. By comparison, total gross domestic product rose 4% in 1994,
following a 3.1% gain in 1993 and a 2.6% rise in 1992. NOTE: These figures
reflect the most recent revisions made to prior years' data by the Commerce
Department's Bureau of Economic Analysis.
1994 Compared with 1993
Net sales for 1994 climbed over the half billion dollar mark to $536.6
million, an increase of 13% over 1993's $474.1 million. Unit volume increased
by 10% to 337,700 tons. Carbon and stainless steels generated 78% of total
shipments, with the balance provided by non-ferrous metals. Sales growth in
dollars outpaced increases in unit volume due to higher prices at the producer
level and to improved margins. Average mill prices in 1994 were about 4.9%
above 1993 levels.
We continued to focus on gross margin, a vital component of profitability.
In 1994, cost of sales as a percentage of total sales decreased. Gross margin
percentage rose to 27.1% compared with 25.8% for 1993, due primarily to the
higher level of value-added services we provided to our customers. Gross
profit totalled $145.2 million, up 19% from 1993's level of $122.3 million.
Strong unit volume increases, higher mill prices, and our improved gross
margin percentage all contributed to the increase in gross profit.
Substantially all inventories are valued using the LIFO (last-in,
first-out) method. This had the effect of increasing Castle's cost of sales by
$6.1 million in 1994, compared with what they would have been on a FIFO
(first-in, first-out) basis.
Total operating expenses for 1994 were $112.1 million, compared with $102.1
million in the preceding year. As a percentage of sales, operating expenses
fell to 20.9% as compared to 21.5% in 1993. These results reflect the success
of our ongoing focus on improving operating efficiencies. Depreciation
decreased slightly while interest expense fell 15% due to lower average
borrowings.
In 1994, the Company's income tax rate, at 39.1%, declined slightly from
the previous year due to tax loss carry forwards from Canadian operations.
The significant increases in sales volume, and the effect of the Company's
operating leverage on incremental sales, led to record earnings for Castle.
Continued tight control over expenses also contributed to improved total
performance. Earnings for the year reached $15.4 million, or $1.40 a share,
versus $6.9 million, or $.63 per share, in 1993.
All per share figures have been adjusted to reflect a three-for-two stock
split declared in July 1994.
1993 Compared with 1992
In 1993, sales totalled $474.1 million, up 12% from 1992's $423.9 million.
Unit volume was up 24% to 307,865 tons sold. Carbon and stainless steels
generated 77% of total revenues in 1993 and 73% in 1992, with the balance
provided by non-ferrous metals. On average, pricing in 1993 was about 4% below
1992 levels.
Material cost, as a percentage of total sales, increased slightly. Gross
margin percentage was 25.8%, compared with 1992's 26.0%. Gross profit for 1993
totalled $122.3 million, an increase of 11% from the $110.2 million reported
in 1992, as strong volume increases more than offset the effects of price
deflation and sales mix shifts that occurred throughout the year. LIFO had the
effect of increasing Castle's cost of sales by $0.1 million in 1993, after
reducing it in 1992 by $5.7 million, compared with what it would have been on
a FIFO (first-in, first-out) basis.
Total operating expenses were $102.1 million in 1993 compared with $94.9
million in 1992. As a percentage of sales, operating expenses declined to
21.5% in 1993 from 22.4% in 1992. Interest expense decreased by 12% due
primarily to significantly lower rates.
The Company's Federal income tax rate remained essentially unchanged in
1993 from the previous year.
Castle's 1993 net income represented a sharp increase from the $3.6
million, or $.33 per share, recorded in 1992. The 1992 earnings figure
included net income of $222,000, or $.02 per share, due to the adoption of new
accounting methods for postretirement benefits and income taxes.
7
<PAGE>
- --------------------------------------------------------------------------------
Capital Expenditures
Capital expenditures during 1994 totalled $7.9 million compared with $4.6
million in 1993. In 1994 approximately $2.5 million was expended for
additional production capabilities at H-A Industries, with the remaining
expenditures aimed at enhancing existing facilities and maintaining property
and equipment in good working order. In 1993 approximately $1.2 million was
expended for the addition of a quench and temper heat treat line, with the
balance spent to maintain property and equipment in good working order.
During the latter half of 1994 and 1993, the Company sold and leased back
approximately $2.6 million and $2.1 million of fixed assets respectively,
which added to cash flow and decreased long-term borrowing.
Liquidity and Capital Resources
We continue to improve upon our solid financial base. Strong operating cash
flows provided funds for our capital expenditures and reduced long-term
borrowings.
At 1994 year end, stockholders' equity had increased 18% to $82.2 million,
or $7.42 per share. Total borrowings were reduced by $21 million to $42.4
million bringing our debt-to-capital ratio down to 34% as compared to 48% at
the end of 1993.
Accounts receivable rose in 1994 reflecting the increase in sales levels.
The number of days' sales outstanding decreased from 1993. Collections
remained strong, exceeding our target levels for both the fourth quarter and
the full year. We believe that our net receivables at December 31, 1994 are of
a very good quality. Inventory levels remained substantially unchanged.
