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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995
Commission File Number 1-5415
A. M. Castle & Co.
(Exact name of registrant as specified in its charter.)
Delaware 36-0879160
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3400 North Wolf Road, Franklin Park, Illinois 60131
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone, including area code: 708/455-7111
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock No Par Value - 11,155,269 shares as of October 31, 1995.
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A. M. CASTLE & CO.
Part I. FINANCIAL INFORMATION
Page
Number
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . 3
Condensed Balance Sheets . . . . . . . . . . 3
Comparative Statements of Cash Flows . . . . 3
Comparative Statements of Income . . . . . . 4
Notes to Condensed Financial Statements. . . 6
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations . . . . 6 - 8
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 8
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A. M. CASTLE & CO.
CONDENSED BALANCE SHEETS
(Dollars in thousands except per share data)
(unaudited) Sept 30 Dec. 31 Sept 30
Assets 1995 1994 1994
Cash. . . . . . . . . . . . . . . . .$ 854 $ 976 $ 4,485
Accounts receivable, net. . . . . . . 68,045 58,892 56,168
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 109,150 98,215 97,783
Total current assets . . . . . .$178,049 $158,083 $158,436
Prepaid expenses and other assets . . 16,279 13,854 11,712
Fixed assets, net . . . . . . . . . . 43,868 41,190 42,007
Total assets . . . . . . . . . .$238,196 $213,127 $212,155
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 59,959 $ 61,282 $ 63,694
Accrued liabilities . . . . . . . . . 15,649 14,704 12,582
Income taxes payable. . . . . . . . . 2,304 2,321 1,170
Current portion of long-term debt . . 2,971 3,831 3,944
Total current liabilities. . . . 80,883 82,138 81,390
Long-term debt, less current portion. 47,163 38,531 41,801
Deferred income taxes . . . . . . . . 8,746 7,772 7,988
Post retirement benefit obligations . 2,747 2,525 2,533
Stockholders' equity. . . . . . . . . 98,657 82,161 78,443
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$238,196 $213,127 $212,155
SHARES OUTSTANDING. . . . . . . . . . 11,149 11,079 11,072
BOOK VALUE PER SHARE. . . . . . . . . $ 8.85 $ 7.42 $ 7.08
WORKING CAPITAL . . . . . . . . . . .$ 97,166 $ 75,945 $ 77,046
WORKING CAPITAL PER SHARE . . . . . .$ 8.72 $ 6.85 $ 6.96
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Nine Months
Ended Sept. 30,
Cash flows from operating activities: 1995 1994
Net income. . . . . . . . . . . . . . . . $ 20,478 $ 10,777
Depreciation. . . . . . . . . . . . . . . 3,316 3,527
Other . . . . . . . . . . . . . . . . . . (561) 259
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 23,233 14,563
(Increase) decrease in working capital. . (21,150) 11,607
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . 2,083 26,170
Cash flows from investing activities:
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . (5,994) (3,621)
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (5,994) (3,621)
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Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . 7,772 (17,714)
Dividends paid. . . . . . . . . . . . . . (4,333) (2,644)
Other . . . . . . . . . . . . . . . . . . 350 766
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . 3,789 (19,592)
Net increase (decrease) in cash . . . . . . (122) 2,957
Cash - beginning of year. . . . . . . . . 976 1,528
Cash - end of period. . . . . . . . . . . $ 854 $ 4,485
Supplemental disclosure on cash flow information:
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 2,540 $ 2,977
Income taxes . . . . . . . . . . . . . $ 12,467 $ 7,057
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three For the Nine
Months Ended Months Ended
Sept. 30, Sept. 30,
1995 1994 1995 1994
Net sales . . . . . . . . $149,023 $132,187 $481,160 $397,856
Cost of material sold . . 108,297 96,288 348,351 290,712
Gross profit on sales . 40,726 35,899 132,809 107,144
Operating expenses. . . . 29,877 27,662 93,416 83,363
Depreciation expense. . . 1,083 1,152 3,316 3,527
Interest expense, net . . 785 804 2,175 2,528
Total . . . . . . . . . 31,745 29,618 98,907 89,418
Income before taxes . . . 8,981 6,281 33,902 17,726
Income Taxes:
Federal . . . . . . . . 2,894 2,021 10,825 5,618
State . . . . . . . . . 694 478 2,599 1,331
3,588 2,499 13,424 6,949
Net income. . . . . . . . 5,393 3,782 20,478 10,777
Net income per share. . . $ .48 $ .34 $ 1.84 $ .98
Financial Ratios:
Return on sales . . . . 3.62% 2.87% 4.26% 2.71%
Asset turnover. . . . . 2.50 2.49 2.69 2.50
Return on assets. . . . 9.06% 7.13% 11.46% 6.78%
Leverage factor . . . . 2.90 3.05 2.90 3.05
Return on opening
stockholders' equity . 26.26% 21.76% 33.23% 20.67%
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Other Data:
Cash dividends paid . . $ 1,669 $ 885 $ 4,333 $ 2,644
Dividends per share . . .15 .08 .39 .24
Average number of shares
outstanding. . . . . . 11,132 11,066 11,103 11,018
Tons sold . . . . . . . 80,263 82,932 264,737 253,880
Inventory determination under the LIFO method can only be made at the
end of each fiscal year based on the inventory levels and costs at that
time. Accordingly, interim LIFO determinations, including those at
September 30, 1995, and September 30, 1994, must necessarily be based on
management's estimates of expected year end inventory levels and costs.
