-----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,
Jd5R4/7BlHIzBJ1+pguk7IxrrKFiqrU++HB14NG5ltzxgBL4RvKzmfZqLKBFDO1c
GKnNKIzgcc9EmRZWPKqabA==
<SEC-DOCUMENT>0000950131-01-001621.txt : 20010328
<SEC-HEADER>0000950131-01-001621.hdr.sgml : 20010328
ACCESSION NUMBER: 0000950131-01-001621
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010327
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-K405
SEC ACT:
SEC FILE NUMBER: 001-05415
FILM NUMBER: 1580075
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
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K405
<TEXT>
<PAGE>
Page 1 of 15 Pages
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Fee Required)
<TABLE>
<S> <C>
For the fiscal year ended December 31, 2000 Commission File Number: 1-5415
----------------- ------
</TABLE>
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 or organization)
3400 North Wolf Road, Franklin Park, Illinois 60131
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 455-7111
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- --------------------------- ------------------------------------
Common Stock - no par value American and Chicago Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
------------------
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K X .
---
The approximate aggregate market value of the registrant's common stock held by
non-affiliates of the registrant on March 2, 2001 was $135,941,414.
-----------
The number of shares outstanding of the registrant's common stock on March 1,
2001 was 14,160,564 shares.
----------
DOCUMENTS INCORPORATED BY REFERENCE
Documents Incorporated by Reference Applicable Part of Form 10-K
- ----------------------------------- ----------------------------
Annual Report to Stockholders for the Parts I, II and IV
year ended December 31, 2000
Proxy Statement dated March 26, 2001 Part III
furnished to Stockholders in connection with
registrant's Annual Meeting of Stockholders
================================================================================
<PAGE>
PAGE 2 OF 15
PART I
Item 1. Business.
A. M. Castle & Co. is one of North America's largest, independent metals
service center companies. The registrant (Company) provides a complete range of
inventories as well as preprocessing services to a wide variety of customers.
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 core
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. In the last three years, sales mix in the
Company's core business was approximately as follows:
2000 1999 1998
---- ---- ----
Carbon and Stainless 73% 76% 75%
Non-Ferrous Metals 27% 24% 25%
--- --- ---
100% 100% 100%
These metals are inventoried in many forms including round, hexagon, square
and flat bars; plates; tubing; shapes; and sheet and coil.
Depending on the size of the facility and the nature of the markets it
serves, each of the Company's service centers is equipped as needed with Bar
Saws, Close Tolerance Plate Saws, Oxygen and Plasma Arc Flame Cutting Machinery,
Laser Burning, Water-Jet Cutting, Stress Relieving and Annealing Furnaces,
Surface Grinding Equipment, Edge Conditioning Equipment, Sheet Shears and Coil
Processing Equipment. The Company also does specialized fabrications for
customers through pre-qualified subcontractors.
Emphasis on the more highly engineered grades and alloys of metals,
supported by strong service commitments, has earned the Company a leadership
role in filling the needs of users of those metals.
The Company has its main office, and largest distribution center, in
Franklin Park, Illinois. This center serves metropolitan Chicago and,
approximately, a nine-state area. In addition, there are distribution centers in
various other cities (see Item 2). The Chicago, Los Angeles and Cleveland
distribution centers together account for approximately 42% of all sales.
In North America, the Company serves the wide range of industrial companies
within the $700 billion producer durable equipment sector of the economy from
locations throughout the United States and Canada. The customer base includes
many Fortune 500 companies as well as thousands of medium and smaller sized ones
spread across the entire spectrum of metals using industries. The Company's
customer base is well diversified with no single industry accounting for more
than 5% of the Company's total business and, no one customer, more than 2%. The
Company's coast-to-coast network of metals service centers provides next day
delivery to over 90% of the markets it serves, and two-day delivery to virtually
all of the rest. Listed below are the operating subsidiaries and divisions
included in the Company's core business segment, along with a brief summary of
their business activities.
<PAGE>
PAGE 3 OF 15
In Mexico, the Company operates through a joint venture, Castle de Mexico,
S.A. de C.V., and targets a wide range of businesses within the producer durable
goods sector. Markets in Western Europe are serviced by the United Kingdom based
subsidiary, A. M. Castle & Co. Limited, a U.K. Corporation.
Total Plastics, Inc., headquartered in Michigan, serves a wide variety of
users of industrial plastics. Keystone Tube Company is a distributor of tubular
products serving the Midwest customers directly from its Chicago area facility.
Oliver Steel Plate Company processes and distributes heavy steel plate from its
Cleveland area plant. The Company's value-added bar processing center, H-A
Industries, thermally processes, turns and straightens alloy and carbon bar.
The Company holds a one-third joint venture interest in Kreher Steel Co., a
Midwest distributor, focusing on customers whose primary need is for immediate,
reliable delivery of large quantities of alloy, SBQ and stainless bars. In 1998,
Castle formed Metal Express, a small order distribution company in which it has
a 60% interest and acquired a 50% joint venture interest in Energy Alloys LLC, a
Houston based metals distributor. In 1999 the Company purchased a 50% interest
in Laser Precision, located in Libertyville, Illinois in order to enhance its
processing capabilities. In 2000 the Company invested in MetalSprectrum, LLC, a
metals industry e-commerce company in order to enhance sales opportunities.
In general, the Company purchases metals from many producers. Satisfactory
alternative sources are available for all metals that the Company buys and its
business would not be materially adversely affected by the loss of any one
supplier. Purchases are made in large lots and held in the distribution centers
until sold, usually in smaller quantities. The Company's ability to provide
quick delivery, frequently overnight, of a wide variety of metal products allows
customers to reduce inventory investment because they do not need to order the
large quantities required by producing mills.
<PAGE>
PAGE 4 OF 15
The major portion of 2000 net sales were from materials owned by the
Company. The materials required to fill the balance of such sales were obtained
from other sources, such as direct mill shipments to customers or purchases from
other metals distributors. Sales are primarily through the Company's own sales
organization and are made to many thousands of customers in a wide variety of
industries. No single customer is significant to the Company's sales volume.
Deliveries are made principally by leased trucks. Common carrier delivery is
used in areas not serviced directly by the Company's fleet.
The Company encounters strong competition both from other independent
metals distributors and from large distribution organizations, some of which
have substantially greater resources.
The Company has approximately 2,000 full-time employees in its operations
throughout the United States, Canada and the United Kingdom. Approximately 400
of these are represented by collective bargaining units, principally the United
Steelworkers of America.
Item 2. Properties.
The Company's principal executive offices are at its Franklin Park plant
near Chicago, Illinois. All properties and equipment are well maintained and in
good operating condition and sufficient for the current level of activities.
Metals distribution centers and sales offices are maintained at each of the
following locations, all of which are owned in fee, except as indicated:
<PAGE>
PAGE 5 OF 15
Approximate
Floor Area in
Locations Square Feet
- ----------------- -------------
Castle Metals
- -------------
Atlanta, Georgia 35,100 (1)
Charlotte, North Carolina 116,500
Chicago area -
Franklin Park, Illinois 522,600
Cincinnati, Ohio 5,300 (1)
Cleveland area -
Bedford Heights, Ohio 374,400
Dallas, Texas 78,000
Edmonton, Alberta 38,300 (1)
Fairfield, Ohio 108,000 (1)
Gary, Indiana 35,000 (1)
Houston, Texas 109,100
Kansas City, Missouri 170,000
Kent, Washington 31,000 (1)
Los Angeles area -
Paramount, California 264,900
Montreal, Quebec 26,100 (1)
Minneapolis, Minnesota 65,000
Philadelphia, Pennsylvania 71,600
Salt Lake City, Utah 1,000 (1)
Stockton, California 60,000 (1)
Toronto area -
Mississauga, Ontario 60,000 (1)
Wichita, Kansas 22,500 (1)
Winnipeg, Manitoba 50,000
Worcester, Massachusetts 56,000
---------
Total Castle Metals 2,300,400
Castle Metals U.K. Ltd.
- -----------------------
Blackburn, U.K. 43,000 (1)
Christchurch, U.K. 12,000 (1)
--------
55,000
H-A Industries
- --------------
Hammond, Indiana 243,000 (1)
---------
Keystone Tube, Inc.
- -------------------
La Porte, Indiana 90,000
Riverdale, Illinois 115,000 (1)
Titusville, Pennsylvania 92,000
---------
297,000
<PAGE>
PAGE 6 of 15
Approximate
Floor Area in
Locations Square Feet
- ----------------- -------------
Total Plastics, Inc.
- --------------------
Baltimore, Maryland 30,500 (1)
Cleveland, Ohio 8,500 (1)
Detroit, Michigan 22,000 (1)
Elk Grove Village, Illinois 14,400 (1)
Fort Wayne, Indiana 9,600 (1)
Grand Rapids, Michigan 42,500
Harrisburg, Pennsylvania 24,000 (1)
Indianapolis, Indiana 27,500 (1)
Kalamazoo, Michigan 81,000 (1)
New Philadelphia, Ohio 10,700
Pittsburgh, Pennsylvania 4,400
Rockford, Michigan 53,600 (1)
South Bend, Indiana 7,500 (1)
----------
336,200
Oliver Steel Plate Company
- --------------------------
Twinsburg, Ohio 120,000 (1)
GRAND TOTAL 3,351,600
==========
Sales Offices (Leased)
- ----------------------
Buffalo, New York
Detroit, Michigan
Milwaukee, Wisconsin
Pittsburgh, Pennsylvania
Phoenix, Arizona
San Diego, California
Tulsa, Oklahoma
(1) Leased: See Note 5 in the 2000 Annual Report to Stockholders, incorporated
herein by this specific reference, for information regarding lease
agreements.
<PAGE>
PAGE 7 OF 15
Item 3. Legal Proceedings.
There are no material legal proceedings other than the ordinary routine
litigation incidental to the business of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
PAGE 8 OF 15
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Item 6.