Working capital was $75.9 million at December 31, 1994, compared with $86
million at December 31, 1993. The decrease is due primarily to increased
levels of trade payables.
Our Company had unused committed and uncommitted lines of bank credit of
$123.8 million at December 31, 1994, compared with $103.6 million at 1993 year
end. Management believes that funds generated from operations, existing lines
of credit and additional borrowing capacity should provide adequate funding
for current and anticipated business operations.
8
<PAGE>
- --------------------------------------------------------------------------------
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)
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets
Cash......................................................................................... $ 1.0 $ 1.5 $ .7
Accounts receivable, net..................................................................... 58.9 49.0 45.0
Inventories, at latest cost.................................................................. 149.9 147.2 141.9
------- ------ ------
Total current assets....................................................................... 209.8 197.7 187.6
Less -- current liabilities.................................................................. (102.8) (84.3) (84.9)
------- ------ ------
Net current assets............................................................................. 107.0 113.4 102.7
Fixed and other assets, net.................................................................... 55.0 52.1 53.1
------- ------ ------
Total assets, less current liabilities..................................................... 162.0 165.5 155.8
Long-term debt................................................................................. (38.5) (58.0) (53.0)
Deferred income taxes.......................................................................... (7.8) (8.1) (7.8)
Postretirement benefit obligations............................................................. (2.5) (2.5) (2.2)
Unrecognized inventory gain, net of taxes...................................................... (31.0) (27.3) (27.3)
------- ------ ------
Stockholders' equity........................................................................... $ 82.2 $ 69.6 $ 65.5
------- ------ ------
------- ------ ------
</TABLE>
9
<PAGE>
A.M. Castle & Co. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales................................................................................. $536,568 $474,108 $423,913
Cost of material sold..................................................................... 391,386 351,823 313,683
-------- -------- --------
Gross profit on sales................................................................... 145,182 122,285 110,230
-------- -------- --------
Expenses
Operating expenses...................................................................... 112,070 102,089 94,944
Depreciation (Notes 1 and 5)............................................................ 4,603 4,784 4,865
Interest expense, net (Notes 2 and 4)................................................... 3,215 3,801 4,333
-------- -------- --------
119,888 110,674 104,142
-------- -------- --------
Income before income taxes and cumulative effect of changes in accounting methods......... 25,294 11,611 6,088
-------- -------- --------
Income taxes (Notes 1 and 3)
Federal -- currently payable............................................................ 6,503 3,926 2,296
-- deferred....................................................................... 1,474 (141) (133)
State................................................................................... 1,907 927 533
-------- -------- --------
9,884 4,712 2,696
-------- -------- --------
Net income before cumulative effect of changes in accounting methods...................... 15,410 6,899 3,392
-------- -------- --------
Cumulative effect of changes in accounting methods (Notes 3 and 6)........................ -- -- 222
-------- -------- --------
Net income................................................................................ 15,410 6,899 3,614
========= ========= =========
Net income per share before cumulative effect of changes in accounting methods............ $ 1.40 $ .63 $ .31
Cumulative effect of change in accounting methods......................................... -- -- .02
-------- -------- --------
Net income per share (Notes 1 and 7)...................................................... $ 1.40 $ .63 $ .33
--------- --------- --------
--------- --------- --------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Consolidated Statements of Reinvested Earnings
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year.............................................................. $ 49,409 $ 45,421 $ 44,717
Net income................................................................................ 15,410 6,899 3,614
Cash dividends -- $.33 per share in 1994, $.27 per share in 1993 and $.27 per share in
1992 (Note 7)........................................................................... (3,641) (2,911) (2,910)
-------- -------- --------
Balance at end of year.................................................................... $ 61,178 $ 49,409 $ 45,421
========= ========= =========
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
10
<PAGE>
A.M. Castle & Co. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets
Cash (Note 1)........................................................................... $ 976 $ 1,528 $ 693
Accounts receivable, less allowances of $600............................................ 58,892 49,048 44,995
Inventories -- principally on last-in, first-out basis (latest cost higher by
approximately $51,700 in 1994, $45,600 in 1993 and $45,500 in 1992) (Note 1).......... 98,215 101,572 96,368
-------- -------- --------
Total current assets.............................................................. 158,083 152,148 142,056
-------- -------- --------
Prepaid expenses and other assets (Note 1)................................................ 13,854 11,088 9,947
-------- -------- --------
Property, plant and equipment, at cost (Notes 1 and 5)
Land.................................................................................... 4,062 4,115 4,117
Buildings............................................................................... 34,716 34,875 34,734
Machinery and equipment................................................................. 59,497 57,028 54,833
-------- -------- --------
98,275 96,018 93,684
Less -- accumulated depreciation...................................................... 57,085 55,044 50,482
-------- -------- --------
41,190 40,974 43,202
-------- -------- --------
Total assets.............................................................................. $213,127 $204,210 $195,205
========= ========= =========
Liabilities and stockholders' equity
Current liabilities
Accounts payable........................................................................ $ 61,282 $ 49,982 $ 51,597
Accrued payroll and employee benefits (Note 6).......................................... 9,843 5,982 4,084
Accrued liabilities..................................................................... 4,861 3,512 3,656
