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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000 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 Identification No.)
incorporation of organization)
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 practicable date.
Class Outstanding at March 31, 2000
Common Stock, No Par Value 14,048,070 shares
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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
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations . . . . . 6-7
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)
<TABLE>
<CAPTION>
March 31, Dec. 31, March 31,
ASSETS 2000 1999 1999
<S> <C> <C> <C>
Cash . . . . . . . . . . . . . . . . $ 2,568 $ 2,578 $ 4,399
Accounts receivable, net . . . . . . 101,197 83,352 89,793
Inventories (principally on last-in,
first-out basis) . . . . . . . . . . 175,471 169,618 205,793
Total current assets . . . . . . . $ 279,236 $255,548 $ 299,985
Prepaid expenses and other assets. . 63,469 60,716 58,370
Fixed assets, net. . . . . . . . . . 95,986 97,077 99,210
Total assets . . . . . . . . . . . $ 438,691 $413,341 $ 457,565
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . $ 112,370 $102,976 $ 103,048
Accrued liabilities. . . . . . . . . 15,678 17,230 15,980
Income taxes payable . . . . . . . . 7,098 4,876 5,370
Current portion of long-term debt . 3,577 3,915 3,702
Total current liabilities. . . . . $ 138,723 $128,997 $128,100
Long-term debt, less current portion 138,290 122,625 165,831
Deferred income taxes. . . . . . . . 16,692 16,356 15,919
Post retirement benefit obligations 2,179 3,552 3,767
Stockholders' equity . . . . . . . . 142,807 141,811 143,948
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . $ 438,691 $413,341 $ 457,565
SHARES OUTSTANDING . . . . . . . . . 14,048 14,046 14,044
BOOK VALUE PER SHARE . . . . . . . . $ 10.17 $ 10.10 $ 10.25
WORKING CAPITAL. . . . . . . . . . . $140,513 $126,551 $ 171,885
WORKING CAPITAL PER SHARE. . . . . . $ 10.00 $ 9.01 $ 12.24
DEBT TO CAPITAL. . . . . . . . . . . 49.8% 47.2% 54.1%
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) For the Three Months
Ended March 31,
<C> <S> <S>
Cash flows from operating activities: 2000 1999
Net income . . . . . . . . . . . . . . . . . . $ 3,766 $ 2,755
Depreciation . . . . . . . . . . . . . . . . . 2,438 2,408
Other. . . . . . . . . . . . . . . . . . . . . (3,661) 1,725
Cash provided from operating activities before
working capital changes. . . . . . . . . . . . 2,543 6,888
(Increase) decrease in working capital . . . . (14,031) 10,668
Net cash provided from (used by) operating
activities . . . . . . . . . . . . . . . . . . (11,488) 17,556
Cash flows from investing activities:
Capital expenditures, net of sales proceeds. . (1,079) (6,745)
Net cash provided from (used by) investing
activities . . . . . . . . . . . . . . . . . . (1,079) (6,745)
Cash flows from financing activities:
Long-term borrowings, net. . . . . . . . . . . 15,327 (6,545)
Dividends paid . . . . . . . . . . . . . . . . . (2,742) (2,738)
Other. . . . . . . . . . . . . . . . . . . . . (28) (83)
Net cash provided from (used by) financing
activities . . . . . . . . . . . . . . . . . . 12,557 (9,366)
Net increase (decrease) in cash. . . . . . . . . $ (10) $ 1,445
Cash - beginning of year . . . . . . . . . . . 2,578 2,954
Cash - end of period . . . . . . . . . . . . . $ 2,568 $ 4,399
Cash paid/(received) during period . . . . . . .
Interest. . . . . . . . . . . . . . . . . . . . $ 1,834 $ 2,999
Income taxes. . . . . . . . . . . . . . . . . . $ (253) $ (553)
