-----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, VmCyyh6dpXSiHOBllj7kEQW3J+VypFOsC8ZRR04uMYWKkcG1E9olFybb/SHEHJVZ bw8MgBuMuDhfuTbz+nINGg== 0000018172-98-000001.txt : 19980518 0000018172-98-000001.hdr.sgml : 19980518 ACCESSION NUMBER: 0000018172-98-000001 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19980515 SROS: NONE 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: 98622515 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 10Q 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, 1998 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, 1998 Common Stock, No Par Value 14,043,074 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 1998 1997 1997 Cash . . . . . . . $ 2,967 $ 2,775 $1,780 Accounts receivable,net 101,655 88,478 80,158 Inventories (principally on last-in, first-out basis) 164,658 152,028 10 Total current assets . . $269,280 $243,281 190,696 Prepaid expenses and other assets. . . . . . . . 44,900 45,684 33,580 Fixed assets, net. . . . . 85,671 77,410 64,774 Total assets . . . . . . $399,851 $366,375 $289,050 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable . . . . . $ 93,854 $ 98,813 $ 88,776 Accrued liabilities. . . . 16,063 18,076 13,124 Income taxes payable . . . 7,098 3,934 4,903 Short term debt. . . . . . 3,343 0 0 Current portion of long-term debt . .. . . . . . . . . 2,721 2,688 2,095 Total current liabilities $123,079 $123,511 $108,898 Long-term debt, less current portion.. . . . . . . . . 117,905 90,735 39,188 Deferred income taxes. . 13,371 12,543 11,743 Other liabilities. . . . 3,944 2,877 3,283 Stockholders' equity . . 141,552 136,709 125,938 Total liabilities and stockholders' equity. . $399,851 $366,375 $289,050 SHARES OUTSTANDING. . . . 14,043 14,041 14,020 BOOK VALUE PER SHARE . . $ 10.08 $ 9.74 $ 8.98 WORKING CAPITAL . . . . . $146,201 $119,770 $ 81,798 WORKING CAPITAL PER SHARE $ 10.41 $ 8.53 $ 5.83 DEBT TO CAPITAL . . . . . 46.7% 40.6% 24.7% CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Three Months Ended March 31, Cash flows from operating activities: 1998 1997 Net income . . . . . . . . . $ 7,133 $ 6,182 Depreciation and amortization. . 1,896 1,447 Other. . . . . . . . . . . . . . 196 1,658 Cash provided from operating activities before working capital changes. . . . . 9,225 9,287 (Increase) decrease in working capital . . . . . . . . . . . . (29,770) (1,108) Net cash provided from (used by) operating activities . . . . . . . (20,545) 8,179 Cash flows from investing activities: Investments and acquisitions . . 0 (766) Capital expenditures, net of sales proceeds . . . . . . . . . (7,519) (3,135) Net cash provided from (used by) investing activities . . . . . . . (7,519) (3,901) Cash flows from financing activities: Long-term borrowings, net. . . . 27,203 (2,133) Short term debt. . . . . . . . . 3,343 0 Dividends paid . . . . . . . . . (2,387) (2,103) Other. . . . . . . . . . . . . . 97 (67) Net cash provided from (used by) financing activities . . . . . . . 28,256 (4,303) Net increase (decrease) in cash. . 192 (25) Cash - beginning of year . . . . 2,775 1,805 Cash - end of period . . . . . . $ 2,967 $ 1,780 Cash paid (received) during the period: Interest . . . . . . . . . . . . $ 1,146 $ 692 Income Taxes . . . . . . . . . . $ 703 $ 1,405 Page 4 of 9 A.M. CASTLE & CO. COMPARATIVE STATEMENTS OF INCOME (Dollars in thousands, except tonnage and per share data) For the Three Months Ended March 31, (Unaudited) 1998 1997 Net sales. . . . . . . . . . . . . $211,728 $177,326 Cost of material sold. . . . . . . 150,093 126,395 Gross profit on sales. . . . . . 61,635 50,931 Operating expenses . . . . . . . . 46,154 38,495 Operating profit . . . . . . . . . 15,481 12,436 Depreciation and amortization expense. 1,896 1,447 Interest expense, net. . . . . . . 1,758 638 Income before taxes . . . . . . . 11,827 10,351 Income Taxes: Federal. . . . . . . . . . . . . 3,797 3,345 State. . . . . . . . . . . . . . 897 824 4,694 4,169 Net income . . . . . . . . . . . . $ 7,133 $ 6,182 Basic income per share . . . . . . $ .51 $ .44 Diluted income per share . . . . . $ .51 $ .44 Financial Ratios: Return on sales. . . . . . . . . 3.37% 3.49% Asset turnover . . . . . . . . . 2.12 2.45 Return on assets . . . . . . . . 7.14% 8.55% Leverage factor. . . . . . . . . 2.92 2.37 Return on opening stockholders' equity . . . . . . . . . . 20.87% 20.28% Other Data: Cash dividends paid. . . . . . . $2,387 $2,103 Dividends per share. . . . . . . .17 .15 Average number of shares outstanding . . . . . . . . . . 14,042 14,012 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, 1998, and March 31, 1997, 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 $56.1 million, $57.1 million, and $57.1 million at March 31, 1998, December 31, 1997, and March 31, 1997, 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, 1997, 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 1998 interim results reported herein may not necessarily be indicative of the results of operations for the full year 1998. 