Current and deferred income taxes (Notes 1 and 3)....................................... 2,321 1,199 1,801
Current portion of long-term debt (Note 4).............................................. 3,831 5,435 5,593
-------- -------- --------
Total current liabilities......................................................... 82,138 66,110 66,731
-------- -------- --------
Long-term debt, less current portion (Note 4)............................................. 38,531 58,024 52,993
-------- -------- --------
Deferred income taxes (Notes 1 and 3)..................................................... 7,772 8,067 7,837
-------- -------- --------
Postretirement benefit obligation (Note 6)................................................ 2,525 2,466 2,164
-------- -------- --------
Stockholders' equity (Note 7)
Common stock, without par value -- authorized 15,000,000 shares; issued and outstanding
11,079,645 in 1994, 10,917,474 in 1993, and 10,914,063 in 1992........................ 24,114 21,938 21,813
Earnings reinvested in the business..................................................... 61,178 49,409 45,421
Other................................................................................... 244 168 101
Treasury stock, at cost (596,441 shares in 1994, 494,220 shares in 1993, and 482,331
shares in 1992)....................................................................... (3,375) (1,972) (1,855)
-------- -------- --------
Total stockholders' equity........................................................ 82,161 69,543 65,480
-------- -------- --------
Total liabilities and stockholders' equity................................................ $213,127 $204,210 $195,205
========= ========= =========
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
- --------------------------------------------------------------------------------
11
<PAGE>
A.M. Castle & Co. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income............................................................................... $ 15,410 $ 6,899 $ 3,614
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation........................................................................... 4,603 4,784 4,865
Cumulative effect of accounting changes (Notes 3 and 6)................................ -- -- (222)
Gain on sale of facilities/equipment................................................... (106) (18) (20)
Increase (decrease) in deferred taxes.................................................. (295) 230 906
(Increase) in prepaid expenses and other assets........................................ (2,766) (1,141) (134)
Vested portion of restricted stock awards.............................................. 68 -- --
Increase (decrease) in postretirement benefit obligation............................... 59 302 (27)
-------- ------- --------
Cash provided from operating activities before changes in current accounts................. 16,973 11,056 8,982
-------- ------- --------
(Increase) decrease in current assets/liabilities
Accounts receivable.................................................................... (9,844) (4,053) (431)
Inventories............................................................................ 3,357 (5,204) (8,076)
Accounts payable....................................................................... 11,300 (1,615) 14,223
Accrued payroll and employee benefits.................................................. 3,861 1,898 (58)
Accrued liabilities.................................................................... 1,349 (144) (59)
Current deferred income taxes.......................................................... 1,122 (602) 34
-------- ------- --------
Net (increase) decrease in current assets/liabilities...................................... 11,145 (9,720) 5,633
-------- ------- --------
Net cash provided from operating activities................................................ 28,118 1,336 14,615
-------- ------- --------
Cash flows from investing activities
Proceeds from sales of facilities/equipment (Note 5)..................................... 3,213 2,083 1,162
Capital expenditures..................................................................... (7,926) (4,621) (1,794)
-------- ------- --------
Net cash provided from (used by) investing activities...................................... (4,713) (2,538) (632)
-------- ------- --------
Cash flows from financing activities
Net borrowing under line-of-credit agreements............................................ -- -- (200)
Proceeds from issuance of long-term debt................................................. 4,409 10,066 --
Repayments of long-term debt............................................................. (25,506) (5,193) (10,617)
Dividends paid........................................................................... (3,641) (2,911) (2,910)
Net proceeds from issuance of stock...................................................... 705 8 --
Other.................................................................................... 76 67 106
-------- ------- --------
Net cash provided from (used by) financing activities...................................... (23,957) 2,037 (13,621)
-------- ------- --------
Net increase (decrease) in cash............................................................ (552) 835 362
Cash -- beginning of year.................................................................. 1,528 693 331
-------- ------- --------
Cash -- end of year........................................................................ $ 976 $ 1,528 $ 693
========= ======== =========
Supplemental disclosures of cash flow information
Cash paid during the year for --
Interest............................................................................... $ 3,435 $ 4,106 $ 4,524
-------- ------- --------
Income taxes........................................................................... $ 9,057 $ 5,084 $ 1,754
-------- ------- --------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanyi g notes to consolidated financial statements are an integral
part of these statements.
12
<PAGE>
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.
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. The
cost of these benefits are recognized in the financial statements during the
employee's active working career.
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 -- 11,033,356 in
1994, 10,915,472 in 1993 and 10,914,077 in 1992. The number of shares in 1993
and 1992 have been restated to reflect a 50% stock dividend in 1994.
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, 1994 of $691,000 is reflected on the consolidated balance sheet
under prepaid expense and other assets.
(2) Short-term debt
Short-term borrowing activity was as follows (in thousands):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum borrowed........................... $6,975 $9,475 $ 5,725
Average borrowed........................... 2,638 3,055 2,610
Average interest rate during the year...... 4.3% 3.4% 3.9%
- ---------------------------------------------------------------------------
</TABLE>
(3) Income taxes
Effective January 1, 1992, the Company adopted SFAS Statement No. 109,
"Accounting for Income Taxes". As permitted under the new rules, prior year's
financial statements were not restated.
