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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 June 30, 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 - 14,006,267 shares as of June 30, 1996.
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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. . . 5 - 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 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . 8
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) June 30 Dec. 31 June 30
Assets 1996 1995 1995
Cash. . . . . . . . . . . . . . . . .$ 901 $ 667 $ 802
Accounts receivable, net. . . . . . . 77,681 63,408 69,915
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 102,294 97,766 104,257
Total current assets . . . . . .$180,876 $161,841 $174,974
Prepaid expenses and other assets . . 31,595 16,245 16,403
Fixed assets, net . . . . . . . . . . 55,837 44,463 44,153
Total assets . . . . . . . . . .$268,308 $222,549 $235,530
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 83,286 $ 60,969 $ 68,429
Accrued liabilities . . . . . . . . . 14,059 12,776 14,506
Income taxes payable. . . . . . . . . 843 958 3,372
Current portion of long-term debt . . 2,349 2,756 4,334
Total current liabilities. . . . 100,537 77,459 90,641
Long-term debt, less current portion. 39,709 28,015 39,637
Deferred income taxes . . . . . . . . 10,392 10,893 7,857
Post retirement benefit obligations . 3,120 2,819 2,607
Stockholders' equity. . . . . . . . . 114,550 103,363 94,788
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$268,308 $222,549 $235,530
SHARES OUTSTANDING. . . . . . . . . . 14,006 13,945* 13,905*
BOOK VALUE PER SHARE. . . . . . . . .$ 8.18 $ 7.41* $ 6.83*
WORKING CAPITAL . . . . . . . . . . .$ 80,339 $ 84,382 $ 84,333
WORKING CAPITAL PER SHARE . . . . . .$ 5.74 $ 6.05* $ 6.06*
*Restated to reflect a 25% stock dividend.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Six Months
Ended June 30,
Cash flows from operating activities: 1996 1995
Net income. . . . . . . . . . . . . . . . $ 14,647 $ 15,085
Depreciation. . . . . . . . . . . . . . . 2,554 2,233
Other . . . . . . . . . . . . . . . . . . (881) (2,047)
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 16,320 15,271
(Increase) decrease in working capital. . 4,918 (9,399)
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . 21,238 5,872
Cash flows from investing activities:
Investments and acquisitions. . . . . . . (16,897) -0-
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . (11,330) (5,196)
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (28,227) (5,196)
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Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . 10 682 1,609
Dividends paid. . . . . . . . . . . . . . ( 3,775) ( 2,664)
Other . . . . . . . . . . . . . . . . . . 316 205
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . 7,223 ( 850)
Net increase (decrease) in cash . . . . . . 234 ( 174)
Cash - beginning of year. . . . . . . . . 667 976
Cash - end of period. . . . . . . . . . . $ 901 $ 802
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 1,358 $ 1,563
Income taxes . . . . . . . . . . . . . $ 10,253 $ 8,700
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1996 1995 1996 1995
Net sales . . . . . . . . $174,797 $163,081 $349,844 $332,137
Cost of material sold . . 125,475 118,297 251,517 240,054
Gross profit on sales . 49,322 44,784 98,327 92,083
Operating expenses. . . . 35,571 31,714 69,802 63,539
Depreciation expense. . . 1,319 1,141 2,554 2,233
Interest expense, net . . 915 643 1,688 1,390
Total . . . . . . . . . 37,805 33,498 74,044 67,162
Income before taxes . . . 11,517 11,286 24,283 24,921
Income Taxes:
Federal . . . . . . . . 3,629 3,595 7,733 7,931
State . . . . . . . . . 863 852 1,903 1,905
4,492 4,447 9,636 9,836
Net income. . . . . . . . 7,025 6,839 14,647 15,085
Net income per share. . . $ .50 $ .49 $ 1.05 $ 1.09
Financial Ratios:
Return on sales . . . . 4.02% 4.19% 4.19% 4.54%
Asset turnover. . . . . 2.61 2.77 2.61 2.82
Return on assets. . . . 10.47% 11.61% 10.92% 12.81%
Leverage factor . . . . 2.60 2.87 2.60 2.87
Return on opening
stockholders' equity . 27.19% 33.30% 28.34% 36.72%
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Other Data:
Cash dividends paid . . $2,101 $1,333 $ 3,775 $ 2,664
Dividends per share . . .15 .10* .27 .19*
Average number of
shares outstanding . . 13,999 13,870* 13,983 13,861*
Tons sold 82,463 89,573 170,626 184,474
*Restated to reflect a 25% stock dividend.
Inventory determination under the LIFO method can only be made at the
end of each fiscal year based on the inventory levels and costs at that
time. Accordingly, interim LIFO determinations, including those at June
30, 1996 and June 30, 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 $62.0
million, $66.3 million, and $65.7 million at June 30, 1996, December 31,
1995 and June 30, 1995 respectively. Taxes on income would become
payable on any realization of this excess from reductions in the level
of inventories.
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.
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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 April 25th, 1996, the Company declared a 25% dividend,
which was effected as a 5 for 4 split. The additional shares were
distributed May 24, 1996 to shareholders of record May 10, 1996.
All per share amounts presented have been restated to reflect the
effect of the 25% stock dividend.
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.