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Financial Data
-----------------------
Net Sales $ 744.5 $ 707.4 $ 792.8 $ 754.9 $ 672.6
Cost of Sales 522.9 483.1 559.1 540.3 481.4
Special charges 2.0 -- -- -- --
-------- ------- ------- ------- -------
Gross Profit 219.6 224.3 233.7 214.6 191.2
Operating Expenses 195.5 189.1 185.1 164.3 139.9
Impairment and other
Operating expenses 6.5 -- -- -- --
Depreciation and Amortization 9.7 9.9 8.5 6.6 5.3
Interest expense, net 10.3 10.6 9.4 4.2 2.9
-------- ------- ------- ------- -------
(Loss) income before taxes (2.4) 14.7 30.7 39.5 43.1
Income taxes (0.7) 6.0 12.2 15.7 17.0
-------- ------- ------- ------- -------
Net (loss) income $ (1.7) $ 8.7 $ 18.5 $ 23.8 $ 26.1
======== ======= ======= ======= =======
Share Data
----------
Number of shares outstanding
At year-end (in thousands) 14,161 14,048 14,043 14,041 14,008
Net (loss) income per share basic $ (0.12) $ 0.62 $ 1.32 $ 1.70 $ 1.86
Net (loss) income per share diluted $ (0.12) $ 0.62 $ 1.32 $ 1.69 $ 1.86
Cash dividend per share $ 0.78 $ 0.78 $ 0.76 $ 0.66 $ 0.57
Book value per share $ 9.12 $ 10.10 $ 10.25 $ 9.74 $ 8.70
Financial Position at Year-End
------------------------------
Total assets $ 418.9 $ 413.3 $ 460.0 $ 366.4 $ 261.4
Long-term debt $ 161.1 $ 122.6 $ 172.3 $ 90.7 $ 40.9
Stockholders equity $ 129.2 $ 141.8 $ 144.0 $ 136.7 $ 121.9
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required to be filed in Part II (Items 5 and 7) in Form 10-
K has been included in the 2000 Annual Report to Stockholders, as required by
the Securities and Exchange Commission, and is included elsewhere in the filing.
Accordingly, the following items required under Items 5 and 7 are incorporated
herein by this specific reference to the 2000 Annual Report to Stockholders:
"Common Stock Information", page 15, and "Financial Review", pages 14 and 15.
<PAGE>
PAGE 9 OF 15
Item 8. Financial Statements and Supplementary Data.
See Part IV, Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
<TABLE>
<CAPTION>
Executive Officers of The Registrant
------------------------------------
Name and Title Age Business Experience
- -------------- --- -------------------
<S> <C> <C>
Michael Simpson 62 Mr. Simpson began his employment with the
Chairman of the Board registrant in 1968. He was elected President of Hy-Alloy Steels
Co. in 1974 and was elected Vice President - Midwest Region
in 1977. In 1979, Mr. Simpson was elected Chairman of the Board.
G. Thomas McKane 56 Mr. McKane began his employment with the registrant in May
President and Chief of 2000. Formerly, he had been employed by Emerson Electric
Executive Officer since 1968.
M. Bruce Herron 55 Mr. Herron began his employment with the registrant in 1970.
Executive Vice President - He was elected to the position of Vice President - Western
Chief Operating Officer Region in 1989; Vice President - Sales in 1998; and Executive
Vice President and Chief Operating Officer in 1999. He was
named Vice President-Sales in 2000.
Edward F. Culliton 59 Mr. Culliton began his employment with the registrant in 1965.
Vice President and He was elected Corporate Secretary in 1972; Treasurer in
Chief Financial Officer 1975; and Vice President of Finance in 1977. He is the Chief
Financial Officer.
Marc Biolchin 46 Mr. Biolchin began his employment with the registrant's
Vice President - Keystone Tube Company (acquired in 1997) in 1977.
Tubular Group He was named Vice President - Tubular Group in 1998.
Stephen V. Hooks 49 Mr. Hooks began his employment with the registrant in 1972.
Vice President - He was elected to the position of Vice President - Midwest
Merchandising Region in 1993, and Vice President - Merchandising in
1998.
</TABLE>
<PAGE>
PAGE 10 OF 15
<TABLE>
<CAPTION>
Name and Title Age Business Experience
- -------------- --- -------------------
<S> <C> <C>
Gary J. Kropf 53 Mr. Kropf began his employment with the registrant in 1999.
Vice President- He was elected to the position of Vice President - Carbon
Sales Group in 1999 and became Vice President - Sales in 2000.
Tim N. Lafontaine 47 Mr. Lafontaine began his employment with the registrant
Vice President - in 1975, and was elected Vice President - Alloy Group in
Alloy Group 1998.
John R. Nordin 44 Mr. Nordin began his employment with the registrant in 1998.
Vice President - He was elected Vice President - Chief Information Officer
Chief Information Officer in 1998.
Gise Van Baren 69 Mr. Van Baren began his employment with the registrant's
Vice President Hy-Alloy Steels Co. (acquired in 1973) in 1954. He
H-A Industries became Vice President of Hy-Alloy in 1976 and President in
1979. He was elected Vice President - Alloy Products
Group in 1991, and named Vice President - H-A Industries in
1998.
Craig R. Wilson 49 Mr. Wilson began his employment with the registrant in
Vice President - 1979. He was elected to the position of Vice President -
Advanced Material Eastern Region in 1997; Vice President - Business
Group Improvement and Quality in 1998; and Vice President and
General Manager-Great Lakes Region in 1999. He was named
Vice President-Advanced Materials Group in 2000.
Henry C. Winters 59 Mr. Winters began his employment with the registrant in
Vice President- 1999 and was elected Vice President - Operations in 1999.
Operations
Paul J. Winsauer 49 Mr. Winsauer began his employment with the registrant in
Vice President - 1981. In 1996, he was elected to the position of Vice-
Human Resources President - Human Resources.
James A. Podojil 58 Mr. Podojil began his employment with the registrant in
Chief Accounting Officer 1968. In 1977 he was elected to the position of Controller
and Treasurer/Controller and in 1985 was elected to the additional post of Treasurer.
Jerry M. Aufox 58 Mr. Aufox began his employment with the registrant in 1977.
Secretary and Corporate In 1985 he was elected to the position of Secretary and
Counsel Corporate Counsel. He is responsible for all legal affairs of the
registrant.
</TABLE>
<PAGE>
PAGE 11 OF 15
All additional information required to be filed in Part III, Item 10, Form
10-K, has been included in the Definitive Proxy Statement dated March 26, 2001
filed with the Securities and Exchange Commission, pursuant to Regulation 14A
entitled "Information Concerning Nominees for Directors" and is hereby
incorporated by this specific reference.
Item 11. Executive Compensation.
All information required to be filed in Part III, Item 11, Form 10-K, has
been included in the Definitive Proxy Statement dated March 26, 2001, filed with
the Securities and Exchange Commission, pursuant to Regulation 14A entitled
"Management Remuneration" and is hereby incorporated by this specific reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required to be filed in Part I, Item 4, Form 10-K, has
been included in the Definitive Proxy Statement dated March 26, 2001, filed with
the Securities and Exchange Commission pursuant to Regulation 14A, entitled
"Information Concerning Nominees for Directors" and "Stock Ownership of Certain
Beneficial Owners and Management" is hereby incorporated by this specific
reference.
Other than the information provided above, Part III has been omitted
pursuant to General Instruction G for Form 10-K and Rule 12b-23 since the
Company will file a Definitive Proxy Statement not later than 120 days after the
end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A,
which involves the election of Directors.
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial statements (incorporated by reference to the 2000 Annual Report
to Stockholders) and exhibits are set forth in the accompanying index to
Financial Statements and Schedules. No reports on Form 8-K were filed in the
fourth quarter of 2000.
<PAGE>
PAGE 12 OF 15
A. M. CASTLE & CO.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<S> <C>
Report of Independent Public Accountants on Schedules............................................ Page 13
Consent of Independent Public Accountants with respect to Form S-8............................... Page 13
Consolidated Financial Statement Schedules
Valuation and Qualifying Accounts - Schedule II............................................ Page 14
Data incorporated by reference from 2000 Annual Report to Stockholders of A. M. Castle & Co.,
included herein -
Consolidated Statements of Income - For the years ended December 31, 2000, 1999
and 1998....................................................................................... Page 17
Consolidated Statements of Reinvested Earnings - For the years ended December 31,
2000, 1999 and 1998............................................................................ Page 17
Consolidated Balance Sheets - December 31, 2000, 1999 and 1998................................. Page 18
Consolidated Statements of Cash Flows - For the years ended December 31, 2000, 1999 and
1998........................................................................................... Page 19
Notes to Consolidated Financial Statements..................................................... Pages 20-24
Report of Independent Public Accountants....................................................... Page 24
</TABLE>
Exhibits:
<TABLE>
<S> <C>
20 - Report furnished to security holders............................................... Exhibit A
3 - Articles of Incorporation and amendments........................................... Exhibit B
3 - By laws of the Company............................................................. Exhibit C
10 - Long term incentive compensation plan.............................................. Exhibit D
10 - Description of management incentive plan........................................... Exhibit E
10 - 1996 restricted stock and stock option plan........................................ Exhibit F
</TABLE>
Exhibits listed above, except for exhibits B through F, are incorporated by
reference in accordance with Rule 12b-32 (17 CFR 240.12b-32) as the material has
been previously filed as part of registrants form 10-K filing for the fiscal
year ended December 31, 1998.
All schedules and exhibits, other than those listed above are omitted as
the information is not required or is furnished elsewhere in the financial
statements or the notes thereto.
<PAGE>
PAGE 13 OF 15
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------------------
To A. M. Castle & Co.:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements included in the A. M. Castle & Co.
2000 Annual Report to Stockholders incorporated by reference in this Form 10-K,
and have issued our report thereon dated February 1, 2001. Our audits were made
for the purpose of forming an opinion on those statements taken as a whole.
Schedule II is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
February 1, 2001
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
WITH RESPECT TO FORM S-8
-----------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference of the following into the Company's previously filed S-8 Registration
Statements Numbers 33-30545 and 33-37818:
1. Our supplemental report dated February 1, 2001 included in this Annual
Report on Form 10-K for the year ended December 31, 2000; and
2. Our report dated February 1, 2001 incorporated by reference in this Annual
Report on Form 10-K for the year ended December 31, 2000.
Arthur Andersen LLP
Chicago, Illinois
March 15, 2001
<PAGE>
PAGE 14 OF 15
SCHEDULE II
A. M. CASTLE & CO.
ACCOUNTS RECEIVABLE - ALLOWANCE FOR DOUBTFUL ACCOUNTS
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 580 $ 638 $ 620
Add - Provision charged to income 1,814 318 418
- Recoveries 77 102 186
Less - Uncollectible accounts charged
against allowance (1,881) (478) (586)
------- ------ -------
Balance, end of year $ 590 $ 580 $ 638
======= ====== =======
</TABLE>
<PAGE>
PAGE 15 OF 15
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ James A. Podojil
------------------------
James A. Podojil, Treasurer and Controller
(Mr. Podojil is the Chief Accounting Officer and has been authorized to sign
on behalf of the registrant.)