The cumulative prior years' effect of adopting Statement 109 as of January
1, 1992, was to increase net income by $1,799,000, or $.17 per share. This
change in accounting principle had no 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 Federal and state deferred tax liabilities and assets as of
December 31, 1994, 1993 and 1992 are as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation............................. $ 5,119 $5,211 $ 5,213
Inventory, net........................... 3,991 1,675 2,287
Pension.................................. 2,617 2,644 2,251
Other, net............................... (101) 400 536
------- ------ -------
Net deferred liabilities............... 11,626 9,930 10,287
Deferred tax assets:
Postretirement benefits.................. 1,155 1,132 1,014
------- ------ -------
Net deferred tax liabilities........... $10,471 $8,798 $ 9,273
========= ======= =========
- --------------------------------------------------------------------------
</TABLE>
The components of the provision (benefit) for deferred Federal income tax,
before the cumulative effect of changes in accounting
13
<PAGE>
A.M. Castle & Co. and Subsidiaries
Notes To Consolidated Financial Statements (continued)
methods for the years ended December 31, 1994, 1993 and 1992, are as follows
(in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation................................. $ (4) $ (56) $(140)
Inventory, net............................... 2,013 (516) (318)
Pension...................................... 16 342 256
Other, net................................... (551) 89 69
------ ----- -----
$1,474 $(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>
- --------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax at statutory rates....... $8,853 $3,948 $2,069
State income taxes, net of Federal income
tax benefits............................... 1,223 603 352
Net operating loss carry-forward............ (296) 98 283
Other....................................... 104 63 (8)
------ ------ ------
$9,884 $4,712 $2,696
======= ======= =======
- --------------------------------------------------------------------------
</TABLE>
(4) Long-term debt
Long-term debt consisted of the following at December 31, 1994, 1993 and 1992
(in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Revolving credit agreement (a) (c)....... $20,076 $40,678 $30,235
9.3% insurance company term loan, due in
equal installments through 2000......... 9,990 11,660 13,330
Industrial development revenue bonds at
variable rates, due in varying amounts
through 2006 (b) (c).................... 8,800 6,342 8,122
11 1/2% insurance company term loan, due
in equal installments through 1995...... 1,500 3,000 4,500
Canadian bank term loan at variable
rates, due in equal installments through
1995, with a final payment in 1996...... 1,158 1,605 2,065
Other.................................... 838 174 334
------- ------- -------
Total.................................... 42,362 63,459 58,586
Less -- current portion.................. (3,831) (5,435) (5,593)
------- ------- -------
Total long-term portion.................. $38,531 $58,024 $52,993
========= ========= =========
- --------------------------------------------------------------------------
</TABLE>
The carrying value of long term debt does not differ materially from their
estimated fair value as of December 31, 1994.
(a) The Company has revolving credit agreements of $60 million domestically
and $6.1 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 Rates from
four participating banks. 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. 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 .25% is required on the unused
portion of the Canadian facility.
(b) The industrial revenue bonds are based on a variable rate demand bond
structure and are backed by a letter of credit. Interest rates are reset
monthly and, because of the letter of credit backing are based on high quality
municipal notes and bonds.
(c) The most restrictive provisions of the loan agreements require the Company
to maintain minimum earnings to fixed charge ratios. At December 31, 1994, the
Company was in compliance with all restrictive covenants.
(d) Aggregate annual principal payments required on the noncurrent portion of
long-term debt (including obligations under capital leases) are due as follows
<TABLE>
<CAPTION>
(in thousands):
- --------------------------------------------------------------------------
<S> <C> <C> <C>
1996 $2,725 1997 $1,936 1998 $2,050 1999 $1,996
- --------------------------------------------------------------------------
</TABLE>
Total net book value of assets collateralized under financing arrangements
approximated $2.2 million at December 31, 1994.
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 1994, 1993 and 1992.
(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 -- Obligations under capitalization of leases are not
significant.
(c) Operating leases -- Future minimum rental payments under operating leases
that have initial or remaining noncancelable lease
14
<PAGE>
A.M. Castle & Co. and Subsidiaries
Notes To Consolidated Financial Statements (continued)
terms in excess of one year as of December 31, 1994, are as follows (in
thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Year ending December 31,
- ------------------------------------------------------------------------
<S> <C>
1995.......................................................... $ 3,952
1996.......................................................... 3,661
1997.......................................................... 3,437
1998.......................................................... 2,258
1999.......................................................... 1,993
Later years................................................... 2,871
-------
Total minimum payments required................................ $18,172
=======
- ------------------------------------------------------------------------
</TABLE>
(d) Rental expense -- Total rental payments charged to expense were $7.4
million in 1994, $7.0 million in 1993 and $6.8 million in 1992.
