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Proc-Type: 2001,MIC-CLEAR
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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 September 30, 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) Registrants 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 issuers classes of common stock, as of the latest practicable date. Class Outstanding at September 30, 2000 Common Stock, No Par Value 14,060,573 shares Page 2 of 9 A. M. CASTLE & CO. Part I. FINANCIAL INFORMATION Page Number Part I. Financial Information Item 1. Financial Statements: Condensed Balance Sheet 3 Comparative Statements of Cash Flows 3 Comparative Statements of Income 4 Notes to Condensed Financial Statements 5-6 Item 2. Managements 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 CONDENSED BALANCE SHEETS (Dollars in thousands except per share data) (unaudited) Sept. 30, Dec. 31, Sept. 30, ASSETS 2000 1999 1999 Cash $2,458 $2,578 $3,292 Accounts receivable, net. 103,153 83,352 95,020 Inventories (principally on last-in, first-out basis) 188,751 169,618 179,520 Total current assets $294,362 $255,548 $277,832 Prepaid expenses and other assets 69,457 60,716 56,591 Fixed assets, net 97,338 97,077 94,025 Total assets $461,157 $413,341 $428,448 LIABILITIES AND STOCKHOLDERS EQUITY Accounts payable $105,253 $102,976 $ 84,219 Accrued liabilities 15,980 17,230 17,032 Income taxes payable 4,300 4,876 3,865 Current portion of long-term debt 3,021 3,915 3,545 Total current liabilities $128,554 $128,997 $108,661 Long-term debt, less current portion 171,920 122,625 156,708 Deferred income taxes 17,236 16,356 16,225 Other Liabilities 2,254 3,552 3,710 Stockholders equity 141,193 141,811 143,144 Total liabilities and stockholders' equity. $461,157 $413,341 $428,448 SHARES OUTSTANDING 14,061 14,046 14,045 BOOK VALUE PER SHARE $10.04 $10.10 $10.19 WORKING CAPITAL $165,808 $126,551 $169,171 WORKING CAPITAL PER SHARE $11.79 $9.01 $12.04 DEBT TO CAPITAL 55.3% 47.2% 52.8% CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Nine Months Ended Sept. 30, Cash flows from operating activities: 2000 1999 Net income. $7,981 $7,243 Depreciation and amortization 7,102 7,307 Other. (6,844) 5,646 Cash provided from operating activities before working capital changes 8,239 20,196 (Increase) decrease in working capital (39,237) 12,485 Net cash provided from (used by) operating activities (30,998) 32,681 Cash flows from investing activities: Investments and acquisitions (4,050) (3,097) ) Capital expenditures, net of sales proceeds (4,876) (5,258) ) Net cash provided from (used by) investing activities (8,926) (8,355) ) Cash flows from financing activities: Long-term borrowings, net 48,401 (15,909) ) Dividends paid (8,245) (8,216) ) Other. (352) 137 Net cash provided from (used by) financing activities 39,804 (23,988) ) Net increase (decrease) in cash $(120) $338 Cash - beginning of year 2,578 2,954 Cash - end of period $2,458 $3,292 Supplemental Cash Disclosure Interest $7,406 $8,290 Income taxes $5,079 $3,517 Page 4 of 9 COMPARATIVE STATEMENTS OF INCOME (Dollars in thousands, except per share data) For The Three For The Nine (Unaudited) Months Ended Months Ended Sept. 30, Sept. 30, 2000 1999 2000 1999 Net sales $184,958 $177,097 $572,475 $540,549 Cost of material sold 130,354 123,027 400,195 372,503 Gross profit on sales 54,604 54,070 172,280 168,046 Operating expenses. 47,452 46,631 144,405 140,067 Depreciation and amortization expense 2,178 2,442 7,102 7,307 Interest expense, net 2,669 2,637 7,409 8,371 Income before taxes 2,305 2,360 13,364 12,301 Income Taxes: Federal. 747 840 4,351 4,193 State 179 166 1,032 865 926 1,006 5,383 5,058 Net income $1,379 $1,354 $7,981 $7,243 Net income per share $.10 $.10 $.57 $.52 Diluted income per share. $.10 $.10 $.57 $.52 Financial Ratios: Return on sales .75% .76% 1.39% 1.34% Asset turnover 1.60 1.65 1.66 1.68 Return on assets 1.20% 1.26% 2.31% 2.25% Leverage factor 3.25 2.98 3.25 2.98 Return on opening stockholders equity 3.89% 3.76% 7.50% 6.71% Other Data: Cash dividends paid $2,761 $2,739 $8,245 $8,216 Dividends per share $0.195 $0.195 $0.585 $0.585 Average number of shares outstanding 14,061 14,048 14,052 14,045 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 September 30, 2000,
December 31, 1999 and September 30, 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 $44.6 million, $36.9 million and $40.8 million at September 30, 2000, December 31, 1999 and September 30, 1999, respectively. Taxes on income would become payable on any