Date: March 2, 2001
----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Michael Simpson /s/ William K. Hall /s/ Patrick J. Herbert III
- ---------------------------------- --------------------------- ---------------------------------
Michael Simpson, William K. Hall, Director Patrick J. Herbert III, Director
Chairman of the Board Chairman, Audit Committee March 2, 2001
March 2, 2001 March 2, 2001
/s/ G. Thomas McKane /s/ John P. Keller
- ------------------------------------ --------------------------------
G. Thomas McKane, President - John P. Keller, Director
Chief Executive Officer, and Director Member, Audit Committee
March 2, 2001 March 2, 2001
/s/ Edward F. Culliton /s/ John W. McCarter, Jr.
- ----------------------------------- ---------------------------------
Edward F. Culliton, Vice President - John W. McCarter, Jr., Director
Chief Financial Officer, and Director Member, Audit Committee
March 2, 2001 March 2, 2001
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<PAGE>
[LOGO] A. M. Castle & Co.
2000 Annual Report
Our Roadmap to Shareholder Value...
Increasing Operating Margins
Improving Asset Utilization
Growing Revenues
<PAGE>
Corporate Profile:
- --------------------------------------------------------------------------------
Founded in 1890, A. M. Castle & Co. provides highly engineered materials and
value-added services to a wide range of industrial companies within the $700
billion producer durable equipment sector of the economy. Our customer base
includes many Fortune 500 companies as well as thousands of medium and
smaller-sized ones spread across the entire spectrum of metals-using industries.
Within our core specialty metals business, we are recognized as North America's
leading industrial distributor of carbon, alloy and stainless steels; nickel
alloys; aluminum; titanium; copper and brass; as well as the industry pioneer
and premier provider of materials management programs that are designed to
reduce our customers' total costs. Through our subsidiary, Total Plastics, Inc.,
we also distribute a broad range of value-added industrial plastics. Together,
Castle and our affiliated companies operate over 50 locations throughout North
America. Our common stock is traded on the American and Chicago Stock Exchanges
under the ticker symbol CAS.
A. M. Castle & Co.'s Roadmap to Shareholder Value
Increasing Operating Margins
[X] Fix Under-Performing Areas of the Core Business
[X] Reduce Operating Costs
[X] Utilize E-Commerce to Reduce Costs and Improve Service
[X] Improve Information Systems
Improving Asset Utilization
[X] Improve Inventory Performance
[X] Increase Volume to Utilize Excess Capacity
[X] Exit Non-Strategic Businesses
Growing Our Revenues
[X] Improve Customer Service
[X] Revitalize Sales Organization
[X] Leverage Sales Opportunities for Existing Businesses
[X] Focus On Growth Markets
<PAGE>
- --------------------------------------------------------------------------(LOGO)
The Year In Brief
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
%
2000* 1999 Change
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Results Net sales $ 744,509 $707,465 5%
Gross profit on sales 219,646 224,339 (2)
EBITDA** 17,652 35,207 (50)
(Loss) income before taxes (2,395) 14,698 (116)
Net (loss) income (1,675) 8,714 (119)
- ----------------------------------------------------------------------------------------------
Per Share of Net income (loss) basic (.12) 0.62 (119)
Common Stock Dividends 0.780 0.780 --
Stockholders' equity 9.12 10.10 (10)
- ----------------------------------------------------------------------------------------------
Balance Sheet Total assets 418,851 413,341 1
Total debt 164,560 126,540 30
Total equity 129,241 141,811 (9)
Working capital 155,320 128,110 21
Cash flow*** 8,094 18,580 (56)
Average shares outstanding 14,054 14,046 --
- ----------------------------------------------------------------------------------------------
Selected Ratios Return on sales (0.2)% 1.2% (117)
Return on total capital (0.6)% 3.3% (118)
Return on opening equity (1.2)% 6.1% (120)
Current ratio 2.4 2.0 20
Debt to capital ratio 56.0% 47.2% 19
- ----------------------------------------------------------------------------------------------
</TABLE>
* 2000 figures include special charges to cost of sales of $2,016 and $6,516
of impairment and other operating expenses (Note 8)
** See page 11 for definition
*** Net income plus depreciation and amortization
A. M. Castle & Co. 1
<PAGE>
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------
G. Thomas McKane Michael Simpson
[PHOTO] President and CEO Chairman of the Board [PHOTO]
The year 2000 was very disappointing for A. M. Castle & Co. as it was for the
entire metals distribution industry. At this writing, we have not seen a marked
improvement or return to historical demand and price levels. We are firmly
resolved to address and manage the issues that have adversely affected our
results for the past several years. We have a new CEO at the helm, Tom McKane,
who comes to Castle after 32 years of experience at Emerson Electric. Under his
leadership and with the help of outside consultants, we initiated a
comprehensive review of our business, identifying our operating deficiencies as
well as our growth opportunities. We are now in the process of developing and
implementing a roadmap to improving shareholder value, a hallmark of our long
history.
In this, our first annual report under Tom's leadership, we will be sharing
with you what is, in effect, a work in process. We don't yet have all the
answers to the challenges we face. We do, however, have a much improved
understanding of the critical areas on which we must focus our energy. They are:
. Increasing Operating Margins
. Improving Asset Utilization
. Selectively Growing Our Revenues
- --------------------------------------------------------------------------------
"In our core metals business, our value proposition to customers remains
unchanged: deliver highly engineered metals for critical applications where
exact conformance-to-specifications is essential. Our goals are to improve our
service levels to give our customers the best total-cost alternative to their
materials sourcing and servicing requirements, and to be their single-source
supplier of choice. We are supplying our organization with the necessary people
and technological capabilities to achieve these goals."
- --------------------------------------------------------------------------------
Before we share with you the specific actions that are underway or planned
to address these areas, we'd like to more fully explain business conditions in
our operating environment and, more specifically, their effect on our results
this past year.
2000 Market Conditions and Financial Results
For most of 2000, the specialty metals distribution industry was affected by
higher raw materials costs in the face of continuing customer resistance to
price increases. While demand for specialty metals strengthened in late 1999 and
into the first part of 2000, it softened in the second half, and fell
precipitously in the last quarter of the year.
As noted earlier, our performance in 2000 reflected these difficult market
conditions. In addition, fourth quarter and annual results included an $8.5
million pre-tax charge to implement an asset-restructuring plan that is expected
to generate $15 million of cash flow in 2001. This plan includes: first, the
disposition of two non-strategic business units that are not expected to realize
the financial returns originally projected; and second, a reduction of the
carrying values of certain inventory and other assets that will enable us to
more quickly convert them to cash.
Annual sales in 2000 rose five percent to $745 million compared with $707
million in 1999. Excluding the after-tax impact of the asset restructuring
charge of $5.2 million, or 37 cents per share, after-tax profits declined to
$3.4 million, or 25 cents per share, compared with $8.7 million, or 62 cents per
share, in 1999. Including the asset restructuring charge, the company posted an
after-tax loss of $1.7 million, or 12 cents per share, for the year 2000.
2 2000 Annual Report
<PAGE>
A. M. Castle's & Co.'s Roadmap to Shareholder Value
- --------------------------------------------------------------------------[LOGO]
Developments in the last quarter of the year accounted for virtually all of
the decline in our year-to-year comparisons. Sales in the quarter rose three
percent to $172 million compared with $167 million a year ago. Excluding the
impact of the asset restructuring charges, operations produced an after-tax loss
of $4.5 million, or 32 cents per share, compared with a net profit of $1.5
million, or 10 cents per share, in 1999. The special charge increased the loss
by $5.2 million, or 37 cents per share, resulting in a quarterly after-tax loss
of $9.7 million or 69 cents per share. Several additional factors including: a
$3.8 million swing in year-to-year charges to the LIFO reserve; losses from our
investment in the e-commerce business MetalSpectrum.com; and an unexpectedly
sharp downturn in business during December, combined to negatively impact our
fourth quarter and year-end results. Further details related to these factors
can be found in the management discussion and analysis section of this report.
Our gross margins provide the most telling indication of the magnitude and
impact of business conditions on our operating results. On a straight buy-sell
basis, they fell one full margin point for the year. This factor alone caused a
$7.5 million reduction in EBITDA (Earnings Before Interest, Taxes, Depreciation
and Amortization) for the year and $1.8 million for the fourth quarter. Clearly,
we have a strong sense of urgency to lower our operating costs in order to
sustain our historic operating earnings even in the face of softer gross margin
rates.
- --------------------------------------------------------------------------------
"Although our 2000 performance was not acceptable, our analysis of the factors
driving those results indicates that on a purely operational basis our business
is quite sound. We remain highly competitive in the marketplace and have many
opportunities to improve our bottom-line performance."
- --------------------------------------------------------------------------------
Roadmap to Shareholder Value
As noted at the start of this letter, we are developing and implementing a
roadmap to address the challenges we face as well as to identify and invest in
growth opportunities. The initial thrust of our strategy is to focus on
initiatives that will improve cash generation and operating efficiency, which,
in turn, will set the stage for making high-return investments in the future. We
have been aided throughout our evaluation process by HOLT Value Associates(R),
whom we brought in to help us examine Castle on a cash flow return basis. We
have embraced Holt's concepts and tools and are incorporating CFROI(R) into our
management process.
Specifically, our strategy focuses on three critical areas:
. Increasing operating margins
. Improving asset utilization
. Selectively building top-line growth by leveraging our current
opportunities and focusing on growing markets
In this letter, we describe how each of these areas will contribute to
increasing Castle's shareholder value.
Increasing Operating Margins:
The first major element of our plan is to improve the operating margins on the
business we now enjoy. During the second quarter of 2000, in one of the first
steps of this process, we identified three business units that were consistent
with our long-term strategies but operating below acceptable performance levels.
Taskforces were assigned to each of these units, and plans developed and
implemented to turn these operations around. As a result of these efforts, we
project a $4 million increase in the bottom line contribution of these business
units in 2001 compared with their performance in 2000.
Early in 2001, we initiated the second step of this process by significantly
reducing our operating expenses in all areas of the business. We implemented a
workforce reduction of from 8 to 10 percent, initiated a wage and salary freeze
for non-union personnel and made reductions in virtually every other area of the
expense budget. These changes are designed to bring operating expenses more
closely into line with current and projected levels of business activity.
- --------------------------------------------------------------------------------
"On the shop floor, we are reorganizing many operations into a cell-based
structure, so cross-trained teams of employees are able to follow a job from
beginning to end. This is a proven technique in manufacturing which leads to
higher quality and a much more predictable workflow. In turn, this contributes
to improved utilization of our resources and better margins, and drives on-time
delivery."