(e) Sale and leaseback of assets -- During 1994, 1993 and 1992, the Company
sold and leased back equipment under operating leases with terms of five,
seven and eight years, respectively. The leases allow for a purchase option
after five years of $1,101,000 and after six years of $662,000 and $519,000,
respectively. Annual rentals are $482,000 for the 1994 lease transaction,
$342,000 for the 1993 lease transaction and $173,000 for the 1992 lease
transaction. The assets were sold at approximately net book value for proceeds
of $2,618,000, $2,063,000 and $1,154,000, 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 Company-sponsored
retirement plans. These retirement plans are defined benefit, noncontributory
plans. Benefits paid to retirees are based upon age at retirement, years of
credited service and average earnings.
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 1994, 1993 and 1992 were composed of the
following (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Normal service cost...................... $ 1,318 $ 1,188 $ 1,115
Interest cost on projected benefit
obligation.............................. 3,612 3,414 3,201
Actual return on plan assets............. (820) (4,203) (3,117)
Net amortization and deferral............ (4,145) (906) (1,822)
------- ------- -------
Net pension credit....................... $ (35) $ (507) $ (623)
========= ========= =========
- ----------------------------------------------------------------------------
</TABLE>
The status of the plans at December 31, 1994, 1993 and 1992, was as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of vested benefit
obligation.............................. $36,617 $38,125 $31,861
Plus -- Nonvested benefit obligation.... 2,945 3,703 2,108
------- ------- -------
Vested and nonvested accumulated benefit
obligation............................ 39,562 41,828 33,969
Plus -- Projected salary increases
benefit obligation.................... 4,816 5,380 5,046
------- ------- -------
Projected benefit obligation............ 44,378 47,208 39,015
Plan assets at fair market value......... 46,508 48,514 46,757
------- ------- -------
Plan assets in excess of projected
benefit obligation...................... 2,130 1,306 7,742
Items not yet recognized in earnings
Unrecognized net transitional assets.... (1,952) (3,084) (3,921)
Unrecognized net loss................... 4,791 6,336 926
Unrecognized prior-service cost......... 1,353 1,561 1,536
------- ------- -------
Pension prepaid recognized on the
consolidated balance sheets at December
31...................................... $ 6,322 $ 6,119 $ 6,283
======= ======= =======
- ----------------------------------------------------------------------------
</TABLE>
The assumptions used to measure the projected benefit obligations, future
salary increases, and to compute the expected long-term return on assets for
the Company's defined benefit pension plans are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate.................................... 8.75% 7.75% 9.00%
Projected annual salary increases................ 4.75 4.75 6.00
Expected long-term rate of return on plan
assets.......................................... 9.50 9.50 9.50
- -------------------------------------------------------------------------
</TABLE>
The Company has profit sharing plans for the benefit of salaried and other
eligible employees (including officers). The Company's profit sharing plan
includes features under Section 401(k) of the Internal Revenue Code. The plan
includes a provision whereby the Company partially matches employee
contributions up to a maximum of 6% of the employees' salary. The plan also
includes 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.
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.
15
<PAGE>
A.M. Castle & Co. and Subsidiaries
Notes To Consolidated Financial Statements (continued)
Amounts accrued and charged to income under each plan are included as part of
accrued payroll and employee benefits at each respective year end. The amounts
charged to income are summarized below (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Profit sharing and 401-K.......................... $2,224 $ 244 $227
======= ======= =====
Management incentive.............................. $2,678 $1,412 $679
======= ======= =====
- --------------------------------------------------------------------------
</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 $.15 per share. This change in
accounting principle had no significant effect on the current year's expense.
Net postretirement benefit cost for 1994, 1993 and 1992 includes the
following components (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost......................................... $128 $129 $147
Interest cost on accumulated postretirement benefit
obligation.......................................... 238 233 224
Amortization of unrecognized prior service cost...... 17 (26) --
Amortization of unrecognized net (gain) or loss...... (25) 8 --
---- ---- ----
Net periodic postretirement benefit cost............. $358 $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, 1994, 1993 and 1992 (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees................................... $1,354 $1,491 $ 589
Fully eligible active plan participants.... 149 214 374
Other active plan participants............. 1,524 1,560 1,792
------ ------ ------
3,027 3,265 2,755
Unrecognized prior service cost............ 238 264 --
Unrecognized net loss...................... (324) (647) (176)
------ ------ ------
Accrued postretirement benefit
obligation............................... $2,941 $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, 1994 by $211,000 with no significant effect on the
1994 postretirement benefit expense. The weighted average discount rate used in
determining the accumulated postretirement benefit obligation was 8.75% in 1994,
7.75% in 1993 and 9.0% in 1992.
(7) Common stock
On July 28, 1994, the Company declared a 50% stock dividend which was
accounted for as a 3-for-2 stock split and had no effect on common stock or
reinvested earnings. All per share amounts presented reflect the effect of the
50% stock dividend on a retroactive basis.
