-----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, KZJrOHZxbdwEdayAZBhbeCwe+wA4IRVimOl15YTdgvqURK+ttDd+sJg/vN58d7l2 s/1nhvKRWgoJDnjchgXN1Q== 0000018172-99-000003.txt : 19990812 0000018172-99-000003.hdr.sgml : 19990812 ACCESSION NUMBER: 0000018172-99-000003 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990811 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: 99683701 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 10 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 June 30, 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 June 30, 1999 Common Stock, No Par Value 14,043,505 shares Page 2 of 10 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. . . . . 5-6 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations . . . . . . 7-8 Part II. Other Information Item 1. Legal Proceedings. . . . . . . . . . . . . . . . 9 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 9 Page 3 of 10 A. M. CASTLE & CO. CONDENSED BALANCE SHEETS (Dollars in thousands except per share data) (Unaudited)
June 30, Dec 31, June 30, ASSETS 1999 1998 1998 Cash . . . . . . . . . . . . . . . . . . . 4,524 2,954 3,376 Accounts receivable, net . . . . . . . . . 93,196 85,688 97,489 Inventories (principally on last-in, first-out basis) . . . . . . . . . . . . 200,220 217,152 193,351 Total current assets . . . . . . . . . . 297,940 305,794 294,216 Prepaid expenses and other assets. . . . . 60,713 59,547 53,262 Fixed assets, net. . . . . . . . . . . . . 101,068 94,622 89,000 Total assets . . . . . . . . . . . . . . 459,721 459,963 436,478 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable . . . . . . . . . . . . . 107,607 98,835 114,618 Accrued liabilities. . . . . . . . . . . . 16,728 18,536 17,295 Income taxes payable . . . . . . . . . . . 4,632 3,445 3,725 Current portion of long-term debt. . . . . 3,718 3,765 3,173 Total current liabilities. . . . . . . . 132,685 124,581 138,811 Long-term debt, less current portion.. . . 162,976 172,313 135,299 Deferred income taxes. . . . . . . . . . . 15,994 15,105 13,407 Other liabilities . . . . . . . . . . . . 3,732 3,952 3,919 Stockholders' equity . . . . . . . . . . . 144,334 144,012 145,042 Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . 459,721 459,963 436,478 SHARES OUTSTANDING . . . . . . . . . . . . 14,045 14,043 14,044 BOOK VALUE PER SHARE . . . . . . . . . . . 10.28 10.26 10.33 WORKING CAPITAL. . . . . . . . . . . . . . 165,255 181,213 155,405 WORKING CAPITAL PER SHARE. . . . . . . . . 11.77 12.90 11.07 DEBT TO CAPITAL. . . . . . . . . . . . . . 53.6% 55.0% 48.8%
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Six Months Ended June 30,
1999 1998 Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . 5,889 13,452 Depreciation and amortization. . . . . . . 4,865 4,013 Other. . . . . . . . . . . . . . . . . . . 1,459 (7,321) Cash provided from operating activities before working capital changes. . . . . . . . . . 12,213 10,144 (Increase) decrease in working capital . . 17,584 (33,539) Net cash provided from (used by) operating activities . . . . . . . . . . . . . . . . 29,797 (23,395) Cash flows from investing activities: Investments and acquisitions . . . . . . . (3,065) (3,822) Capital expenditures, net of sales proceeds. (10,127) (11,660) Net cash provided from (used by) investing activities . . . . . . . . . . . . . . . . (13,192) (15,482) Cash flows from financing activities: Long-term borrowings, net. . . . . . . . . (9,468) 44,598 Dividends paid . . . . . . . . . . . . . . . (5,477) (5,125) Other. . . . . . . . . . . . . . . . . . . (90) 5 Net cash provided from (used by) financing activities . . . . . . . . . . . . . . . . (15,035) 39,478 Net increase (decrease) in cash. . . . . . . 1,570 601 Cash - beginning of year . . . . . . . . . 2,954 2,775 Cash - end of period . . . . . . . . . . . 4,524 3,376 Supplemental Cash Disclosure Cash paid (received) during the period: Interest . . . . . . . . . . . . . . . . . 5,698 2,998 Income taxes . . . . . . . . . . . . . . . 1,975 8,223
