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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, 1997
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 - 14,019,878 shares as of March 31, 1997.
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A. M. CASTLE & CO.
Part I. FINANCIAL INFORMATION
Page
Number
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . 3
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . 3
Condensed Balance Sheets . . . . . . . . . . 3
Comparative Statements of Cash Flows . . . . 4
Comparative Statements of Income . . . . . . 4
Notes to Condensed Financial Statements. . . 5
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations . . . .7 - 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. . . . . . . 8
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A. M. CASTLE & CO.
CONDENSED BALANCE SHEETS
(Dollars in thousands except per share data)
(unaudited) March 31 Dec. 31 March 31
Assets 1997 1996 1996
Cash. . . . . . . . . . . . . . . . .$ 1,780 $ 1,805 $ 649
Accounts receivable, net. . . . . . . 80,158 68,791 77,371
Inventories (principally on last-in,
first-out basis. . . . . . . . . . . 108,758 93,315 107,736
Total current assets . . . . . .$190,696 $163,911 $185,756
Prepaid expenses and other assets . . 33,580 34,742 23,263
Fixed assets, net . . . . . . . . . . 64,774 62,717 48,947
Total assets . . . . . . . . . .$289,050 $261,370 $257,966
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . . .$ 88,776 $ 63,860 $ 72,744
Accrued liabilities . . . . . . . . . 13,124 15,105 11,498
Income taxes payable. . . . . . . . . 4,903 2,455 4,749
Current portion of long-term debt . . 2,095 2,482 3,174
Total current liabilities. . . . 108,898 83,902 92,165
Long-term debt, less current portion. 39,188 40,934 43,145
Deferred income taxes . . . . . . . . 11,743 11,427 10,190
Post retirement benefit obligations . 3,283 3,181 2,970
Stockholders' equity. . . . . . . . . 125,938 121,926 109,496
Total liabilities and stockholders'
equity . . . . . . . . . . . . .$289,050 $261,370 $257,966
SHARES OUTSTANDING. . . . . . . . . . 14,020 14,009 13,986*
BOOK VALUE PER SHARE. . . . . . . . .$ 8.98 $ 8.70 $ 7.83*
WORKING CAPITAL . . . . . . . . . . .$ 81,798 $ 80,009 $ 93,591
WORKING CAPITAL PER SHARE . . . . . .$ 5.83 $ 5.71 $ 6.69*
*Restated to reflect a 25% stock dividend.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Three Months
Ended March 31,
Cash flows from operating activities: 1997 1996
Net income. . . . . . . . . . . . . . . . $ 6,182 $ 7,622
Depreciation. . . . . . . . . . . . . . . 1,383 1,235
Other . . . . . . . . . . . . . . . . . . 1,722 (669)
Cash provided from operating
activities before working
capital changes. . . . . . . . . . . . 9,287 8,188
(Increase) decrease in working capital. . (1,108) (9,796)
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . 8,179 (1,608)
Cash flows from investing activities:
Investments and acquisitions. . . . . . . (766) (8,181)
Capital expenditures, net of sale
proceeds. . . . . . . . . . . . . . . . . (3,135) (4,214)
Net cash provided from (used by) investing
activities. . . . . . . . . . . . . . . . (3,901)(12,395)
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Cash flows from financing activities:
Long-term borrowings, net . . . . . . . . (2,133) 15,474
Dividends paid. . . . . . . . . . . . . . (2,103) ( 1,674)
Other . . . . . . . . . . . . . . . . . . (67) 185
Net cash provided from (used by) financing
activities. . . . . . . . . . . . . . . . (4,303)) 13,985
Net increase (decrease) in cash . . . . . . (25) (18)
Cash - beginning of year. . . . . . . . . 1,805 667
Cash - end of period. . . . . . . . . . . $ 1,780 $ 649
Cash paid (received) during the period:
Interest . . . . . . . . . . . . . . . $ 692 $ 915
Income taxes . . . . . . . . . . . . . $ 1,405 $ 2,056
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,
1997 1996
Net sales . . . . . . . . $177,326 $175,047
Cost of material sold . . 126,395 126,042
Gross profit on sales . 50,931 49,005
Operating expenses. . . . 38,559 34,231
Depreciation expense. . . 1,383 1,235
Interest expense, net . . 638 773
Total . . . . . . . . . . 40,580 36,239
Income before taxes . . . 10,351 12,766
Income Taxes:
Federal . . . . . . . . 3,345 4,104
State . . . . . . . . . 824 1,040
4,169 5,144
Net income. . . . . . . . 6,182 7,622
Net income per share. . . $ 0.44 $ 0.54*
Financial Ratios:
Return on sales . . . . 3.49% 4.35%
Asset turnover. . . . . 2.45 2.71
Return on assets. . . . 8.55% 11.82%
Leverage factor . . . . 2.37 2.50
Return on opening
stockholders' equity . 20.28% 29.50%
Other Data:
Cash dividends paid . . $ 2,103 $ 1,674
Dividends per share . . $ 0.15 $ 0.12*
Average number of shares
outstanding. . . . . . 14,012 13,966*
Tons sold . . . . . . . 92,509 88,163
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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, 1997, and March 31, 1996, 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 $57.1
million, $58.8 million, and $64.2 million at March 31, 1997, December
31, 1996 and March 31, 1996 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, 1996, 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 1997 interim results reported herein may not necessarily
be indicative of the results of operations for the full year 1996.