Changes in the common and treasury stock accounts during 1994, 1993 and
1992 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Common Stock Treasury Stock
-----------------------------------------
Shares
Issued Amount Shares Amount
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1991........... 11,396,394 $21,813 482,332 $1,855
Other...................... -- -- (1) --
---------- ------- ------- ------
December 31, 1992........... 11,396,394 21,813 482,331 1,855
Stock options exercised.... 15,300 125 11,709 115
Other...................... -- -- 180 2
---------- ------- ------- ------
December 31, 1993........... 11,411,694 21,938 494,220 1,972
Stock options exercised.... 252,962 2,108 102,344 1,404
Other...................... 11,430 68 (123) (1)
---------- ------- ------- ------
December 31, 1994........... 11,676,086 $24,114 596,441 $3,375
============ ========= ========= =======
- ---------------------------------------------------------------------------
</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 337,500 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. In 1994 11,858 shares were awarded
and compensation expense in the amount of $117,000 was recognized. No shares
were awarded under this plan in 1993 or 1992.
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
16
<PAGE>
A.M. Castle & Co. and Subsidiaries
Notes To Consolidated Financial Statements (continued)
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 525,000 shares of common stock for use
under the plan. A summary of plan transactions for 1994, 1993 and 1992 is as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Option Exercise
Shares Price
- --------------------------------------------------------------------------
<S> <C> <C>
December 31, 1992......................... 337,500 7.083 -- 8.833
Granted.................................. 12,450 8.167 -- 8.250
Forfeitures.............................. (4,200) 7.833 -- 8.833
Exercised................................ (15,300) 7.083 -- 8.833
-------- ---------------
December 31, 1993......................... 330,450 7.833 -- 8.833
Granted.................................. 168,750 15.083
Forfeitures.............................. -- --
Exercised................................ (252,962) 7.833 -- 8.833
-------- ---------------
December 31, 1994......................... 246,238 7.833 -- 15.083
========== ===============
- --------------------------------------------------------------------------
</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 $5.2 million at December 31, 1994. Also, the Company
has $3.7 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 1994 and 1993 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>
1994 quarters
Net sales..................... $133,848 $131,821 $132,187 $138,712
Gross profit.................. 36,347 34,898 35,899 38,038
Net income.................... $ 3,642 $ 3,353 $ 3,782 $ 4,633
Net income per share.......... $ .33 $ .30 $ .34 $ .42
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.......... $ .16 $ .15 $ .13 $ .19
- --------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
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, 1994, 1993
and 1992, 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, 1994, 1993 and 1992, 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 LLP
Chicago, Illinois,
February 6, 1995.
17
<PAGE>
A.M. Castle & Co. and Subsidiaries
Consolidated Eleven-Year Financial and
Operating Summary
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except employee and per share data-Note 7) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Supplemental Tons sold (in thousands)............................................ 338 308 249
Summary of Net sales........................................................... $536.6 $474.1 $423.9
Earnings Cost of sales....................................................... 391.4 351.8 313.7
------ ------ ------
Gross profit........................................................ 145.2 122.3 110.2
Operating expenses.................................................. 112.1 102.1 94.9
Depreciation........................................................ 4.6 4.8 4.9
------ ------ ------
Profit from operations.............................................. 28.5 15.4 10.4
Interest expense, net............................................... 3.2 3.8 4.3
------ ------ ------
Income before income taxes.......................................... 25.3 11.6 6.1
Income taxes........................................................ 9.9 4.7 2.7
------ ------ ------
Net income.......................................................... 15.4 6.9 3.41
Cash dividends...................................................... 3.6 2.9 2.9
------ ------ ------
Reinvested earnings................................................. $ 11.8 $ 4.0 $ 0.5
======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------------------
Share Data Number of shares outstanding at year-end (in thousands)............. 11,080 10,917 10,914
(Note 7) Net income per share................................................ $ 1.40 $ .63 $ .31
Cash dividends per share............................................ $ .33 $ .27 $ .27
Book value per share................................................ $ 7.42 $ 6.37 $ 6.00
- ---------------------------------------------------------------------------------------------------------------------------------
Financial Working capital..................................................... $ 76.0 $ 86.1 $ 75.3
Position Property, plant and equipment, net.................................. $ 41.2 $ 41.0 $ 43.2
at Year-End Total assets........................................................ $213.1 $204.2 $195.2
Short-term debt..................................................... $ -- $ -- $ --
Long-term debt...................................................... $ 38.5 $ 58.0 $ 53.0
Stockholders' equity................................................ $ 82.2 $ 69.5 $ 65.5
- ---------------------------------------------------------------------------------------------------------------------------------
Financial Return on sales..................................................... 2.9% 1.5% 0.8%
Ratios Asset turnover...................................................... 2.5 2.3 2.2
Return on assets.................................................... 7.2% 3.4% 1.7%
Leverage factor..................................................... 3.1 3.1 3.0
Return on opening stockholders' equity.............................. 22.2% 10.5% 5.2%
Percent earnings reinvested......................................... 76.6% 58.0% 14.7%
Percent increase (decrease) in equity............................... 18.3% 6.1% 1.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Other Data Additions to property, plant and equipment.......................... $ 7.9 $ 4.6 $ 1.8
Stockholders at year-end............................................ 1,639 1,625 1,670
Employees at year-end............................................... 1,185 1,204 1,196
Per employee data (in thousands)
Net sales........................................................... $452.8 $393.8 $354.4
Gross profit........................................................ $122.5 $101.6 $ 92.1
Operating expenses, including depreciation.......................... $ 98.5 $ 88.8 $ 83.4
Profit from operations.............................................. $ 24.0 $ 12.8 $ 8.7
- ---------------------------------------------------------------------------------------------------------------------------------
</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.
