-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G7e28rSi3I3TkOwtqe5G5fSYQ1rChI4+CQNTjt9xiyfUucjBsGN+5kAvZ3Q3KCs9 /Lz8dzxYisU9K+9xxY5IQw== 0000018172-99-000001.txt : 19990512 0000018172-99-000001.hdr.sgml : 19990512 ACCESSION NUMBER: 0000018172-99-000001 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19990511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASTLE A M & CO CENTRAL INDEX KEY: 0000018172 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS SERVICE CENTERS & OFFICES [5051] IRS NUMBER: 360879160 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-05415 FILM NUMBER: 99616647 BUSINESS ADDRESS: STREET 1: 3400 N WOLF RD CITY: FRANKLIN PARK STATE: IL ZIP: 60131 BUSINESS PHONE: 7084557111 MAIL ADDRESS: STREET 1: 3400 N WOLF RD CITY: FRANKLIN PARK STATE: IL ZIP: 60131 10-Q/A 1 Page 1 of 9 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, 1999 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, 1999 Common Stock, No Par Value 14,043,505 shares 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 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 Page 3 of 9 A. M. CASTLE & CO. CONDENSED BALANCE SHEETS (Dollars in thousands except per share data) (unaudited) March 31, Dec. 31, March 31, ASSETS 1999 1998 1998 Cash . . . . . . . . . . . . . . . . . $4,399 $2,954 $2,967 Accounts receivable, net . . . . . . . 89,793 85,688 101,655 Inventories (principally on last-in, first-out basis). . . . . . . . . . 205,793 217,152 164,658 Total current assets . . . . . . . . $299,985 $305,794 $269,280 Prepaid expenses and other assets. . . 58,370 59,547 44,900 Fixed assets, net. . . . . . . . . . . 99,210 94,622 85,671 Total assets . . . . . . . . . . . . $457,565 $459,963 $399,851 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable . . . . . . . . . . . $103,048 $ 98,835 $ 93,854 Accrued liabilities. . . . . . . . . . 15,980 18,536 16,063 Income taxes payable . . . . . . . . . 5,370 3,445 7,098 Short term debt. . . . . . . . . . . . - - 3,343 Current portion of long-term debt. . . 3,702 3,765 2,721 Total current liabilities. . . . . . $128,100 $124,581 $123,079 Long-term debt, less current portion . 165,831 172,313 117,905 Deferred income taxes. . . . . . . . . 15,919 15,105 13,371 Other Liabilities. . . . . . . . . . . 3,767 3,952 3,944 Stockholders' equity . . . . . . . . . 143,948 144,012 141,552 Total liabilities and stockholders' equity. . . . . . . . . . . . . $457,565 $459,963 $399,851 SHARES OUTSTANDING . . . . . . . . . . 14,044 14,043 14,043 BOOK VALUE PER SHARE . . . . . . . . . $ 10.25 $ 10.26 $ 10.08 WORKING CAPITAL. . . . . . . . . . . . $171,885 $181,213 $146,201 WORKING CAPITAL PER SHARE. . . . . . . $ 12.24 $ 12.90 $ 10.41 DEBT TO CAPITAL. . . . . . . . . . . . 54.1% 55.0% 46.7% CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Three Months Ended March 31, Cash flows from operating activities: 1999 1998 Net income . . . . . . . . . . . . . . . . . . . . $ 2,755 $ 7,133 Depreciation and amortization. . . . . . . . . . . 2,408 1,896 Other. . . . . . . . . . . . . . . . . . . . . . . 1,725 196 Cash provided from operating activities before working capital changes. . . . . . . . . . . . . . 6,888 9,225 (Increase) decrease in working capital . . . . . . 10,668 (29,770) Net cash provided from (used by) operating activities.. . . . . . . . . . . . . . . . . . . . 17,556 (20,545) Cash flows from investing activities: Capital expenditures, net of sales proceeds. . . . (6,745) (7,519) Net cash provided from (used by) investing activities . . . . . . . . . . . . . . . . . . . . (6,745) (7,519) Cash flows from financing activities: Long-term borrowings, net. . . . . . . . . . . . . (6,545) 27,203 Short term debt. . . . . . . . . . . . . . . . . . - 3,343 Dividends paid . . . . . . . . . . . . . . . . . . (2,738) (2,387) Other. . . . . . . . . . . . . . . . . . . . . . . (83) 97 Net cash provided from (used by) financing activities. . . . . . . . . . . . . . . . . . . . (9,366) 28,256 Net increase (decrease) in cash . . . . . . . . . . $ 1,445 $ 192 Cash - beginning of year . . . . . . . . . . . . 