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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 March 31, 1996
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: 847/455-7111
None
(Former name, former address and former fiscal year, if changed since
last year)
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 - 11,189,159 shares as of March 31, 1996.
Page 2 of 9
A. M. CASTLE & CO.
Part I. FINANCIAL INFORMATION
Page
Number
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . 3
Condensed Balance Sheets . . . . . . . . . . 3
Comparative Statements of Cash Flows . . . . 3
Comparative Statements of Income . . . . . . 4
Notes to Condensed Financial Statements. . . 5 - 6
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations . . . . 7 - 8
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 9
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A. M. CASTLE & CO.
CONDENSED BALANCE SHEETS
(Dollars in thousands except per share data)
(unaudited) Mar. 31 Dec. 31 Mar. 31
Assets 1996 1995 1995
Cash. . . . . . . . . . . . . . . . .$ 649 $ 667 $ 3,419
Accounts receivable, net. . . . . . . 77,371 63,408 74,282
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 107,736 97,766 96,990
Total current assets . . . . . .$185,756 $161,841 $174,691
Prepaid expenses and other assets . . 23,263 16,245 12,957
Fixed assets, net . . . . . . . . . . 48,947 44,463 42,220
Total assets . . . . . . . . . .$257,966 $222,549 $229,868
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 72,744 $ 60,969 $ 73,403
Accrued liabilities . . . . . . . . . 11,498 12,776 11,983
Income taxes payable. . . . . . . . . 4,749 958 7,492
Current portion of long-term debt . . 3,174 2,756 3,768
Total current liabilities. . . . 92,165 77,459 96,646
Long-term debt, less current portion. 43,145 28,015 33,837
Deferred income taxes . . . . . . . . 10,190 10,893 7,696
Post retirement benefit obligations . 2,970 2,819 2,558
Stockholders' equity. . . . . . . . . 109,496 103,363 89,131
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$257,966 $222,549 $229,868
SHARES OUTSTANDING. . . . . . . . . . 11,189 11,156 11,081
BOOK VALUE PER SHARE. . . . . . . . .$ 9.79 $ 9.27 $ 8.04
WORKING CAPITAL . . . . . . . . . . .$ 93,591 $ 84,382 $ 78,045
WORKING CAPITAL PER SHARE . . . . . .$ 8.36 $ 7.56 $ 7.04
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Nine Months
Ended March 31,
Cash flows from operating activities: 1996 1995
Net income. . . . . . . . . . . . . . . . $ 7,622 $ 8,246
Depreciation. . . . . . . . . . . . . . . 1,235 1,092
Other . . . . . . . . . . . . . . . . . . (669) 1,005
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 8,188 10,343
(Increase) decrease in working capital. . ( 9,796) 256
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . ( 1,608) 10,599
Cash flows from investing activities:
Investments and acquisitions. . . . . . . ( 8,181) -
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . ( 4,214) (2,122)
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (12,395) (2,122)
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Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . 15 474 ( 4,757)
Dividends paid. . . . . . . . . . . . . . ( 1,674) ( 1,331)
Other . . . . . . . . . . . . . . . . . . 185 54
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . 13,985 ( 6,034)
Net increase (decrease) in cash . . . . . . (18) 2,443
Cash - beginning of year. . . . . . . . . 667 976
Cash - end of period. . . . . . . . . . . $ 649 $ 3,419
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 915 $ 1,082
Income taxes . . . . . . . . . . . . . $ 2,056 $ 294
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A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three Months Ended
(Unaudited) March 31,
1995 1994
Net sales . . . . . . . . $175,047 $169,056
Cost of material sold . . 126,042 121,757
Gross profit on sales . 49,005 47,299
Operating expenses. . . . 34,231 31,825
Depreciation expense. . . 1,235 1,092
Interest expense, net . . 773 747
Total . . . . . . . . . . 36,239 33,664
Income before taxes . . . 12,766 13,635
Income Taxes:
Federal . . . . . . . . 4,104 4,336
State . . . . . . . . . 1,040 1,053
5,144 5,389
Net income. . . . . . . . 7,622 8,246
Net income per share. . . $ 0.68 $ 0.74
Financial Ratios:
Return on sales . . . . 4.35% 4.88%
Asset turnover. . . . . 2.71 2.94
Return on assets. . . . 11.82% 14.35%
Leverage factor . . . . 2.50 2.80
Return on opening
stockholders' equity . 29.50% 40.15%
Other Data:
Cash dividends paid . . $ 1,674 $ 1,331
Dividends per share . . $ 0.15 $ 0.12
Average number of shares
outstanding. . . . . . 11,173 11,080
Tons sold . . . . . . . 88,163 94,901
Inventory determination under the LIFO method can only be made at the
end of each fiscal year based on the inventory levels and costs at that
time. Accordingly, interim LIFO determinations, including those at
March 31, 1996, and March 31, 1995, 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 $64.2
million, $66.3 million, and $58.1 million at March 31, 1996, December
31, 1995 and March 31, 1995 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, 1995, 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.