- --------------------------------------------------------------------------------
Also, throughout 2001, we invested considerable time, energy and monies
into enhancing our e-commerce capabilities. Our efforts are designed to add
speed and convenience for our customers and suppliers, and to take costs out of
the system. Since our business centers on delivering value-added specialty
metals to our customers, on-line auctioning of commodity metals will not be a
significant element of
A.M. Castle & Co. 3
<PAGE>
_______________________________________________________________________________
this strategy. Rather, we will use e-commerce to lower transaction costs for
suppliers and customers, which will make us a more attractive business partner.
In five years, we expect business-to-business e-commerce to be as commonplace as
the telephone or fax machine. We are preparing today for that eventuality.
Currently, we offer an e-commerce vehicle through Castle Direct, and are
rapidly building a larger presence with MetalSpectrum.com, an e-commerce joint
venture owned by Castle and 12 of the leading companies in the metals business.
We envision the ability of suppliers and customers to use the Internet to order
and investigate order status, view inventory levels, obtain price quotes, and
make payments. Not only will this create greater efficiency and improve customer
service, but will contribute to Castle's margins by reducing the amount of
employee intervention required to process routine business transactions.
- --------------------------------------------------------------------------------
"Information technology at Castle means creating business systems and processes
that enhance our relationships with customers. We are focused on reducing cycle
time, increasing efficiency, and making it easy to do business with Castle."
- --------------------------------------------------------------------------------
The final element of our plan to improve operating margins is an all-out
effort to implement the information systems needed in today's competitive
business environment. We are in the process of installing a warehouse management
system at our flagship Franklin Park facility to improve customer service
levels, quality and operating efficiency. While the start-up has been difficult,
we believe that improved systems are critical to our future success.
Replacing outdated portions of our information technology network is
another key initiative for 2001 and beyond. Our approach to upgrading our
systems will be based upon implementing commercially available software with a
proven track record in the industrial market. This will allow us to replace
existing systems without disrupting service to our customers. The result will be
a fully integrated system supporting customer service, supply chain management
and back office operations. This will not happen overnight, but we are well on
the way to identifying exactly what we need, and will be implementing this
initiative throughout 2001.
Improving Asset Utilization:
The second key element of our plan is to make better use of the assets employed
in our business. As a distribution company, the management of inventory is
critical to our success. We have taken steps to improve our performance in this
area, and, in the fourth quarter of 2000, realized a $25 million reduction in
inventory levels.
Additionally, as part of our asset-restructuring plan, we have revalued certain
slower-moving inventories so that they can be readily converted to cash. We
expect to realize approximately $2.4 million of additional cash flow in 2001 as
a result of this action. These are the first two steps towards achieving our
5-year target of a 20 to 25 percent improvement in inventory turnover rates.
- --------------------------------------------------------------------------------
"We are improving the quality of our balance sheet by removing under-utilized
assets and slow-moving inventory, reducing debt, and maximizing the productivity
of all remaining assets. In the fourth quarter alone, Castle reduced inventory
by $25 million."
- --------------------------------------------------------------------------------
The longer-term plan is to make changes to our processes to assure that we
can achieve and sustain a higher level of performance in both inventory
management and customer service. We are re-engineering our supply chain
structure, which will be managed by a professional with a proven track record
recruited from outside the company to lead this charge. He will report directly
to the CEO and will be provided with all the resources needed to get the job
done. Going forward, the entire supply chain process of purchasing, scheduling,
inventory management and transportation will be managed by a supply officer. We
expect this to significantly improve both our service quality and inventory
turnover ratios. This is an exciting change for Castle and will have a
significant positive impact on the company's asset performance and ability to
serve our customers.
In addition, we are reviewing all of our major processing operations from
the standpoint of capacity utilization, and developing programs to leverage the
areas of our business where we can significantly improve results with
sustainable increases in volume. We are going to focus sales efforts in these
areas since they offer an outstanding opportunity to make immediate positive
contributions to the bottom line.
As mentioned earlier, we have identified two non-strategic business units
that are not expected to perform at acceptable levels. Our plan is to sell these
businesses to synergistic buyers who are better positioned to optimize their
inherent value. We expect to generate over $11 million of cash for reinvestment
in more productive uses and for debt reduction. Given the nature of these
businesses, there will be little impact on top line revenues.
Our prevailing goal in asset utilization is to make a good business run
better. We have a solid franchise that provides a tremendous value proposition
for both large and small customers. Our sales growth in today's difficult market
demonstrates the benefit of being one of a handful of metals distributors able
to serve a customer's sourcing requirements all across North America.
4 2000 Annual Report
<PAGE>
A. M. Castle's & Co.'s Roadmap to Shareholder Value
- ------------------------------------------------------------------------- [LOGO]
Growing Our Revenues
The final element of our plan is to focus our sales efforts on those areas of
the business most likely to generate sustainable, profitable volume increases.
While many of the steps described above will, in fact, increase operating
efficiency and inventory utilization, they will also improve the level of
service we are able to provide to our customers. Doing more business with our
existing base of customers is our most attractive growth opportunity.
Late in the year 2000, we announced a significant change in the structure
of our sales organization. The core Castle Metals business was split into two
regions and a senior sales executive was named to head up each of them. Bruce
Herron has been named Vice President-Sales West and Gary Kropf is now the Vice
President-Sales East. These changes are designed to provide for more frequent
executive contact with our customers across the country and closer day-to-day
involvement with our local district managers and field sales representatives.
Our overall objective is to better understand our customers' needs so that we do
a better job of meeting them.
- --------------------------------------------------------------------------------
"Castle continues to maintain a diverse customer base with no significant
geographical or customer concentration. This broad foundation presents many
opportunities to show customers excellent service and as a result, win their
confidence and a larger share of their business."
- --------------------------------------------------------------------------------
As we stated earlier, within our existing plant capacity, we have
identified several areas where we are capable of handling significantly more
business and thus leverage the assets we have in place. We have initiated sales
efforts to increase our volume in these areas. Likewise, we have identified
opportunities to better capitalize on the synergies provided by our subsidiaries
and joint ventures. For instance, we are more closely aligning the sales
strategies and inventory planning of our Houston and Edmonton operations with
those of our joint venture, Energy Alloys. This will enable us to better
capitalize on the opportunities we have in the oilfield and petrochemical
markets, which are growing at double-digit rates. Similarly, with the strength
of the aviation and aerospace markets, we are leveraging our North American
capabilities into Western Europe through our United Kingdom subsidiary.
Comparable programs for coordination of sales initiatives with Oliver Steel
Plate Company and Laser Precision have been strengthened so that we can begin to
realize more of the commercial synergies that were projected when these business
units were formed.
Finally, within our core business, subsidiaries and joint ventures, we are
selectively investing capital to expand our capabilities to serve our faster
growing markets. For instance, we have expanded our Wichita facility to develop
more business in the growing aircraft business. Also, we continue to expand our
small order business, Metal Express. As of year-end 2000, Metal Express had
grown to thirty locations with six more planned for opening in 2001. We are also
growing our business with the semiconductor industry, as this particular sector
has been and continues to be strong.
Building Shareholder Value
To summarize, with solid operating margins, strong cash flow, 262 consecutive
quarters of cash dividends, and a leadership position in most of its markets,
Castle has historically been an outstanding total return value proposition. We
intend to build upon all the strengths that have made Castle an above average
total return investment, and to focus on the areas that offer the greatest
opportunity to improve cash returns in the future.
We do not expect overnight solutions to some of our operating difficulties,
but we do expect steady improvement in a number of critical areas. We expect the
progress to be measurable, although at the start, it may not always be dramatic.
We ask for and appreciate your continuing patience as we work to achieve the
shareholder value-enhancing goals outlined in this report. We look forward to
reporting to you on our progress in the coming months and throughout 2001.
/s/ G. Thomas McKane /s/ Michael Simpson President
G. Thomas McKane Michael Simpson President
and CEO Chairman of the Board
- --------------------------------------------------------------------------------
In May 2000, former President and CEO Dick Mork retired from Castle. Our Company
owes Dick a tremendous amount of gratitude for his long years of service, his
dedication and energy, and his determination to grow Castle into a significantly
larger and more dynamic organization. Dick spent his entire career at our
Company, joining Castle in 1957 and moving steadily up the ranks. He was elected
Vice President of the Eastern Region in 1977, and became Senior Vice President
and Chief Operating Officer in 1988. Dick assumed the Presidency in 1990, and
held that position until this past year when he elected to retire. We wish him
all the best as he pursues his wide range of interests, and thank him for many
contributions and his help in paving a smooth transition for our new leadership.
- --------------------------------------------------------------------------------
A. M. Castle & Co. 5
<PAGE>
Strategic Focus
- --------------------------------------------------------------------------------
In this section of the report, we highlight how our employee teams are working
together to grow our revenues, increase operating margins, and improve asset
utilization. As you will see, while each team has a highly focused agenda, their
activities complement and advance the achievement of all three of our
objectives.
A. M. Castle & Co.'s Roadmap to Shareholder Value
Increasing Operating Margins
[_] Fix Under-Performing Areas of the Core Business
[_] Reduce Operating Costs
[X] Utilize E-Commerce to Reduce Costs and Improve Service
[_] Improve Information Systems
Improving Asset Utilization
[X] Improve Inventory Performance
[X] Increase Volume to Utilize Excess Capacity
[_] Exit Non-Strategic Businesses
Growing Our Revenues
[X] Improve Customer Service
[X] Revitalize Sales Organization
[X] Leverage Sales Opportunities for Existing Businesses
[X] Focus On Growth Markets
[PHOTO]
Left to right; Bruce Herron, Steve Hooks and Gary Kropf
SALES TEAM: Getting Closer to Our Customers
In the letter to shareholders, we said that our existing customers represent the
best opportunity for growing sales. With this in mind, we realigned our sales
structure so that people at all levels of the organization can spend more time
in the field with customers. As previously noted, we established two regions,
headed up by Bruce Herron, Vice President-Sales West and Gary Kropf, Vice
President-Sales East. Both Bruce and Gary are seasoned Castle leaders who,
combined, bring nearly 60 years of sales and management experience to their new
roles. Their presence helps maximize sales opportunities by getting closer to
customers and by ensuring that we are consistently meeting their needs.
Additionally, being able to spend more time with local district managers and
field sales reps allows Bruce and Gary to fulfill a dual role of training,
coaching and guiding our people toward greater success and advancement.
At the district level, our managers' primary responsibility is to grow the
sales of our core products and services. By making more effective use of the
assets that are available to them, whether it is working capital, plant and
operating equipment, the capabilities of joint venture partners such as Energy
Alloys, or subsidiaries like Oliver Steel Plate Company, our district managers'
mandate is to enhance the ability of their sales forces to pursue new business
and expand relationships with existing customers.