2,954 2,775 Cash - end of period . . . . . . . . . . . . . . $ 4,399 $ 2,967 Cash paid (received) during the period: Interest . . . . . . . . . . . . . . . . . . . . $ 2,999 $ 1,146 Income taxes . . . . . . . . . . . . . . . . . . $ (653) $ 703 Page 4 of 9 A.M. CASTLE & CO. COMPARATIVE STATEMENTS OF INCOME (Dollars in thousands, except per share data) For the Three Months Ended March 31, (Unaudited) 1999 1998 Net sales. . . . . . . . . . . . . . . . . . . . . $183,460 $211,728 Cost of material sold. . . . . . . . . . . . . . . 126,635 150,093 Gross profit on sales. . . . . . . . . . . . . . 56,825 61,635 Operating expenses . . . . . . . . . . . . . . . . 46,866 46,154 Depreciation and amortization expense. . . . . . . 2,408 1,896 Interest expense, net. . . . . . . . . . . . . . . 2,893 1,758 Total. . . . . . . . . . . . . . . . . . . . . . 52,167 49,808 Income before taxes . . . . . . . . . . . . . . . 4,658 11,827 Income Taxes: Federal. . . . . . . . . . . . . . . . . . . . . 1,560 3,797 State. . . . . . . . . . . . . . . . . . . . . . 343 897 1,903 4,694 Net income . . . . . . . . . . . . . . . . . . . . $ 2,755 $ 7,133 Net income per share . . . . . . . . . . . . . . . $ .20 $ .51 Diluted income per share . . . . . . . . . . . . . $ .20 $ .51 Financial Ratios: Return on sales. . . . . . . . . . . . . . . . . 1.50% 3.37% Asset turnover . . . . . . . . . . . . . . . . . 1.60 2.12 Return on assets . . . . . . . . . . . . . . . . 2.41% 7.14% Leverage factor. . . . . . . . . . . . . . . . . 3.18 2.92 Return on opening stockholders' equity . . . . . 7.65% 20.87% Other Data: Cash dividends paid. . . . . . . . . . . . . . . $2,738 $ 2,387 Dividends per share. . . . . . . . . . . . . . . .195 .17 Average number of shares outstanding . . . . . . 14,044 14,043 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, 1999, and March 31, 1998, 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 $46.4 million and $56.1 million at March 31, 1999 and March 31, 1998, respectively. Taxes on income would become payable on any realization of this excess from reductions in the level of inventories. Page 5 of 9 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, 1998, 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 1999 interim results reported herein may not necessarily be indicative of the results of operations for the full year 1999. 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): First Quarter 1999 1998 Net Income $ 2,755 $ 7,133 Weighted average common shares outstanding 14,044 14,042 Dilutive effect of outstanding employee and directors' common stock options 7 66 Diluted common shares outstanding 14,051 14,108 Basic earnings per share $ .20 $ .51 Diluted earnings per share $ .20 $ .51 Outstanding employee and directors' common stock options having no dilutive effect 536 - 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. Page 6 of 9 Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations. Results of Operations Operating results before taxes, depreciation, amortization and interest expense for the first quarter of 1999 were down 36% compared to 1998's record first quarter. The Company earned $2.8 million ($.20 per share) as compared to $7.1 million ($.51 per share) in the comparable quarter last year. Results were adversely affected by a combination of excess inventory in the overall market and pricing pressures versus last year's first quarter during which market conditions were relatively healthy. Quarterly sales totalled $183.5 million, representing a 13% decrease from the first quarter of 1998 sales of $211.7 million. The decrease was due primarily to a 14.9% decrease in tons sold along with a 4% reduction in average selling prices. Gross profit for the quarter decreased by $4.8 million (7.8%) to $56.8 million due mainly to sales volume decreases which were offset by an increase in the total gross margin percentage from 29.1% to 31.0% as the Company's expansion of value-added services and processing capabilities continues to have a positive effect on gross margin performance. First quarter operating expenses were up $.7 million (1.5%) over the comparable quarter last year. Increases were due largely to expenses on acquisitions which were not included in the first quarter of last year. First quarter depreciation and amortization expense increased by $0.5 million (27.0%) over the prior year's comparable period. This increase was primarily the result of depreciation associated with new facilities and equipment. Net interest expense for the