- ---------------
1992 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).
- ------------------------------------------------------------------------------
18
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1990 1989 1988 1987 1986 1985 1984
- -----------------------------------------------------------------------------------
234 248 255 277 258 231 211 230
$436.4 $478.9 $501.1 $499.3 $376.1 $322.9 $307.2 $328.4
331.1 363.6 380.6 375.1 282.1 240.6 224.0 237.5
- ------ ------ ------ ------ ------ ------ ------ ------
105.3 115.3 120.5 124.2 94.0 82.3 83.2 90.9
92.8 97.5 96.7 92.6 74.9 74.6 70.1 71.0
5.3 5.2 4.4 3.9 3.7 3.6 3.3 3.2
- ------ ------ ------ ------ ------ ------ ------ ------
7.2 12.6 19.4 27.7 15.4 4.1 9.8 16.7
6.8 6.8 5.1 5.1 3.3 4.1 3.1 2.9
- ------ ------ ------ ------ ------ ------ ------ ------
.4 5.8 14.3 22.6 12.1 0.0 6.7 13.8
.2 2.7 5.6 8.9 5.5 (0.1) 3.0 6.7
- ------ ------ ------ ------ ------ ------ ------ ------
.2 3.1 8.7 13.7 6.6 0.1 3.7 7.1
3.9 4.9 4.7 3.5 3.0 3.0 2.8 2.0
- ------ ------ ------ ------ ------ ------ ------ ------
$ (3.7) $ (1.8) $ 4.0 $ 10.2 $ 3.6 $ (2.9) $ 0.9 $ 5.1
======= ======= ======= ======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------
10,914 10,893 10,830 10,785 10,705 10,660 10,632 10,566
$ .02 $ .29 $ .80 $ 1.27 $ .62 $ .01 $ .35 $ .67
$ .36 $ .45 $ .43 $ .32 $ .28 $ .29 $ .26 $ .19
$ 5.93 $ 6.27 $ 6.44 $ 6.07 $ 5.17 $ 4.83 $ 5.10 $ 5.02
- ------------------------------------------------------------------------------------
$ 79.7 $ 89.9 $ 75.8 $ 89.0 $ 47.9 $ 47.5 $ 50.5 $ 43.5
$ 47.4 $ 54.8 $ 45.3 $ 39.4 $ 35.7 $ 38.4 $ 35.8 $ 36.7
$190.4 $226.6 $202.3 $211.9 $158.7 $145.6 $138.3 $135.0
$ .2 $ 11.9 $ .5 $ -- $ 6.0 $ 14.0 $ 2.0 $ 3.0
$ 63.3 $ 76.7 $ 51.0 $ 61.0 $ 27.8 $ 30.8 $ 30.2 $ 24.4
$ 64.7 $ 68.3 $ 69.7 $ 65.5 $ 55.3 $ 51.5 $ 54.2 $ 53.1
- ------------------------------------------------------------------------------------
0.1 % 0.7% 1.7% 2.7% 1.8% 0.1% 1.2% 2.2%
2.3 2.1 2.5 2.4 2.3 2.2 2.2 2.4
0.1 % 1.4% 4.3% 6.5% 4.2% 0.1% 2.7% 5.3%
2.8 3.3 3.1 3.8 3.1 2.8 2.6 2.8
0.3 % 4.5% 13.2% 24.7% 12.9% 0.2% 7.0% 14.9%
-- % --% 46.3% 74.8% 54.0% --% 24.3% 71.8%
(5.3)% (2.0)% 6.4% 18.5% 7.3% (5.0)% 2.1% 11.1%
- -------------------------------------------------------------------------------------
$ 3.3 $ 13.4 $ 10.4 $ 7.8 $ 2.6 $ 6.2 $ 3.1 $ 4.7
1,750 1,730 1,747 1,732 1,750 1,843 1,893 1,873
1,268 1,379 1,371 1,373 1,232 1,227 1,258 1,356
$344.2 $347.3 $365.5 $363.7 $305.3 $263.2 $244.2 $242.2
$ 83.0 $ 83.6 $ 87.9 $ 90.5 $ 76.3 $ 67.0 $ 66.1 $ 67.0
$ 77.4 $ 74.5 $ 73.7 $ 70.3 $ 63.8 $ 63.7 $ 58.3 $ 54.7
$ 5.6 $ 9.1 $ 14.2 $ 20.2 $ 12.5 $ 3.3 $ 7.8 $ 12.3
- ------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
[Description of Graphics Omitted
from EDGAR Submission]
1. On the cover of the Annual Report and on the left side of the inside cover,
the left side of page 2 and center top of page 4-5 is a photograph of a
laser beam ending in a starburst on the left.