A second aspect of our sales strategy is to ensure that our sales force has
a growing number of product and processing options to offer customers, and then
to provide support for them. Our merchandising team spearheads this effort. Led
by Steve Hooks, Vice President-Merchandising, this team designs, sources,
develops and promotes the products and processing options that we offer our
customers. This is our area of greatest opportunity to improve
6 2000 Annual Report
<PAGE>
A. M. Castle's & Co.'s Roadmap to Shareholder Value
- ------------------------------------------------------------------------- [LOGO]
operating margins and asset utilization while growing our driving revenue base.
With the recent establishment of a new supply chain management group, our
merchandising experts can now focus all of their energies on their core
competencies.
There are two key aspects to their effort. First, our corporate product
managers play a major role in managing inventories in order to optimize service
levels. Second, based on input from our customers and utilizing new IT tools,
they can leverage our resources, capabilities and capacity to make our products
and services more readily available to the marketplace, and to develop
innovative solutions to customer problems.
Waterjet and laser cutting are two examples of the leading edge processing
capabilities we have introduced to our industry. For certain applications, these
technologies can substantially reduce our customers' cost of producing finished
parts. By integrating advanced metal cutting technology into our general-line
distribution business, we can deliver close-tolerance finished products at the
lowest total cost to the customer.
In the product area, Duracorr(R), a registered trademark of Bethlehem-
Lukens Plate, is the latest in a long series of expansions to our line of highly
engineered metals. Duracorr(R), is a low cost plate product priced between
carbon sheet and traditional 300 series stainless grades that gives customers
new options in designing and manufacturing products with greater corrosion and
wear resistance for longer useful life cycles.
The final component of our sales strategy is to focus on growth markets.
Within our core durable goods customer base, we are aggressively pursuing sales
opportunities in faster growing sectors such as the aircraft, energy,
semiconductors and oil and gas. Our United Kingdom operation, which primarily
serves the needs of the aerospace industry in Western Europe, provides access to
another growth sector of our market.
A .M. Castle & Co.'s Roadmap to Shareholder Value
Increasing Operating Margins
[X] Fix Under-Performing Areas of the Core Business
[X] Reduce Operating Costs
[_] Utilize E-Commerce to Reduce Costs and Improve Service
[_] Improve Information Systems
Improving Asset Utilization
[X] Improve Inventory Performance
[_] Increase Volume to Utilize Excess Capacity
[_] Exit Non-Strategic Businesses
Growing Our Revenues
[X] Improve Customer Service
[_] Revitalize Salesm Organization
[X] Leverage Sales Opportunities for Existing Businesses
[_] Focus On Growth Markets
[PHOTO]
Left to right; Hank Winters, Dick Meyers and Larry Sansom
OPERATIONS TEAM: Creating Capacity Through Process Improvement Castle plays a
critical role in the selecting, stocking and cutting of specialty metal
components for a wide range of customers. We view ourselves as an integral part
of our customers' value stream, delivering solutions that transform the products
we sell them to a higher finished stage - rather than acting simply as a raw
materials supplier.
A. M. Castle & Co. 7
<PAGE>
Strategic Focus
- --------------------------------------------------------------------------------
The operations team, led by Vice President of Operations Hank Winters, is
drawing on the best thinking and practices from around the world to re-engineer
our processes in order to create the metals industry's leanest and most
efficient operations. Working with experienced professionals such as Dick Meyers
and Larry Sansom, our mission is to provide optimal customer service and to
create additional capacity without additional investment.
Toward this end, we are building systems that will enable us to respond to
material flows, beginning with the initial order and flowing seamlessly and
quickly through customer delivery. Our WMS (Warehouse Management System)
represents a major thrust of this effort. We are initially installing WMS in our
flagship Chicago location. When complete, this electronic bar coded system will
greatly enhance our ability to store, find, cut and ship a wide variety of metal
sizes and shapes, and to get the maximum use out of our order-picking processing
and loading cells. Not only will this improve asset utilization, it will lead to
improved cycle time and the best customer service possible.
Under the guidance of Castle's operations managers, we are also making
headway in streamlining work processes. For instance, at Tri-State, which makes
OEM plate parts, we reduced cycle time from 7 days to less than 24 hours.
Similarly, at our chrome bar finishing facility, we trimmed man-hours per ton by
more than one-third. In both cases, we added capacity without capital. These
early successes demonstrate our ability to make more efficient use of our
existing capital investments, which, in turn, will generate higher inventory
turns and lower working capital requirements.
Increasingly, we are using information systems in support of our operations
initiatives. Our Hammond, Indiana heat-treating and cold-finishing facility
represents a prime example of this linkage. New software helps set production
scheduling, resulting in reduced cycle time, fewer delays and higher service
levels. In the world of on-time deliveries, all of these improvements translate
into higher customer satisfaction and increased throughput.
Similarly, as part of our plate processing capabilities, we are utilizing
CAD/CAM software to convert customer prints and electronic files into the most
efficient cutting configuration. We then "pull" material through the process,
minimizing material usage and inventory requirements. Typical manufacturing
"pushes" products on the basis of forecasts. Developing processes that "pull"
products through the value stream based on actual customer demand provides a
further example of how we are using the latest and best thinking in
manufacturing and distribution to create a supply chain-driven organization.
We are confident about the positive implications that our re-engineering
will have on working capital, customer service, available capacity and cycle
times - all key components of our strategic initiatives to improve operating
margins and asset utilization.
8 2000 Annual Report
<PAGE>
A. M. Castle's & Co.'s Roadmap to Shareholder Value
- ------------------------------------------------------------------------- [LOGO]
Increasing Operating Margins
[_] Fix Under-Performing Areas of the Core Business
[X] Reduce Operating Costs
[X] Utilize E-Commerce to Reduce Costs and Improve Service
[X] Improve Information Systems
Improving Asset Utilization
[X] Improve Inventory Performance
[_] Increase Volume to Utilize Excess Capacity
[_] Exit Non-Strategic Businesses
Growing Our Revenues
[X] Improve Customer Service
[_] Revitalize Salesm Organization
[_] Leverage Sales Opportunities for Existing Businesses
[X] Focus On Growth Markets
[PHOTO]
John Nordin and User Group Advisory Team.
INFORMATION SYSTEMS TEAM: Creating Seamless Links With Customers and Suppliers
This team's mission is to build an information infrastructure tied to key
business processes. In layman's terms, this means we are prioritizing those
activities that add the most value for customers, and then supporting them with
state of the art information technology. Wherever possible, we are taking
advantage of the outstanding commercial software solutions available.
Implementing "out of the box" software solutions, with a minimum of
customization, helps to lessen information technology expenses and speeds the
implementation of solutions.
Under the leadership of John Nordin, Vice President and CIO, our
information systems goal is to achieve the highest return on Castle's
information systems portfolio, including:
1. Supply chain management covering purchasing, inventory management,
forecasting and order processing;
2. Electronic commerce applications ranging from EDI exchanges and sales
force automation to web-based transactions; and
3. Industry-specific applications such as material testing, plate
processing and warehouse management.
Traditionally, Castle has pioneered a number of customer-facing electronic
initiatives in our industry. We began our e-commerce initiatives over 15 years
ago with order entry. Today, the metals industry is ripe for e-commerce
efficiencies, and Castle is once again assuming a lead role.
The next phase in our information systems investment involves upgrading our
internal information technology capabilities to operate with maximum efficiency.
We also plan to be "net-ready" for industry initiatives underway that are
transforming the way we communicate with customers. In support of these
objectives, we are implementing a three-pronged approach. First, we continue to
enhance our traditional EDI capabilities. Second, we have developed Castle
Direct, our proprietary e-commerce platform and internal electronic network.
Third, as earlier described, we have played a major role in spearheading a new
metals marketplace with our participation in MetalSpectrum.com, an open
electronic marketplace. Many of the world's metal leaders, including mills,
distributors, service centers, fabricators and OEMs, are using MetalSpectrum.com
to conduct business.
As we develop leading-edge information solutions within our business, we
are also pursuing the next generation of customer information delivery, which
utilizes the Internet to reduce transaction costs, and to facilitate and broaden
the flow of information between Castle and its customers. Fast, accurate
information is becoming a much more valuable part of the specialty metals
distribution process.
Our e-commerce goal is to enhance the customer relationship. Tangible
results will include reduced cycle time and improved data integrity. Whether the
customer is a multinational aerospace manufacturer or a five-person metal shop,
there are enormous benefits to driving more transactions and interactions over
the web. Our internal information systems initiatives are being designed to
fully integrate with e-commerce initiatives. Being fully integrated with the
electronic metals marketplace presents one of our greatest long-term
opportunities to cost-effectively serve all types and sizes of customers.
A. M. Castle & Co. 9
<PAGE>
_______________________________________________________________________________
A. M. Castle & Co. and Subsidiaries
Consolidated Eleven-Year Financial And Operating Summary
================================================================================
<TABLE>
<CAPTION>
(Dollars in millions, except employee and per share data-Note 7) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Tons sold (in thousands)......................................... 389 373 394
Summary of Net sales........................................................ $ 744.5 $ 707.5 $ 792.8
Earnings Cost of sales.................................................. 522.9 483.2 559.1
Special charges................................................ 2.0 -- --
---------------------------------------
Gross profit..................................................... 219.6 224.3 233.7
Operating expenses............................................. 195.5 189.1 185.1
Impairment and other operating expenses........................ 6.5 -- --
---------------------------------------
EBITDA*.......................................................... 17.6 35.2 48.6
Depreciation and amortization.................................. 9.7 9.9 8.5
Interest expense, net.......................................... 10.3 10.6 9.4
---------------------------------------
(Loss) income before income taxes................................ (2.4) 14.7 30.7
Income taxes................................................... (.7) 6.0 12.2
---------------------------------------
Net (loss) income................................................ (1.7) 8.7 18.5
Cash dividends................................................... 11.0 11.0 10.6
---------------------------------------
Reinvested earnings.............................................. $ (12.7) $ (2.3) $ 7.9
=======================================
- --------------------------------------------------------------------------------------------------------------------------------
Share Data Number of shares outstanding at year-end (in thousands).......... 14,161 14,048 14,043
(Note 7) Net (loss) income per share basic................................ $ (0.12) $ 0.62 $ 1.32
Net (loss) income per share diluted.............................. $ (0.12) $ 0.62 $ 1.32
Cash dividends per share......................................... $ 0.78 $ 0.78 $ 0.755
Book value per share............................................. $ 9.12 $ 10.10 $ 10.25
- --------------------------------------------------------------------------------------------------------------------------------
Financial Working capital.................................................. $ 155.3 $ 128.1 $ 182.8
Position Property, plant and equipment, net............................... $ 91.1 $ 97.1 $ 94.6
at Year-End Total assets..................................................... $ 418.9 $ 413.3 $ 460.0
Total debt....................................................... $ 164.6 $ 126.5 $ 176.1
Stockholders' equity............................................. $ 129.2 $ 141.8 $ 144.0
- --------------------------------------------------------------------------------------------------------------------------------
Balanced Return on sales.................................................. (.2%) 1.2% 2.3%
Scorecard Total capital turnover........................................... 2.4 2.6 2.6
Ratios Return on total capital.......................................... (.6%) 3.3% 6.0%
Financial Leverage............................................... 2.1 1.9 2.3
Return on opening stockholders' equity........................... (1.2%) 6.1% 13.5%
Percent earnings reinvested...................................... (747.1%) (26.4%) 42.7%
Percent (decrease) increase in equity............................ (8.9%) (1.5%) 5.3%
Per employee data (in thousands)
Net sales...................................................... $ 370.8 $ 364.8 $ 415.7
Gross profit................................................... $ 109.4 $ 115.7 $ 122.6
Operating expenses, impairment and other operating expenses.... $ 100.6 $ 97.5 $ 97.1
EBITDA*........................................................ $ 8.8 $ 18.2 $ 25.5
- --------------------------------------------------------------------------------------------------------------------------------
Other Data Additions to property, plant and equipment....................... $ 13.2 $ 17.8 $ 30.2
Stockholders at year-end......................................... 1,586 1,601 1,657
Employees at year-end............................................ 2,008 1,939 1,907
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This schedule is prepared reflecting accounting changes as required or allowed
to more fairly present the results of operations over the eleven-year period.