</TABLE>
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<TABLE>
A. M. CASTLE & CO.
COMPARATIVE STATEMENTS OF INCOME
(Dollars in thousands, except tonnage and per share data)
For the Three Months Ended March 31,
<CAPTION>
(Unaudited) 2000 1999
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . $195,239 $183,460
Cost of material sold. . . . . . . . . . . . . . . 135,945 126,635
Gross profit on sales. . . . . . . . . . . . . . 59,294 56,825
Operating expenses . . . . . . . . . . . . . . . . 48,224 46,866
Depreciation and amortization expense. . . . . . . 2,438 2,408
Interest expense, net. . . . . . . . . . . . . . . 2,304 2,893
Income before taxes . . . . . . . . . . . . . . . 6,328 4,658
Income Taxes:
Federal. . . . . . . . . . . . . . . . . . . . . 2,052 1,560
State. . . . . . . . . . . . . . . . . . . . . . 510 343
2,562 1,903
Net income . . . . . . . . . . . . . . . . . . . . $ 3,766 $ 2,755
Net income per share . . . . . . . . . . . . . . . $ .27 $ .20
Diluted income per share . . . . . . . . . . . . . $ .27 $ .20
Financial Ratios:
Return on sales. . . . . . . . . . . . . . . . . 1.93% 1.50%
Asset turnover . . . . . . . . . . . . . . . . . 1.78 1.60
Return on assets . . . . . . . . . . . . . . . . 3.43% 2.41%
Leverage factor. . . . . . . . . . . . . . . . . 3.09 3.18
Return on opening stockholders' equity . . . . . 10.62% 7.65%
Other Data:
Cash dividends paid. . . . . . . . . . . . . . . $ 2,742 $ 2,738
Dividends per share. . . . . . . . . . . . . . . $ .195 $ .195
Average number of shares outstanding . . . . . . 14,048 14,044
</TABLE>
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, 2000,
and March 31, 1999, 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 $45.2 million
and $46.4 million at March 31, 2000 and March 31, 1999, 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, 1999, 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 2000 interim results reported herein may not
necessarily be indicative of the results of operations for the full year
2000.
2. Earnings Per Share
In accordance with SFAS No. 128 "Earnings per Share" below is a
reconciliation of the basic and diluted earnings per share calculations
for the periods reported (dollars and shares in thousands):
<TABLE>
<CAPTION>
First Quarter
<S> <C> <C>
2000 1999
Net Income $ 3,766 $ 2,755
Weighted average common shares outstanding 14,048 14,044
Dilutive effect of outstanding employee and
directors' common stock options - 7
Diluted common shares outstanding 14,048 14,051
Basic earnings per share $ .27 $ .20
Diluted earnings per share $ .27 $ .20
Outstanding employee and directors'
common stock options having no
dilutive effect 89 536
</TABLE>
3. Segments
The Company has reviewed the business activities of its divisions and
subsidiaries in accordance with the requirements of SFAS No. 131. The
Company has concluded that its business activities fall into one
identifiable business segment as approximately 95% of all revenues are
derived from the distribution of its specialty metals products. These
products are purchased, warehoused, processed and sold using essentially
the same systems, facilities, sales force and distribution network.
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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 2000 were up 37% compared to 1999's
first quarter. The Company earned $3.8 million ($.27 per share) as compared
to $2.8 million ($.20 per share) in the comparable quarter last year. Results
were favorably affected by an easing of pricing pressures versus last year's
first quarter during which market conditions were relatively depressed. The
decreased interest expense noted below also had a favorable affect.
Quarterly sales totaled $195.2 million, representing a 6.4% increase from the
first Quarter of 1999 sales of $183.5 million. The increase was due
primarily to an 11% increase in tons sold offset by a 2% decrease in average
selling prices.
Gross profit for the quarter increased by $2.5 million (4.3%) to $59.3
million due mainly to sales volume increases which where offset by a decrease
in the total gross margin percentage from 31.0% to 30.4%. Although mill
prices are stronger,there is some expected short-term market compression due
to the fairly rapid price increase.
First quarter operating expenses were up $1.4 million (2.9%) as compared to the
first quarter of last year. The increases are due to increased volume related
expenses and payroll related expenses due to the reorganization of one of the
Company's facilities.
First quarter depreciation and amortization expense is comparable to last year.
Net interest expense for the first quarter decreased approximately $.6 million
(20.4%) as compared to the first quarter of 1999. The decline reflects the
Company's ongoing initiative to use cash flow to pay down debt.
Liquidity and Capital Resources
Accounts receivable increased by $11.4 million from the first quarter of last
year mainly due to the increased sales volume. Net inventory decreased by $30.3
million compared to last year's values due to increased sales activity and
programmed reductions. Total long-term debt decreased by $27.5 million as
compared to the March 31, 1999. The decrease was mainly the result of the
inventory reduction mentioned above. The Company's debt to capital ratio was
49.8% as of March 31, 2000 compare to 54.1% at March 31, 1999. Net worth
decreased $1.1 million from the prior year's quarter. Although the Company has
remained profitable over the past four quarters, the depressed economic
conditions in 1999 resulted in dividends exceeding earnings for this period. A
turnaround in this condition has occurred in the first quarter of this year
with net worth increasing by $1.0 from the December 31,1999 value.
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The Company has unused committed and uncommitted lines of bank credit of
$135.5 million as of March 31, 2000 compared to $121.5 million at March 31,
1999.
Year-2000 Issues
There have been no significant systems or other Year 2000 problems suffered
during the first quarter of 2000 and there are no significant problems
anticipated in the future, either internally or from third parties.
Although many 1999 technology projects were deferred, it is not anticipated
that the resumption of project work will have a material adverse affect on
the Company's liquidity requirements.
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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 on 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 7, 2000 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.)
<PAGE>