first quarter increased approximately $1.1 million (64.6%) as compared to the first quarter of 1998. Higher average borrowing levels were primarily responsible for the expense increase. The additional borrowing was used to finance the Company's growth and acquisition strategy and working capital requirements. Liquidity and Capital Resources Accounts receivable decreased by $11.9 million from the first quarter of last year mainly due to the decreased sales volume. Net inventory increased by $41.1 million compared with last year's values due to a combination of acquisitions, increases to support market initiatives and the adverse effect of weaker than anticipated demand over the past two quarters. Total short term and long term debt increased by $45.6 million as compared to March 31, 1998. The increase was the result of additional capital needed to finance the Company's acquisition strategy along with the higher level of working capital. The Company's debt-to-capital ratio was 54.1% as of March 31, 1999 which is over the target range of 45%. Net worth has increased $2.4 million over the prior year's quarter reflecting continuing profitability despite the recent downturn in the economic environment. Page 7 of 9 The Company has unused committed and uncommitted lines of bank credit of $121.5 million as of March 31, 1999 compared to $152.0 million at March 31, 1998. The Company has not entered into any market risk agreements of a material nature. Fixed interest rate debt outstanding as of March 31, 1999 totalled $106.2 million with an average interest rate of 6.9%. Variable interest rate debt outstanding as of March 31, 1999 totalled $63.3 million with an average interest rate of 5.0%. Year 2000 Issues The Company is currently modifying its computer systems in order to properly process transactions in the year 2000. Expenditures for these modifications are being expensed as incurred. The company expects to have substantially all necessary modifications completed by the third quarter of 1999 with no significant impact on the Company's ongoing results of operations. The Company has identified its communications systems, financial systems, and transactional systems as the major year 2000 risk areas. The Company began to address these issues starting in late 1997. Year-2000 compliant software is operational in Franklin Park, Illinois and will be installed in all other locations over the next three months. The financial software upgrades are progressing well and are nearing completion. As of this date 50% of the 90,000 lines of transactions have been modified, tested and put into production. The remaining 50% is scheduled for completion by the third quarter. The "most reasonably likely worst case Year-2000 scenarios" would involve a partial failure in one of more of the above systems requiring that the particular transaction or process be handled manually until the problem is corrected. The impact of this type of problem would not be likely to have a material effect on results of operations, liquidity or financial condition. The Company is in the process of reassessing its non-information technology systems and identifying risks from third party relationships. Castle is well diversified from a customer, product, and supplier standpoint and, consequently, isolated disruptions in any one area, with the exception of prolonged power interruptions at any of its four largest facilities, are not likely to have a significant impact on total company results. The Company's Year-2000 activities are expected to cost between $1.8 and $2.0 million with approximately 67% being incurred in 1999. Page 8 of 9 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. Page 9 of 9 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, 1999 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.) SIGNATURES EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 3-MOS 3-MOS DEC-31-1999 DEC-31-1999 MAR-31-1999 MAR-31-1999 3,634 0 765 0 90,578 0 (785) 0 205,793 0 299,985 0 184,485 0 (85,275) 0 457,565 0 128,100 0 165,831 0 0 0 0 0 27,465 0 116,483 0 457,565 0 183,460 183,460 183,460 183,460 (126,635) (126,635) (49,131) (49,131) 0 0 (143) (143) (2,893) (2,893) 4,658 4,658 (1,903) (1,903) 2,755 2,755 0 0 0 0 0 0 2,755 2,755 0.20 0.20 0.20 0.20
-----END PRIVACY-ENHANCED MESSAGE-----