3. Acquisitions
On January 2, 1996, the Company acquired Total Plastics, Inc., a
Michigan based plastics distributor; and on March 11, 1996, Total
Plastics, Inc. purchased the net assets of Pontiac Plastics, a
Detroit area plastics distributor. Both acquisitions have been
accounted for by the purchase method of accounting and accordingly,
the purchase price has been allocated to assets acquired and
liabilities assumed. The results of operations of Total Plastics,
Inc. are included in the Company's financial statements as of the
acquisition date. Pro-forma results are not presented as the
amounts do not significantly differ from historical results.
4. Subsequent Events - Acquisitions
On April 1, 1996, the Company acquired Cutter Precision Metals,
Inc., a Washington based metals distributor. The acquisition will
be accounted for as a purchase and accordingly, the results of
operations will be included in the Company's consolidated financial
statements commencing April 1, 1996.
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On May 1, 1996, this Company along with Duferco Steel, Inc.,
through their joint venture Depot Metals, L.L.C., purchased a two-
thirds interest in Kreher Steel Co., Inc., a Chicago based metals
distributor. The Company's interest in the joint venture will be
accounted for using the equity method and the Company's share of
the operating results of the joint venture will be included in the
Company's consolidated financial statements commencing May 1, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations _____________________
Operating results for the first quarter of 1996 were off 8% from
the first quarter of 1995. The $7.6 million earned in the first
quarter of 1996 represents the second best three month period in
the Company's history. The record $8.2 million ($0.74 per share)
earned in the first quarter of 1995 was achieved as a result of a
significant upturn in prices and a strong level of sales volume,
producing a 128% earnings gain over the previous year's earnings.
First quarter sales totaled $175.0 million, a 3.5% increase over
the first quarter of 1995's sales of $169.1 million. Sales unit
volume, expressed in tons sold, decreased by 7.1% compared to the
same period last year. The higher sales dollars were primarily due
to two factors; the acquisition of Total Plastics, Inc. and a 4.6%
increase in average prices compared to the first quarter last year.
These factors helped offset the decrease in tonnage.
Gross margin percentage remained very strong at 28.0% for the first
quarter of 1996, identical to the margin percentage of 28.0% for
the first quarter last year. In terms of dollars, total gross
profit increased by $1.7 million over the first quarter of last
year. Higher prices and the addition of Total Plastics, Inc. were
primarily responsible for the incremental gross profit over last
year's first quarter.
First quarter operating expenses were up by approximately $2.4
million (7.6%) over the comparable period last year. As a
percentage of sales, first quarter 1996 operating expenses
increased to 19.6% from 18.8% for the first quarter of 1995. The
operating expense increases experienced during the quarter were
primarily due to the acquisition of Total Plastics, Inc. and the
aggressive expansion of value-added services from a year ago.
Excluding Total Plastics, Inc., minor expense increases were seen
in payroll, equipment rentals, communications and utilities.
Increases in these areas occurred primarily in Company locations
with expanded processing operations. The severe winter also had an
adverse impact on utilities expense.
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Depreciation expense increased by $0.14 million (13.2%) primarily
as a result of the acquisition of Total Plastics, Inc. and the
expansion of processing capabilities at H-A Industries (the
Company's value-added bar processing center in Hammond, Indiana).
Interest expense was relatively unchanged from the first quarter of
1995. Slightly higher average debt levels were offset by lower
average borrowing rates.
Liquidity and Capital Resources _______________________________
Accounts receivables increased by $3.1 million and net inventory
has increased by $10.7 million as compared to March 31, 1995. The
receivable increase is due to the addition of Total Plastics, Inc.
The inventory increase is primarily related to the expansion of
certain product initiatives which should provide incremental
revenues as the year develops. Total bank and long term borrowing
as of March 31, 1996 increased by $8.7 million as compared to the
balance of March 31, 1995. As a result of the strong earnings
performance, net worth has increased by $20.4 million (22.8%) from
March 31, 1995.
The Company has unused committed and uncommitted lines of bank
credit of $145.3 million as of March 31, 1996, as compared to
$137.0 million at March 31, 1995.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings other than ordinary
routine litigation incidental to the business of the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
(a) None
Item 6. Exhibits and Reports of Form 8-K
(a) None
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. M. Castle & Co.
(Registrant)
Date: May 10, 1996 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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