Statements for years preceding these changes have not been revised to reflect
their retroactive application of these changes. Refer to prior year annual
reports for specific accounting changes.
10 2000 Annual Report
<PAGE>
- ------------------------------------------------------------------------- [LOGO]
<TABLE>
<CAPTION>
================================================================================================
1997 1996 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
378 331 343 338 308 249 234 248
$ 754.9 $ 672.6 $ 627.8 $ 536.6 $ 474.1 $ 423.9 $ 436.4 $ 478.9
540.3 481.4 454.4 391.4 351.8 313.7 331.1 363.6
-- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------
214.6 191.2 173.4 145.2 122.3 110.2 105.3 115.3
164.3 139.9 121.7 112.1 102.1 94.9 92.8 97.5
-- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------
50.3 51.3 51.7 33.1 20.2 15.3 12.5 17.8
6.6 5.3 4.5 4.6 4.8 4.9 5.3 5.2
4.2 2.9 2.9 3.2 3.8 4.3 6.8 6.8
- ------------------------------------------------------------------------------------------------
39.5 43.1 44.3 25.3 11.6 6.1 .4 5.8
15.7 17.0 17.5 9.9 4.7 2.7 .2 2.7
- ------------------------------------------------------------------------------------------------
23.8 26.1 26.8 15.4 6.9 3.4 .2 3.1
9.2 8.0 6.0 3.6 2.9 2.9 3.9 4.9
- ------------------------------------------------------------------------------------------------
$ 14.6 $ 18.1 $ 20.8 $ 11.8 $ 4.0 $ 0.5 $ (3.7) $ (1.8)
================================================================================================
- ------------------------------------------------------------------------------------------------
14,041 14,008 13,945 13,850 13,646 13,643 13,643 13,616
$ 1.70 $ 1.86 $ 1.93 $ 1.12 $ 0.50 $ 0.25 $ 0.02 $ 0.23
$ 1.69 $ 1.86 $ 1.93 $ 1.11 $ 0.50 $ 0.25 $ 0.02 $ 0.23
$ 0.66 $ 0.57 $ 0.43 $ 0.26 $ 0.22 $ 0.22 $ 0.29 $ 0.36
$ 9.74 $ 8.70 $ 7.41 $ 5.94 $ 5.10 $ 4.80 $ 4.74 $ 5.02
- ------------------------------------------------------------------------------------------------
$ 120.8 $ 80.4 $ 84.8 $ 76.6 $ 86.7 $ 75.8 $ 80.9 $ 90.5
$ 77.4 $ 62.7 $ 44.5 $ 41.2 $ 41.0 $ 43.2 $ 47.4 $ 54.8
$ 366.4 $ 261.4 $ 222.5 $ 213.1 $ 204.2 $ 195.2 $ 190.4 $ 226.6
$ 93.4 $ 43.4 $ 30.8 $ 42.3 $ 63.4 $ 58.6 $ 69.4 $ 92.7
$ 136.7 $ 121.9 $ 103.4 $ 82.2 $ 69.5 $ 65.5 $ 64.7 $ 68.3
- ------------------------------------------------------------------------------------------------
3.2% 3.9% 4.3% 2.9% 1.5% 0.8% 0.1% 0.7%
3.6 4.6 5.6 4.8 3.7 3.5 3.2 3.0
11.2% 18.0% 23.9% 13.9% 5.4% 2.8% 0.1% 1.9%
1.7 1.4 1.4 1.6 1.9 1.9 2.0 2.3
19.6% 25.3% 32.6% 22.2% 10.5% 5.2% 0.3% 4.5%
61.3% 69.3% 77.6% 76.6% 58.0% 14.7% --% (58.0%)
12.1% 17.9% 25.8% 18.3% 6.1% 1.2% (5.3%) (2.0%)
$ 402.2 $ 446.9 $ 510.0 $ 452.8 $ 393.8 $ 354.4 $ 344.2 $ 347.3
$ 114.3 $ 127.0 $ 140.8 $ 122.5 $ 101.6 $ 92.1 $ 83.0 $ 83.6
$ 87.5 $ 93.0 $ 98.9 $ 94.6 $ 84.8 $ 79.3 $ 73.2 $ 70.7
$ 26.8 $ 34.0 $ 41.9 $ 27.9 $ 16.8 $ 12.8 $ 9.8 $ 12.9
- ------------------------------------------------------------------------------------------------
$ 16.2 $ 22.5 $ 11.8 $ 7.9 $ 4.6 $ 1.8 $ 3.3 $ 13.4
1,699 1,613 1,618 1,639 1,625 1,670 1,750 1,730
1,877 1,505 1,231 1,185 1,204 1,196 1,268 1,379
================================================================================================
</TABLE>
* Earnings before interest, taxes, depreciation and amortization ("EBITDA")
is a non-GAAP measure that is computed as net income, excluding interest,
taxes, depreciation and amortization. This measure may not be comparable to
similarly titled measures reported by other companies. The Company feels
that EBITDA is a measure that should be reported because of its importance
to the professional investment community.
A. M. Castle & Co. 11
<PAGE>
- --------------------------------------------------------------------------------
Financial Review
This discussion should be read in conjunction with the information contained in
the Consolidated Financial Statements and Notes.
Overview
Castle's operating results reflected the difficult market environment that
emerged in the second half of 1998 and which has continued through 1999 and
2000. Gross margin compression has been an issue throughout the service center
industry due to an inability to fully recover rapidly increasing mill prices on
a timely basis. This, in turn, exerted negative leverage on earnings.
In order to curb the declining results of the past couple years, the
Company engaged in a strategic review of its operations. This review resulted in
a pre-tax charge of $8.5 million against current year earnings. This special
charge is part of a larger plan which includes selling selected under-performing
assets, driving higher inventory turns, improving plant and equipment
utilization and reducing overhead thereby increasing margins and operating cash
flow. It is anticipated that these actions will have a positive effect on future
earnings.
2000 Compared with 1999
Revenues for 2000 of $744.5 million were 5.2% over the $707.5 million generated
in 1999. Approximately 91% of all revenues were derived from its core business,
the distribution of specialty metal products. Carbon and Stainless Steel
accounted for 73% of the sales of these products with the balance being provided
from the sales of non-ferrous metal products.
Gross profit decreased by 2.1% to $219.6 million from $224.3 in 1999. $2.0
million of the reduction is due to special charges made to cost of sales. These
charges were the result of writing down slow moving inventories in preparation
for re-manufacturing them into more saleable items. A precipitous drop in sales
over the last four weeks of the year also had a negative impact on the annual
results. Gross margin percentage decreased from 31.7% in 1999 to 29.5% in 2000.
The reduction in margin was primarily caused by the inability to pass mill cost
increases to customers on a timely basis along with a year-to-year swing in the
net LIFO (last-in, first-out) adjustment which decreased gross profit in 2000 by
$.7 million as compared to an increase of $3.1 million in 1999.
Substantially all inventories are valued using the LIFO method.
Total operating expenses (before Impairment and other operating expenses)
for 2000 were $195.5 million, as compared to $189.1 million, an increase of
3.4%. Much of the increase was due to start-up costs associated with a major
warehouse consolidation project and the implementation of a warehouse management
system. Both programs proved to be more difficult and costly than anticipated.
Increased fuel costs also had a negative effect along with a $.5 million loss on
the investment in a start-up metal industry e-commerce joint venture
(MetalSpectrum). As part of the strategic review of the Company's operations,
impairment losses and other operating expenses of $6.5 million were charged to
operating expense in the fourth quarter of 2000. These losses were taken to
reduce the book values of one of its processing facilities, a joint venture and
other non-productive assets to fair value in anticipation of their sale or other
disposition. See note 8 for detail information.
Depreciation and amortization expense and net interest expense were
comparable to 1999.
Castle's 2000 effective income tax rate at 30.1%, was under the 40.7% rate
last year due to the effect of permanent differences and earnings mix on a very
low pre-tax loss base.
Net loss totalled $1.7 million for 2000 compared to net income of $8.7
million in 1999. Basic earnings per share declined from $.62 in 1999 to a loss
of $.12 in 2000. Net income before special charges and impairment and other
operating expenses (net of statutory income tax rates) was $.25 per share.
1999 Compared with 1998
Revenues for 1999 of $707.5 million were 10.8% under the record sales of $792.8
generated in 1998. Carbon and stainless steels generated approximately 76% of
total sales, with the balance provided by non-ferrous metals.
Gross profit decreased by 4.0% to $224.3 million from $233.7 million in
1998. Gross margin percentage increased to 31.7% from the 29.5% generated in
1998. The gross margin gain reflected the higher value added contribution from
acquisitions and internal investment in leading edge processing
12 2000 Annual Report
<PAGE>
- --------------------------------------------------------------------------[LOGO]
technologies. Substantially all inventories are valued using the LIFO (last-in,
first-out) method. In 1999, the net LIFO adjustment had the effect of increasing
Castle's gross profit by $3.1 million.