On April 1, 1996, the Company acquired Cutter Precision Metals,
Inc., a Washington based metals distributor. The acquisition has
been accounted for as a purchase and accordingly, the results of
operations are included in the Company's consolidated financial
statements as of the acquisition date. Pro-forma results are not
presented as the amounts do not significantly differ from
historical results.
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 has been
accounted for using the equity method and the Company's share of
the operating results of the joint venture has been 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 1996 continue to be very strong. The $7.0
million ($.50 per share) earned for the three month period ended
June 30th, 1996 was the best second quarter in the Company's
history. Earnings thru the first six months of $14.6 million
($1.05 per share) were slightly below last year's record earnings
of $15.1 million ($1.09 per share) to the comparable six month
period. Sales growth and continued improvements in operating
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margins were key factors in the Company's strong earnings
performance.
Despite a decrease in physical volume, sales for the quarter ended
June 30th rose to a record $174.8 million, a 7.2% increase over the
second quarter of 1995's sales of $163.1 million. For the first
half of 1996, sales increased by 5.3% to a record $349.8 million
compared with $332.1 million during the same period in 1995. Sales
unit volume, expressed in tons sold, decreased by 7.9% over last
years second quarter and by 7.5% over the first six months of last
year. The higher sales dollars were primarily due to the
acquisitions of Total Plastics, Inc. and Cutter Precision Metals,
Inc. along with changes in sales mix.
Gross margin percentage increased to 28.2% as compared to 27.5% for
the second quarter of last year. For the first six months of 1996,
gross margin percentage was 28.1% as compared to 27.7% for the
first six months of 1995. Changes in sales mix had a favorable
impact on margin percentage over the prior year's comparable
period. In terms of dollars, total gross profit increased by $4.5
million over the second quarter of last year and by $6.2 million
over the first six months of 1995. Higher gross profit from
changes in sales mix along with gross profit contributions from
Total Plastics, Inc. and Cutter Precision Metals, Inc. offset the
decrease in physical volume from 1995.
Second quarter operating expenses were up by approximately $3.9
million (12.2%) over the comparable period last year. As a
percentage of sales, second quarter 1996 operating expenses were
20.3% of sales as compared to 19.4% for the second quarter of 1995.
The acquisitions of Total Plastics, Inc. and Cutter Precision
Metals, Inc. accounted for the entire increase. Year-to-date,
operating expenses were 19.9% for the first six months of 1996 as
compared to 19.1% for the first six months of 1995. Again the
operating expenses of the acquired companies accounted for
virtually the entire increase. Excluding expenses from the
acquired companies, minor expense increases were seen in payroll,
equipment rentals, property taxes, and utilities. Increases in
these areas occurred primarily in Company locations with expanded
processing operations.
Depreciation expense increased by $0.18 million over the second
quarter of 1995 level primarily due to the additional depreciation
expense associated with the two acquired companies, Total Plastics,
Inc. and Cutter Precision Metals, Inc. Through June 30, 1996
depreciation expense rose by $0.32 million.
Interest expense increased by $0.27 million as compared to the
second quarter of 1995 primarily due to financing requirements for
the Company's recent acquisitions. Through six months interest
expense was up by $0.30 million.
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Liquidity and Capital Resources _______________________________
Accounts receivables increased by $7.8 million while net inventory
has decreased by $2.0 million as compared to June 30, 1995. The
receivable increase is due to the incremental sales contributed by
the Company's two acquisitions, Total Plastics, Inc. and Cutter
Precision Metals, Inc. The inventory decrease reflects the
Company's continuing focus on inventory management. Working
capital at June 30, 1996 was $80.4 million as compared to $84.3
million at June 30, 1995, a decrease of $4.0 million. Total bank
and long term borrowing as of June 30, 1996 decreased by $1.9
million, as compared to the balance at June 30, 1995. As a result
of the strong earnings performance, net worth has increased by
$19.8 million (20.8%) from June 30, 1995.
The Company has unused committed and uncommitted lines of bank
credit of $170.5 million as of June 30, 1996, as compared to $129.8
million at June 30, 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) The Annual Meeting of Stockholders of the Registrant was
held on Thursday, April 25, 1996 at 10:00 AM local time
at 3400 North Wolf Road, Franklin Park, Illinois.
(b) The twelve (12) management nominees were elected to the
Board of Directors, and reference is hereby made to the
Proxy Statement and Notice of Annual Meeting filed
pursuant to Rule 14(a)-6 of the Securities and Exchange
Commission.
(c) The Stockholders at the Annual Meeting ratified the
adoption of the 1996 Restricted Stock and Stock Option
Plan which authorized the issuance of up to 750,000
shares of common stock for use under the plan. The vote
of the Stockholders was 6,039,228 for ratification,
2,700,200 against ratification and 64,956 abstained.
(d) The Stockholders at the Annual Meeting adopted an
amendment to the Registrant's Certificate of
Incorporation increasing the number of shares of common
stock, no par value, which the Registrant is authorized
to issue to 30,000,000 shares. Reference is hereby made
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to the Proxy Statement and Notice of Annual Meeting filed
pursuant to Rule 14(a)-6 of the Securities and Exchange
Commission for details of the amendment. The vote of the
Stockholders on the amendment was 8,983,965 for adoption,
506,516 against adoption and 21,602 abstained.
Shareholders also approved the appointment of Arthur
Andersen and Co. as independent public accountants for
the year 1996.
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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