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.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Operating results for the first quarter of 1997 were off 19% as
compared to the first quarter of 1996. The Company earned $6.2
million ($0.44 per share) on slightly higher sales as compared to
the $7.6 million ($0.54 per share) earned in the year earlier
quarter. The higher sales and gross profit levels were offset by
expense increases resulting from a higher level of transactional
activity, along with a slight inflationary increase in costs,
without any relief from mill pricing.
First quarter sales totaled $177.3 million, a 1.3% increase over
the first quarter of 1996 sales of $175.0 million. The sales
increase was provided by the Company's prior year's acquisitions.
Excluding the effect of these acquisitions, sales for the quarter
were down by $7.0 million or 4%. The decrease in sales was due to
a 4.1% drop in average sales prices, along with a shift in sales
mix, from the relatively higher valued Advanced Materials products,
to the relatively lower valued Carbon and Alloy products, which
served to offset a 4.9% increase in tons sold.
Gross profit rose 3.9% to a record $50.9 million. The increase was
entirely attributable to gross profit contributions from the
Company's prior year's acquisitions. Looking at the Company's core
business, gross profit was down approximately $1.2 million (2.5%)
as a result of lower pricing at the mill level, and sales mix
changes, which were partially offset by the increase in physical
volume sold. Total gross margin percentage for the quarter was
28.7% as compared to 28.0% for the first quarter of 1996. The
Company's expansion of value added services and processing
capabilities continue to have a positive effect on gross margin
performance.
Total operating expenses were up by $4.3 million (12.6%) over the
comparable period last year. Excluding the expenses of the
acquired companies, Castle's operating expenses increased by
approximately $2.0 million (5.8%) over the first quarter of 1996.
Cost increases were experienced primarily in the plant area due to
increased transactional activity, along with a slight increase in
wages. Also contributing to the increase in operating expenses
were increased utility costs, due to higher natural gas prices and
cold weather, and costs associated with the opening of two new
facilities in Minneapolis and Charlotte.
Depreciation expense increased by $0.15 million (12.0%) over the
prior year's comparable period. Excluding depreciation expense
associated with the acquired companies, this expense increased by
$0.03 million (2.8%) over the first quarter of 1996.
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Net interest expense decreased by approximately $0.14 million
(17.5%) as compared to the first quarter of 1996. Lower average
borrowing levels were primarily responsible for the expense
decrease.
Liquidity and Capital Resources
Accounts receivable increased by $2.8 million, and net inventory
has increased by $1.0 million as compared to March 31, 1996. The
receivable increase is due to slightly higher sales and a slightly
higher collection period over the previous year. Net inventory has
remained relatively flat as compared to the prior year quarter and
has increased since December 31, 1996 in support of sales activity
and marketing initiatives. Total bank and long term borrowing as
of March 31, 1997 decreased by $5.0 million as compared to the
balance at March 31, 1996. Net worth has increased by $16.4
million (15%) over the prior year's quarter, reflecting the
continued strong earnings performance.
The Company has unused committed and uncommitted lines of bank
credit of $165.3 million as of March 31, 1997 vs. $145.3 million at
March 31, 1996.
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 9, 1997 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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<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 MAR-31-1997
<CASH> 1,653 0
<SECURITIES> 127 0
<RECEIVABLES> 80,968 0
<ALLOWANCES> (810) 0
<INVENTORY> 108,758 0
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<BONDS> 39,188 0
<COMMON> 26,799 0
0 0
0 0
<OTHER-SE> 99,139 0
<TOTAL-LIABILITY-AND-EQUITY> 289,050 0
<SALES> 177,326 177,326
<TOTAL-REVENUES> 177,326 177,326
<CGS> (126,395) (126,395)
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<LOSS-PROVISION> (84) 0
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<INCOME-PRETAX> 10,351 10,351
<INCOME-TAX> (4,169) (4,169)
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