Total operating expenses for 1999 were $189.1 million, as compared to
$185.1 million in 1998, an increase of 2.2%. The increase was due to higher
expenses at the Company's newly acquired subsidiaries in support of growing
revenues and operating profits. These increases were offset by major reductions
in payroll and other expense in its core business units, which were the result
of the Company's business process improvement initiatives. Depreciation and
amortization expense increased by $1.4 million or 16.3% over the prior year,
reflecting both internal and external expansion. Net interest expense increased
$1.2 million over 1998 due primarily to higher average inventory levels.
Castle's 1999 effective income tax rate, at 40.7%, was over the 1998 rate
of 39.7% due to the effect of permanent differences and earnings mix on a lower
pre-tax base.
Net earnings totalled $8.7 million for 1999 compared to $18.5 million in
1998. Basic earnings per share declined 53% to 62 cents for 1999 as compared to
$1.32 in 1998.
Capital Expenditures
Capital expenditures for 2000 totalled $13.2 million as compared to $17.8
million in 1999. Major expenditures included the consolidation of warehouse
facilities, the implementation of new technology in a warehouse management
system and increased processing capabilities.
The 1999 capital expenditures totalled $17.8 million as compared to $30.2
million in 1998. These expenditures were primarily directed at expanding
processing capabilities with the largest investments occurring at the company's
H-A Industries facility in Hammond, Indiana and it's KSI, LLC facility in
LaPorte, Indiana.
During 2000 and 1999, the company sold and leased back approximately $8.3
million and $7.4 million of fixed assets respectively, which added to cash flow
and reduced long-term borrowing.
Liquidity and Capital Resources
Over the past three years, Castle has invested over $95.0 million in capital
expenditures and investments in new businesses. In the past, earnings and cash
flow, along with planned debt financing had provided for strategic expansion.
Due to the weak earnings performance in 2000, debt financing was needed for
capital expenditures and working capital increases. Total borrowings were $164.6
million at year-end 2000 as compared to $126.5 million at 1999 year-end. These
new borrowings caused an increase in its debt-to-capital ratio of nearly 9
percentage points to 56%, which is slightly above the Company's target range of
40-55%. In order to reduce debt, the Company is taking immediate steps to reduce
operating expense including a reduction in workforce of 8 to 10 percent in 2001
along with the continued implementation of its asset-restructuring plan. The
special charges and asset impairment expenses incurred in 2000 are the
beginnings of this plan.
Working capital was $155.3 million at December 31, 2000 as compared to
$128.1 million at year-end 1999. Inventories decreased by $6.4 million from 1999
values. The decrease mainly occurred in the fourth quarter of 2000. This fourth
quarter reduction also had the effect of reducing accounts payable by $18.2
million since major purchases were curtailed. Accounts receivable increased by
$8.3 million from the prior year-end. The number of days outstanding at the end
of 2000 was 47.0, up 1.2 days from the 45.8 at December 31, 1999. Several large
balances were written off during the year due to bankruptcy. Collections
currently are strong and management believes that the remaining net accounts
receivable at December 31, 2000 are of good quality. An income tax receivable of
$4.1 million at year-end was generated due to the fourth quarter loss and will
be realized early in 2001.
Castle had committed and uncommitted lines of credit of $115.1 million at
December 31, 2000, compared to $171.7 million at December 31, 1999. Management
believes that funds generated from future operations and existing lines of
credit should provide adequate funding for current business operations.
Castle has not entered into any market risk agreements of a material
nature. Fixed rate debt outstanding as of December 31, 2000 totalled $103.3
million with an average interest rate of 6.8%. Variable interest rate debt
outstanding as of December 31, 2000 totalled $61.3 million with an average
interest rate of 6.2%.
A.M. Castle & Co. 13
<PAGE>
- --------------------------------------------------------------------------------
A. M. Castle & Co. and Subsidiaries
Common Stock Information
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
========================================================================================
DIVIDENDS STOCK PRICE RANGE
2000 1999 2000 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First quarter................ $.195 $.195 10 1/2 12 11/16 12 1/16 16
Second quarter............... .195 .195 8 5/16 12 9/16 12 5/16 17
Third quarter................ .195 .195 8 13/16 10 3/4 12 5/8 18 1/4
Fourth quarter............... .195 .195 8 11/16 12 1/4 10 3/4 13 1/8
--------------
$.780 $.780
==============
- ----------------------------------------------------------------------------------------
</TABLE>
Supplementary Schedules
The Company's LIFO inventory system charges cost of material sold at the
inventory costs of its most recent purchases. The LIFO method matches current
revenues with current costs of inventory. This method more fairly presents
results of operations, whether in periods of inflation or deflation.
The Supplementary Statements of Consolidated Financial Position are
presented for analytical and comparative purposes. They are intended to display
the Company's financial position as if the Company was on a FIFO-based inventory
system rather than the LIFO-based inventory system the Company actually uses.
The statements reflect taxes on the unrecognized inventory gain at statutory
Federal rates and the Company's historical average state tax rates and gives no
effect to any supplemental expenses.
Supplementary Schedules
<TABLE>
<CAPTION>
Years Ended December 31,
========================================================================================
(Dollars in thousands, except per share data) 2000 1999 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets
Cash.............................................. $ 2.1 $ 2.6 $ 3.0
Accounts receivable, net.......................... 91.6 83.4 85.7
Inventories, at latest cost....................... 206.1 206.5 269.2
Income tax receivable............................. 4.1 -- --
Other current assets.............................. 1.4 1.5 1.6
----------------------------------
Total current assets.............................. 305.3 294.0 359.5
Less--current liabilities......................... (124.3) (143.8) (145.4)
----------------------------------
Net current assets................................ 181.0 150.2 214.1
Prepaid expenses and other assets................. 55.6 51.1 50.8
Investment in joint ventures...................... 9.7 8.1 7.1
Fixed and other assets, net....................... 91.1 97.1 94.7
----------------------------------
Total assets, less current liabilities............ 337.4 306.5 366.7
Long-term debt.................................... (161.1) (122.6) (172.3)
Deferred income taxes............................. (18.1) (16.4) (15.1)
Minority interest................................. (1.0) (1.9) (1.8)
Post-retirement benefit........................... (2.3) (1.7) (2.2)
Unrecognized inventory gain, net of taxes......... (25.7) (22.1) (31.3)
----------------------------------
Stockholders' equity.............................. $ 129.2 $ 141.8 $ 144.0
==================================
- ----------------------------------------------------------------------------------------
</TABLE>
14 2000 Annual Report
<PAGE>
- --------------------------------------------------------------------------[LOGO]
A. M. Castle & Co. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
=================================================================================================================================
(Dollars in thousands, except per share data) 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales............................................................................ $ 744,509 $ 707,465 $ 792,846
Cost of material sold................................................................ 522,847 483,126 559,084
Special charges...................................................................... 2,016 -- --
-----------------------------------------
Gross profit on sales........................................................... 219,646 224,339 233,762
Operating expenses................................................................... 195,478 189,132 185,109
Impairment and other operating expenses.............................................. 6,516 -- --
Depreciation and amortization expense (Note 1)....................................... 9,769 9,866 8,486
Interest expense, net (Notes 2 and 4)................................................ 10,278 10,643 9,438
-----------------------------------------
Income (loss) before income taxes.................................................... (2,395) 14,698 30,729
-----------------------------------------
Income taxes (Notes 1 and 3)
Federal-currently payable....................................................... 2,873 2,089 7,517
-deferred................................................................ (3,568) 2,867 2,420
State........................................................................... (25) 1,028 2,270
-----------------------------------------
(720) 5,984 12,207
-----------------------------------------
Net (loss) income.................................................................... $ (1,675) $ 8,714 $ 18,522
=========================================
Basic (loss) income per share (Notes 1 and 7)........................................ $ (0.12) $ 0.62 $ 1.32
=========================================
Diluted (loss) income per share (Notes 1 and 7)...................................... $ (0.12) $ 0.62 $ 1.32
=========================================
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Consolidated Statements of Reinvested Earnings
<TABLE>
<CAPTION>
Years Ended December 31,
====================================================================================================================================
(Dollars in thousands, except per share data) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year............................................................ $ 120,385 $ 122,629 $ 114,709
Net (loss) income....................................................................... (1,675) 8,714 18,522
Cash dividends--$0.78 in 2000, $.78 in 1999, and $.755 in 1998.......................... (11,007) (10,958) (10,602)
-----------------------------------------
Balance at end of year.................................................................. $ 107,703 $ 120,385 $ 122,629
=========================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
A. M. Castle & Co. 15
<PAGE>
- --------------------------------------------------------------------------------
A. M. Castle & Co. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Years Ended December 31,
====================================================================================================================================
(Dollars in thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets
Cash (Note 1)............................................................................. $ 2,079 $ 2,578 $ 2,954
Accounts receivable, less allowances of $600 in 2000, 1999, and 1998...................... 91,636 83,352 85,688
Inventories--principally on last-in, first-out basis (latest cost higher by approximately
$42,900 in 2000, $36,900 in 1999, and $52,100 in 1998) (Note 1)......................... 163,206 169,618 217,152
Income tax receivable (Notes 1 and 3)..................................................... 4,116 -- --
Other current assets...................................................................... 1,426 1,559 1,619
--------------------------------------
Total current assets................................................................... 262,463 257,107 307,413
--------------------------------------
Investment in joint ventures................................................................ 9,714 8,057 7,090
--------------------------------------
Prepaid expenses and other assets (Note 1).................................................. 55,566 51,100 50,838
--------------------------------------
Property, plant and equipment, at cost (Notes 1 and 5)
Land...................................................................................... 5,827 5,957 5,955
Buildings................................................................................. 51,187 52,841 51,323
Machinery and equipment................................................................... 123,740 129,011 120,502
--------------------------------------
180,754 187,809 177,780
Less--accumulated depreciation............................................................ 89,646 90,732 83,158
--------------------------------------
91,108 97,077 94,622
--------------------------------------
Total assets................................................................................ $ 418,851 $ 413,341 $ 459,963
======================================
Liabilities and stockholders' equity
Current liabilities
Accounts payable.......................................................................... $ 84,734 $ 102,976 $ 98,835
Accrued payroll and employee benefits (Note 6)............................................ 10,929 10,407 11,199
Accrued liabilities....................................................................... 6,925 6,823 7,337
Current and deferred income taxes (Notes 1 and 3)......................................... 1,130 4,876 3,445
Current portion of long-term debt (Note 4)................................................ 3,425 3,915 3,765
--------------------------------------
Total current liabilities.............................................................. 107,143 128,997 124,581
--------------------------------------
Long-term debt, less current portion (Note 4)............................................... 161,135 122,625 172,313
--------------------------------------
Deferred income taxes (Notes 1 and 3)....................................................... 18,096 16,356 15,105