2. On page 1, there are three vertical bar charts on the bottom 1/2 of the
page. The first chart shows net sales of $424,000,000, $479,000,000 and
$536,000,000 for the years 1992, 1993 and 1994, respectively. The second
vertical bar shows net income of $3,000,000, $7,000,000 and $15,000,000 for
the years 1992, 1993 and 1994, respectively. The third bar chart shows
long term debt of $53,000,000, $58,000,000 and $38,000,000 for the years
1992, 1993 and 1994, respectively. The fourth bar chart shows net worth of
$65,000,000, $69,000,000 and $82,000,000 for the years 1992, 1993 and 1994,
respectively.
3. The photograph on the left side of page 2 depicts Michael Simpson, Chairman
of the Board, left and Richard G. Mork, President and Chief Executive
Officer, right, both standing and facing front.
4. On page 20, 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 1982 through 1994. The S&P Index
is shown by a dotted black line and inflation is shown by a solid black
line. The chart depicts inflation over a 15 year period running from
slightly under $200 to $200. The chart shows a steady upward course of the
S&P Index 500 rising from approximately $200 to somewhere in the
neighborhood of $750. 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 over $1,800.
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 slightly below $1,000,000
shows a rise in total dividends from 1982 to 1994, with a dip from 1984 to
1985, 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 and then rising to approximately $3,750,000 in 1994.
<PAGE>
EXHIBIT "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 trans-
acted, 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 descrip-
tion;
To furnish and provide services of every kind and nature as princi-
pal or agent (including, without limitation, the treating, coating
and processing of any materials, products or other personal proper-
ty) 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
<PAGE>
States or any foreign country, patent rights, licenses and privi-
leges, inventions, improvements and processes, copyrights, trade-
marks 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-
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 de-
scription with any person, firm, association, corporation, munici-
pality, 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 corpora-
tion 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 corpo-
ration 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;
<PAGE>
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 opera-
tions 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-
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 quali-
fications, 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 hereaf-
<PAGE>
ter 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 stockhold-
er, 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 stock-
holders 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.
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
<PAGE>
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 re-
quire 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 condi-
tions and for such consideration, which may be whole or in part
shares of stock in, and/or other securities of, any other corpora-
tion or corporations, as its Board of Directors shall deem expedi-
ent 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 con-
tract 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 transac-
tion, or in any way connected with such person or persons, firm or
association, provided that the interest in any such contract or transac-
tion 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
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
<PAGE>
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 corpo-
ration. 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 reserva-
tion.
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 Corpo-
ration and may not be taken by consent in writing of such stockholders.
No amendment shall change, repeal or make inoperative any of the provi-
sions 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>
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 stock-
holders entitled to notice thereof and to vote thereon or consent
thereto, or as of the date of any such vote or consent, or imme-
diately 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 direc-
tors 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 immedi-
ately 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
<PAGE>
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 associ-
ated with the retention of such experts.
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 extraor-
dinary business transaction.
C. Certain Definitions. As used in this Article Fourteenth,
the following terms shall have the following meanings, respective-
ly.
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 Corpora-
<PAGE>
tion 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 pursu-
ant 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 securi-
ties convertible into or exchangeable for voting securities)
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 Corpo-
ration 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 stockhold-
ers.
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
<PAGE>
information known to them, whether:
1. such interested person beneficially owns more than
5% of the outstanding shares of voting stock of the Corpora-
tion;
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 busi-
ness 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
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 Fif-
teenth 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
<PAGE>
benefit.
If the Delaware Corporation Law is hereafter amended to authorize the
further elimination or limitation of the personal liability of direc-
tors, 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 Corpo-
ration 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)
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<PAGE>
EXHIBIT "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
<PAGE>
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.
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
<PAGE>
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
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.
<PAGE>
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
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.
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
<PAGE>
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,
<PAGE>
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.
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
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.
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<PAGE>
EXHIBIT "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):
<PAGE>
COMPANY'S TOTAL RETURN ATTAINMENT PERCENTAGE
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>
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>
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>
EXHIBIT "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>
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>
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 Partic-
ipant. 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>
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>
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>
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 Partic-
ipant, 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>
(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>
(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>
EXHIBIT "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 1994, the Board and manage-
ment established the cut-in point for payment of management incentive at a rate
of return equivalent to eighty cents ($.80) per share. The maximum incentive
level would be reached at a rate of return after the equivalent to One Dollar
Sixty two Cents ($1.62) 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 partici-
pants will reach one hundred percent (100%) of incentive payout when the maximum
incentive level/rate of return is realized.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 976
<SECURITIES> 0
<RECEIVABLES> 59,492
<ALLOWANCES> (600)
<INVENTORY> 98,215
<CURRENT-ASSETS> 159,093
<PP&E> 99,275
<DEPRECIATION> (57,085)
<TOTAL-ASSETS> 213,127
<CURRENT-LIABILITIES> 82,138
<BONDS> 38,531
<COMMON> 24,114
0
0
<OTHER-SE> 59,047
<TOTAL-LIABILITY-AND-EQUITY> 213,127
<SALES> 536,568
<TOTAL-REVENUES> 536,568
<CGS> (391,386)
<TOTAL-COSTS> (116,328)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (345)
<INTEREST-EXPENSE> (3,215)
<INCOME-PRETAX> 25,294
<INCOME-TAX> (9,884)
<INCOME-CONTINUING> 15,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,410
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
</TABLE>