2. Common Stock and Per Share Information. Basic net income per share computations are based on the weighted average number of shares of common stock outstanding during the respective periods. Diluted earnings per share calculation include the dilutive effect of outstanding employee and directors' common stock options. Page 6 of 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Operating results for the first quarter of 1998 were up 15% as compared to 1997's first quarter. The Company earned $7.1 million ($0.51 per share) as compared to the $6.2 million ($0.44 per share) earned in the year earlier quarter. The Company posted record quarterly sales and improved earnings as a result of increased contributions from recently acquired platform businesses, as well as a continued improving sales trend in the Company's core specialty metals business. Quarterly sales totaled $211.7 million, representing a 19.4% increase over the first quarter of 1997 sales of $177.3 million. The sales increase was provided by contributions from the Company's recent acquisitions as well as increased sales in the Company's core business products. Excluding the effect of acquisitions, sales for the quarter were up by $16.7 million or 10.3%. The increase in sales was due primarily to a 13.6% increase in tons sold, offset by a 0.3% decrease in average sales prices along with a slight shift in sales mix. Gross profit for the quarter rose $10.7 million (21.0%) to a record $61.6 million. The increase was attributable to gross profit contributions from the Company's recent acquisitions, and to its core business. Looking at the Company's core business, gross profit increased by $4.3 million (9.3 %) primarily due to increased sales volume. Total gross margin percentage for the quarter was 29.1% as compared to 28.7% for the first quarter of 1997. 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 by $7.7 million (19.9%) over the comparable period last year. Excluding the expenses of the acquired companies, Castle's operating expenses increased by approximately $3.0 million (8.8%) over the first quarter of 1997. Cost increases continue to be experienced primarily in the areas of payroll, transportation, operating supplies, and outside services. The significant increase in transactional activity and shipments continues to drive the increase. Increases in productivity helped offset some of these costs. Several cost saving initiatives aimed at reducing these expense pressures are being pursued. First quarter depreciation and amortization expense increased by $0.45 million (31.0%) over the prior year's comparable period. Excluding expense associated with the acquired companies, depreciation and amortization increased by $0.15 million (12.4%) over the first quarter of 1997. This increase was primarily the result of depreciation associated with new facilities and equipment. Page 7 of 9 Net interest expense for the first quarter increased by approximately $1.1 million (175.5%) as compared to the first quarter of 1997. Higher average borrowing levels were primarily responsible for the expense increase. The additional borrowing was used to finance the Company's growth and acquisitions strategy. Liquidity and Capital Resources Accounts receivable increased by $21.5 million, and net inventory increased by $55.9 million as compared to the balances as of March 31, 1997. Acquisitions contributed over $6.7 million of the receivable increase with the balance due to higher sales volume. Approximately $14.9 million of the inventory increase is attributable to acquisitions while the balance has been added to support certain market initiatives and the higher level of business activity experienced during the year. Total bank and long term borrowing as of March 31, 1998 increased by $82.7 million as compared to the balance at March 31, 1997. This was the result of additional long term borrowing used to finance the company's growth and acquisition strategy along with higher working capital needs. The Company's debt to capital ratio was 46.7% as of March 31, 1998 which is within the Company's target range. Net worth has increased by $15.6 million, (12.4%), over the prior year's quarter reflecting the continued strong earnings performance. The Company has unused committed and uncommitted lines of bank credit of $152.0 million as of March 31, 1998 vs. $165.3 million at March 31, 1997. 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 late 1998 with no significant impact on the Company's ongoing results of operations. 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 8, 1998 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 9 of 9 EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 QTR-1 3-MOS DEC-31-1998 MAR-31-1998 2,919,000 48,000 102,425,000 (770,000) 164,658,000 269,280,000 163,393,000 (77,722,000) 399,851,000 123,079,000 117,905,000 27,360,000 0 0 114,192,000 399,851,000 211,728,000 211,728,000 211,728,000 211,728,000 (150,093,000) (150,093,000) (47,926,000) (47,926,000) 0 0 (124,000) (124,000) (1,758,000) (1,758,000) 11,827,000 11,827,000 (4,694,000) (4,694,000) 7,133,000 7,133,000 0 0 0 0 0 0 7,133,000 7,133,000 0.51 0.51 0.51 0.51
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