realization of this excess from reductions in the level of inventories. P
A. M. CASTLE & CO.
Notes to Condensed Financial Statements
1. |
Condensed Financial Statements |
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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. |
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2. |
Earnings Per Share |
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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): |
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For The Three |
For The Nine |
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Months Ended |
Months Ended |
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Sept. 30, |
Sept. 30, |
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2000 |
1999 |
2000 |
1999 |
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Net Income |
$1,379 |
$1,354 |
$7,981 |
$7,243 |
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Weighted average common shares outstanding |
14,061 |
14,048 |
14,052 |
14,045 |
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Dilutive effect of outstanding employee and |
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directors' common stock options |
- |
11 |
- |
9 |
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Diluted common shares outstanding |
14,061 |
14,059 |
14,052 |
14,054 |
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Basic earnings per share |
$.10 |
$.10 |
$.57 |
$.52 |
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Diluted earnings per share |
$.10 |
$.10 |
$.57 |
$.52 |
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Outstanding employee and directors' |
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common stock options having no |
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dilutive effect |
992 |
820 |
992 |
820 |
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3. |
Segments |
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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 91% 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
4. |
The Company's subsidiary Total Plastics, Inc. acquired a 90% interest in Aftech on May 1, 2000. The acquisition has been accounted for as a purchase and accordingly the results of operations of Aftech have been included in the Company's consolidated financial statements as of May 1, 2000. Pro-forma results are not required since the amounts do not significantly differ from historical results. |
Item 2. |
Management's Discussion and Analysis Of Financial Condition and Results Of Operations. |
Results of Operations |
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Operating results before taxes, depreciation, amortization and interest expense for the third quarter of 2000 were down 3.9% compared to 1999's third quarter. The Company earned $1.4 million ($.10 per share) in both the third quarter 2000 and 1999. Results were negatively impacted by a reduction in gross margins primarily due to the inability to fully recover mill price increases. The increase in operating expenses was mainly driven by inflation in wages, benefits and operating costs, and a 1.6% increase in the physical volume of shipments to customers. Earnings for the first nine months of $8.0 million ($.57 per share) were up 10.2% from last year's $7.2 million ($.52 per share). |
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Quarterly sales totalled $185.0 million, representing a 4.4% increase from the third quarter of 1999 sales of $177.1 million. Higher shipment levels were the primary reason for the sales dollar change. For the first nine months of 2000 total revenues were $572.5 million as compared to $540.5 million in 1999, a 5.9% increase. |
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Gross profit for the quarter increased by $.5 million (1.0%) to $54.6 million due mainly to sales volume increases which where offset by a decrease in the total gross margin percentage from 30.5% to 29.5%. The decrease in the margin percentage was caused primarily by the inability to pass mill cost increases on to our customers. For the first nine months of 2000 total gross profit increased 2.5% to $172.3 million while the gross margin percentage decreased from 31.1% to 30.1%. |
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Third quarter operating expenses were up $.8 million (1.8%) as compared to the third quarter of last year. The increases were mainly due to inflation in wages, benefits and operating costs along with higher volume-related expenses. Year-to-date operating expenses were up by $4.3 million (3.1%) which reflect volume increases and additional costs incurred in the second quarter of 2000 related to the consolidation of two warehouses into the Franklin Park, Illinois location. |
Page 7 of 9
Third quarter and year-to-date depreciation and amortization expenses where comparable to last year. |
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Net interest expense for the third quarter approximates the third quarter of 1999 while year-to-date interest was $1.0 million (11.5%) less then the same period last year. During the third quarter of 2000 long-term debt began increasing to support increased working capital while during the third quarter of 1999 debt was decreasing in line with decreases in working capital. |
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Liquidity and Capital Resources |
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Accounts receivable increased by $8.1 million from the third quarter of last year mainly due to the increased sales volume. Net inventory increased by $9.2 million compared to last year's values. It is the goal of the company to substantially reduce inventory values during the fourth quarter of this year. Long-term debt, less current portion, increased by $15.2 million when compared to September 30, 1999. The increase was mainly the result of an increase in net working capital along with the acquisition of Aftech by the Company's Total Plastics subsidiary in the second quarter of 2000. The Company's debt-to-capital ratio was 55.3% at September 30, 2000 compared to 52.8% on September 30, 1999. Net worth decreased $2.0 million from the prior year's quarter, due to dividends exceeding earnings over the past four quarters. The Company has unused committed and uncommitted lines of bank credit of $99.2 million as of September 30, 2000 compared to $139.1 million at September 30, 1999. |
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New Accounting Standard |
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The Financial Accounting Standards Board issued SFAS No. 137 "Accounting for Derivative Instruments and Hedging Activities", which is effective for fiscal years beginning after June 15, 2000. The Company is required to and will adopt SFAS N0.137 on January 1, 2001. The Company does not expect adoption to have a significant effect on its consolidated results of operations or financial position. |
Page 8 of 9
Page 8 of 9
Part II. OTHER INFORMATION
Item 1. |
Legal Proceedings |
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There are no material legal proceedings other than ordinary routine litigation incidental to the business of the Registrant. |
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Item 6 |
Exhibits and Reports on Form 8-K |
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(a) |
None |
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(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. |
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(Registrant) |
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Date: |
November 6, 2000 |
By: |
/ ss/J.A. Podojil |
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J. A. Podojil - Treasurer/Controller |
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(Mr. Podojil is the Chief Accounting Officer and has been authorized to sign on behalf of the Registrant.) |