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, 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 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 2000 1999 1999 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% CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Three Months Ended March 31, 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) 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) 2000 1999 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 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. 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, 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): First Quarter 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 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 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. Page 7 of 9 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. 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, 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.)