Page 4 of 10 A.M. CASTLE & CO. COMPARATIVE STATEMENTS OF INCOME (Dollars in thousands, except per share data) For the Three and Six Months Ended June 30, (Unaudited) For The Three For The Six Months Ended Months Ended June 30, June 30,
1999 1998 1999 1998 Net sales. . . . . . . . . . . . . 179,992 205,068 363,452 416,796 Cost of material sold. . . . . . . 122,840 144,498 249,476 294,591 Gross profit on sales. . . . . . 57,152 60,570 113,976 122,205 Operating expenses . . . . . . . . 46,572 45,832 93,436 91,986 Depreciation and amortization expense 2,456 2,117 4,865 4,013 Interest expense, net. . . . . . . 2,841 2,108 5,734 3,866 Total . . . . . . . . . . . . . 51,869 50,057 104,035 99,865 Income before taxes . . . . . . . 5,283 10,513 9,941 22,340 Income Taxes: Federal. . . . . . . . . . . . . 1,793 3,398 3,353 7,195 State. . . . . . . . . . . . . . 356 796 699 1,693 2,149 4,194 4,052 8,888 Net income . . . . . . . . . . . . 3,134 6,319 5,889 13,452 Net income per share . . . . . . . .22 .45 .42 .96 Diluted income per share . . . . . .22 .45 .42 .96 Financial Ratios: Return on sales. . . . . . . . . 1.74% 3.08% 1.62% 3.23% Asset turnover . . . . . . . . . 1.57 1.88 1.58 1.91 Return on assets . . . . . . . . 2.73% 5.79% 2.56% 6.16% Leverage factor. . . . . . . . . 3.19 3.19 3.19 3.19 Return on opening stockholders' equity 8.70% 18.49% 8.18% 19.68% Other Data: Cash dividends paid. . . . . . . 2,739 2,738 5,477 5,125 Dividends per share. . . . . . . . 0.195 0.195 0.390 0.365 Average number of shares outstanding 14,044 14,043 14,04 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 June 30, 1999, December 31, 1998 and June 30, 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 $43.9 million, $52.1 million and $55.4 million at June 30, 1999, December 31, 1998 and June 30, 1998, respectively. Taxes on income would become payable on any realization of this excess from reductions in the level of inventories. Page 5 of 10 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): For The Three For The Six Months Ended Months Ended June 30, June 30,
1999 1998 1999 1998 Net Income $3,134 $6,319 $5,889 $13,452 Weighted average common shares outstanding 14,044 14,043 14,044 14,043 Dilutive effect of outstanding employee and directors' common stock options 10 56 9 59 Diluted common shares outstanding 14,054 14,099 14,053 14,102 Basic earnings per share $ .22 $ .45 $ .42 $ .96 Diluted earnings per share $ .22 $ .45 $ .42 $ .96 Outstanding employee and directors' common stock options having no dilutive effect 536 8 536 8
Page 6 of 10 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. 4. Acquisition The Company's subsidiary Total Plastics, Inc. acquired a 60% interest in Paramont Machine Co. as of April 1, 1999. The acquisition has been accounted for as a purchase and accordingly the results of operations of Paramont have been included in the Company's consolidated financial statements as of April 1, 1999. Pro-forma results are not required as the amounts do not significantly differ from historical results. On April 1, 1999 the Company acquired a 50% interest in Laser Precision. The Company's interest in this joint venture has been accounted for using the equity method and the Company's share of the operating results of the joint venture have been included in the Company's consolidated financial statements commencing April 1, 1999. Page 7 of 10 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 second quarter of 1999 were down 28.2% compared to 1998's second quarter results. The Company earned $3.1 million ($.22 per share) as compared to $6.3 million ($.45 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 second quarter during which market conditions were relatively healthy. Earnings for the first six months of $5.9 million ($.42 per share) were down 56.3% from last year's first half earnings of $13.5 million ($.96 per share). Quarterly sales totaled $180.0 million, representing a 12.2% decrease from the second quarte of 1998 sales of $205.1 million. The decrease was due primarily to a 14.7% decrease in tons sold along with a 5% reduction in average selling prices along with a slight shift in sales