Since future estimates of inventory levels and costs are subject to
certain forces beyond the control of management, interim financial
results are subject to fiscal year end LIFO inventory valuations.
Current replacement cost of inventories exceeds book value by $67.1
million, $51.7 million, and $49.9 million at September 30, 1995,
December 31, 1994 and September 30, 1994 respectively. Taxes on income
would become payable on any realization of this excess from reductions
in the level of inventories.
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A. M. CASTLE & CO.
Notes to Condensed Financial Statements
1. Condensed Financial Statements
The condensed financial statements included herein are unaudited,
except for the balance sheet at December 31, 1994, which is
condensed from the audited financial statements at that date. The
Company believes that the disclosures are adequate to make the
information not misleading; however, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. In the
opinion of management, the unaudited statements, included herein,
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position,
the cash flows, and the results of operations for the periods then
ended. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form
10-K. The 1995 interim results reported herein may not necessarily
be indicative of the results of operations for the full year 1995.
2. Common Stock and Per Share Information
Net income per share computations are based on the weighted average
number of shares of common stock outstanding during the respective
periods. On July 28, 1994, the Company declared a 50% stock
dividend, which was effected as a 3 for 2 stock split. The
additional shares were distributed August 28, 1994 to shareholders
of record August 12, 1994. All per share amounts presented have
been restated to reflect the effect of the 50% stock dividend.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations _____________________
Operating results for 1995 continue to be sharply increased over
1994. Earnings for the three and nine month periods ended
September 30th were new records for the third quarter and nine
month's earnings. Higher prices and continued improvements in
operating margins were key factors in the Company's improved
earnings performance.
Third quarter sales totaled $149.0 million, a 12.7% increase over
third quarter 1994 sales of $132.2 million. Through nine months,
1995 sales totaled $481.2 million, an increase of 21.2% over the
$397.9 million recorded for the first nine months of 1994. Sales
unit volume, expressed in tons sold, decreased by 3.2% compared
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to the third quarter 1994, but increased by 4.3% over the first
nine months of last year. Favorable pricing and sales mix caused
the sale increase in dollars to outpace the increase in tons sold.
The Company's margin improvement program has continued to produce
favorable results, with the third quarter gross margin percentage
increasing to 27.3% as compared to 27.2% for the third quarter last
year. For the first nine months of 1995, gross margin percentage
was 27.6% as compared to 26.9% for the first nine months of 1994.
In terms of dollars, total gross profit increased by $4.8 million
over the third quarter of last year and by $25.7 million over the
first nine months of 1994. The $4.8 million third quarter increase
consisted of an increase of approximately $4.6 million due to
higher prices, a decrease of $0.5 million due to lower physical
volume, and an increase of approximately $0.7 million due to
changes in sales mix.
Third quarter operating expenses were up by approximately $2.2
million (8.0%) over the comparable period last year. As a
percentage of sales however, third quarter 1995 operating expenses
decreased to 20.0% from 20.9% for the third quarter of 1994. The
expense increases experienced during the quarter were primarily in
payroll and payroll related accounts (up approximately $1.0
million), and in processing-related expenses such as repairs and
maintenance, warehouse supplies and utilities. Other expense
increases were noted in trucking, communications and rents. Year-
to-date, operating expenses increased by $10.1 million (12.1%) over
the first nine months of 1994. Again, as a percentage of sales,
operating expenses decreased to 19.4% for the first nine months of
1995 as compared to 21.0% for the first nine months of 1994.
Depreciation expense has decreased from 1994 levels (6.0% for both
the quarter and year-to-date), primarily due to sales and
leasebacks of equipment purchased in 1994 and 1993, which have the
effect of reducing depreciation and interest expense and increasing
rental expense. Rental expense is included in operating expenses
which were discussed above.
Interest expense was relatively unchanged from the third quarter of
1994, and was down by $0.4 million for the first nine months due to
lower debt levels earlier in the year. Total funded borrowing
increased by $4.4 million as compared to the third quarter of 1994.
However, average 1995 funded borrowing for the first nine months of
1995 was approximately $10.0 million below 1994's level for the
first nine months. The debt reduction served to keep interest
expense down even though interest rates have increased due to
Federal Reserve rate hikes.
Liquidity and Capital Resources _______________________________
The Company continued to control working capital needs despite the
upward pressure generated from the continued increase in business
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activity. Accounts receivable increased by $11.9 million, and net
inventory has increased by $11.4 million as compared to September
30, 1994 due to the sharply increased sales volume. As compared to
year-end 1994, accounts receivable are up by $9.2 million and net
inventory increased by approximately $10.9 million. Total bank and
long term borrowing increased by $4.4 million as compared to the
balance at September 30, 1994 and increased by $7.7 million from
December 31, 1994. Finally, as a result of the strong earnings
performance, net worth has increased by $20.2 million (25.8%) from
September 30, 1994.
The Company has unused committed and uncommitted lines of bank
credit of $132.2 million as of September 30, 1995 as compared to
$117.0 million at September 30, 1994.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings other than ordinary
routine litigation incidental to the business of the
Registrant.
Item 6. Exhibits and Reports of Form 8-K
(a) None
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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SIGNATURES __________
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. M. Castle & Co.
(Registrant)
Date: August 11, 1995 By: /ss/ J. A. Podojil
J. A. Podojil
Treasurer/Controller
(Mr. Podojil is the Chief Accounting
Officer and has been authorized to
sign on behalf of the Registrant).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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