mix. For the first six months of 1999 total revenues were $363.5 million as compared to $416.8 million for the second half of 1998, a 12.8% decrease. Gross profit for the quarter decreased by $3.4 million (5.6%) to $57.2 million due mainly to sales volume decreases which where offset by an increase in the total gross margin percentage from 29.5% to 31.8% as the Company's expansion of value added services and processing capabilities continues to have a positive effect on gross margin performance. For the first six months of 1999 total gross profit declined 6.8% to $114.0 million while gross margin percentage increased from 29.3% to 31.4%. Second quarter operating expenses were up $.7 million (1.6%) over the comparable quarter last year. Increases were primarily due expenses of acquisitions which were not included in the second quarter of last year. Several cost saving initiatives continue to be pursued which are aiming at reducing expenses in the future. Year to date operating expenses were up by $1.5 million (1.6%). Second quarter depreciation and amortization expense increased by $0.3 million (16.0%) over the prior year's comparable period while the increase year to date was $0.9 million (21.2%) from 1998. This increase was primarily the result of depreciation associated with new facilities and equipment along with acquisitions. Net interest expense for the second quarter increased approximately $.7 million (34.8%) as compared to the second 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. Year to date this expense increased $1.9 million (48.3%). Liquidity and Capital Resources Accounts receivable decreased by $4.3 million from the second quarter of last year mainly due to the decreased sales volume. Net inventory increased by $6.9 million compared with last years values due to a combination of Page 8 of 10 acquisitions, increases to support market initiatives and the adverse effect of weaker than anticipated demand over the past two quarters. Total debt increased by $28.2 million as compared to the June 30, 1998. The increase was the result of additional capital needed to finance the Company's acquisition strategy along with internal expansion through fixed asset purchases. The Company's debt to capital ratio was 53.6% as of June 30, 1999 which is over the target range of 45%. Net worth decreased $.7 million over the prior year's quarter. Although the Company has remained profitable for the past four quarters despite the recent downturn in the recent economic downturn, dividends have exceeded earnings for this period. The Company has unused committed and uncommitted lines of bank credit of $120.4 million as of June 30, 1999 compared to $140.6 million at June 30, 1998. Year-2000 Issues The Company is currently modifying their 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 its operations. The Company has identified its communications systems, financial systems, and transactional systems as the major Year-2000 risk areas. The Company began addressing these issues in 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 75% of the 90,000 lines of transactions have been modified, tested, and put into production. The remaining 25% is scheduled for completion by the third quarter. The "most reasonably likely worst case Year-2000 scenarios" would involve a partial failure in one or 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 it 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 9 of 10 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 10 of 10 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: July 20, 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.) EX-27 2
5 3-MOS 6-MOS DEC-31-1999 DEC-31-1999 JUN-30-1999 JUN-30-1999 4,190 0 334 0 93,970 0 (774) 0 200,220 0 297,940 0 188,063 0 (86,995) 0 459,721 0 132,685 0 162,976 0 0 0 0 0 27,465 0 116,869 0 459,721 0 179,992 363,452 179,992 363,452 (122,840) (249,476) 0 0 (49,012) (98,142) (16) (159) (2,841) (5,734) 5,283 9,941 (2,149) (4,052) 3,134 5,889 0 0 0 0 0 0 3,134 5,889 0.22 0.42 0.22 0.42
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