--------------------------------------
Minority interest........................................................................... 971 1,861 1,757
--------------------------------------
Post retirement benefit obligations (Notes 1 and 6)......................................... 2,265 1,691 2,195
--------------------------------------
Stockholders' equity (Notes 1 and 7)
Common stock, without par value--authorized 30,000,000 shares; issued and outstanding
14,160,564 in 2000, 14,048,070 in 1999 and 14,043,505 in 1998........................... 27,625 27,625 27,465
Earnings reinvested in the business....................................................... 107,703 120,385 122,629
Accumulated other comprehensive (loss) income (Note 1).................................... (1,123) (665) (681)
Other..................................................................................... (805) -- --
Treasury stock, at cost (742,191 shares in 2000, 854,685 shares in 1999
and 845,938 shares in 1998)............................................................. (4,159) (5,534) (5,401)
--------------------------------------
Total stockholders' equity............................................................. 129,241 141,811 144,012
--------------------------------------
Total liabilities and stockholders' equity.................................................. $ 418,851 $ 413,341 $ 459,963
======================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
16 2000 Annual Report
<PAGE>
- --------------------------------------------------------------------------[LOGO]
A. M. Castle & Co. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
=================================================================================================================================
(Dollars in thousands) 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) income.................................................................... $ (1,675) $ 8,714 $ 18,522
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization...................................................... 9,769 9,866 8,486
Loss (gain) on sale of facilities/equipment........................................ 21 (202) (47)
Increase in deferred taxes......................................................... 1,740 1,251 2,562
(Increase) decrease in prepaid expenses and other assets........................... (4,592) 972 (1,167)
(Increase) decrease in investment in joint ventures................................ (1,657) (967) (1,791)
Increase (decrease) in post retirement benefit obligation.......................... 574 (504) (787)
(Decrease) increase in minority interest........................................... (890) 104 865
Asset impairment................................................................... 5,700 -- --
Other.............................................................................. 10 (36) (25)
-------------------------------------
Cash provided from operating activities before changes in current accounts.............. 9,000 19,198 26,618
-------------------------------------
(Decrease) increase from changes in:
Accounts receivable................................................................ (8,274) 2,559 9,437
Inventories........................................................................ 5,006 47,584 (54,467)
Other current assets............................................................... 133 60 (635)
Accounts payable................................................................... (20,006) 4,118 (3,850)
Accrued payroll and employee benefits.............................................. 482 (812) (1,669)
Current and deferred income taxes.................................................. (7,862) 1,431 (489)
Accrued liabilities................................................................ 83 (541) 1,527
Special charges and other working capital adjustments.............................. 2,832 -- --
-------------------------------------
Net increase (decrease) from changes in current accounts................................ (27,606) 54,399 (50,146)
-------------------------------------
Net cash (used by) provided from operating activities................................... (18,606) 73,597 (23,528)
-------------------------------------
Cash flows from investing activities
Investments and acquisitions (Note 10)............................................... (4,050) (3,129) (26,171)
Proceeds from sales of facilities/equipment (Note 5)................................. 8,264 7,399 9,640
Capital expenditures................................................................. (13,231) (17,770) (30,236)
-------------------------------------
Net cash from investing activities...................................................... (9,017) (13,500) (46,767)
-------------------------------------
Cash flows from financing activities
Proceeds from issuance of long-term debt............................................. 46,484 3,346 84,639
Repayments of long-term debt......................................................... (8,464) (52,968) (2,944)
Dividends paid....................................................................... (11,007) (10,958) (10,602)
Net proceeds from issuance of stock.................................................. -- 27 43
Other................................................................................ 111 80 (662)
-------------------------------------
Net cash provided from (used by) financing activities................................... 27,124 (60,473) 70,474
-------------------------------------
Net (decrease) increase in cash......................................................... (499) (376) 179
Cash--beginning of year................................................................. 2,578 2,954 2,775
-------------------------------------
Cash--end of year....................................................................... $ 2,079 $ 2,578 $ 2,954
=====================================
Supplemental disclosures of cash flow information
Cash paid during the year for--
Interest........................................................................... $ 10,992 $ 11,353 $ 7,987
-------------------------------------
Income taxes....................................................................... $ 5,402 $ 3,302 $ 10,134
=====================================
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
A.M. Castle & Co. 17
<PAGE>
_______________________________________________________________________________
Notes To Consolidated Financial Statements
(1) Principal accounting policies and business description
Nature of operations--The Company is an industrial distributor of specialty
metals including carbon, alloy, and stainless steels; nickel alloys; aluminum;
titanium; copper and brass throughout the United States, Canada, Europe and
Mexico. The customer base includes many Fortune 500 companies as well as
thousands of medium and smaller sized ones in various industries primarily
within the producer durable equipment sector. The Company also distributes
industrial plastics through its subsidiary Total Plastics, Inc.
Basis of presentation--The financial statements include A. M. Castle & Co. (the
Company) and its subsidiaries. All intercompany accounts and transactions have
been eliminated. Certain prior year amounts have been reclassified to conform to
2000 presentation.
Use of estimates--The financial statements have been prepared in accordance with
generally accepted accounting principles which necessarily include amounts based
on estimates and assumptions by management. Actual results could differ from
those amounts.
Cash--For the purposes of these statements, short-term investments that have a
maturity of 90 days or less are considered cash equivalents.
Inventories--Substantially all inventories are stated at the lower of last-in,
first-out (LIFO) cost or market. The Company values its LIFO increments using
the costs of its latest purchases during the years reported.
Property, plant and equipment--Property, plant and equipment are stated at cost
and include assets held under capitalized leases. Major renewals and betterments
are capitalized, while maintenance and repairs that do not substantially improve
or extend the useful lives of the respective assets are expensed currently. When
properties are disposed of, the related costs and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in income.
The Company provides for depreciation of plant and equipment by charging
against income amounts sufficient to amortize the cost of properties over their
estimated useful lives (buildings--12 to 40 years; machinery and equipment--5 to
20 years). Depreciation is provided using the straight-line method for financial
reporting purposes and accelerated methods for tax purposes. Included in
depreciation expense is the amortization of assets under capital leases.
Income taxes--Income tax provisions are based on income reported for financial
statement purposes.
Retirement plan costs--The Company accrues and funds its retirement plans based
on amounts, as determined by an independent actuary, necessary to maintain the
plans on an actuarially sound basis. The Company also provides certain health
care and life insurance benefits for retired employees. The cost of these
benefits are recognized in the financial statements during the employee's active
working career.
Accumulated Other Comprehensive Income (Loss)--The components of
other comprehensive income are as follows: (dollars in thousands)
- --------------------------------------------------------------------------------
Comprehensive Accumulated Other
Income Comprehensive
(Loss) Income (Loss)
- --------------------------------------------------------------------------------
Balance at December 31, 1997................. $ 85
Net Income................................... $18,522
Foreign Currency Translation Loss
(Net of Income Tax of $122)............... (183) (183)
Pension Liability Adjustment
(Net of Income Tax of $389)............... (583) $ (583)
-------
Comprehensive Income......................... $17,756
=======
Balance at December 31, 1998................. (681)
Net Income................................... $ 8,714
Foreign Currency Translation Loss
(Net of Income Tax of 23)................. $ (34) (34)
Pension Liability Adjustment
(Net of Income Tax $33)................... 50 $ 50
-------
Comprehensive Income......................... $ 8,730
=======
Balance at December 31, 1999................. (665)
Net Loss..................................... $(1,675)
Foreign Currency Translation Loss
(Net of Income Tax of $292)............... (438) (438)
Pension Liability Adjustment
(Net of Income Tax of $13)................ (20) $ (20)
-------
Comprehensive Loss........................... $(2,133)
=======
Balance at December 31, 2000................. $(1,123)
=======
- --------------------------------------------------------------------------------
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 three-year reporting
period. (dollars and shares in thousands)
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Net (loss) income............................ $ (1,675) $ 8,714 $ 18,522
Weighted average common shares outstanding... 14,054 14,046 14,043
Dilutive effect of outstanding employee and
directors' common stock options........... -- 4 40
--------------------------------
Diluted common shares outstanding............ 14,054 14,050 14,083
================================
Basic (loss) earnings per share.............. $ (0.12) $ 0.62 $ 1.32
================================
Diluted (loss) earnings per share............ $ (0.12) $ 0.62 $ 1.32
================================
Outstanding employee and directors' common
stock options having no dilutive effect... 1,353 780 140
================================
- --------------------------------------------------------------------------------
Goodwill--Cost in excess of net assets of acquired companies is amortized on a
straight-line basis over a 40-year period. As required, the Company continually
evaluates whether later events or circumstances warrant a revision in the
remaining useful life and recoverability of the unamortized balance. Net book
value of goodwill included in the prepaid expenses and other assets as of
December 31, 2000, 1999 and 1998 was $ 31.6 million, $30.4 million and $29.7
million respectively. Accumulated amortization at December 31, 2000, 1999 and
1998 was $3.6 million, $2.7 million and $1.7 million respectively.
Segment Reporting--In accordance with the requirements of SFAS No. 131, the
Company has concluded that its business activities fall into one identifiable
business segment since approximately 91% of all revenues are derived from the
distribution of its specialty metal products. These products
18 2000 Annual Report
<PAGE>
- --------------------------------------------------------------------------[LOGO]
are purchased, warehoused, processed and sold using essentially the same
systems, facilities, sales force and distribution network. Approximately 73% of
current year revenues from these products came from the sale of carbon and
stainless steel, with the balance provided from the sale of non-ferrous metal
products.
Revenue Recognition--Revenue from product sales is recognized upon shipment to
customers. Provisions for discounts and rebates to customers, and returns and
other adjustments are provided for in the same period the related sales are
recorded. Shipping and handling expenses are recorded as operating expense.
These amounts were $26.9 million, $24.9 million and $26.2 million for 2000, 1999
and 1998 respectively.
New Accounting Standard--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 No. 137 on January 1, 2001. The adoption will
not have a significant effect on the Company's consolidated results of
operations or financial position.
(2) Short-term debt
Short-term borrowing activity was as follows (in thousands):
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Maximum borrowed............................. $ 12,500 $ 22,350 $ 22,000
Average borrowed............................. 2,978 3,442 4,979
Average interest rate during the year........ 7.1% 5.3% 5.8%
- --------------------------------------------------------------------------------
(3) Income taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's Federal and state deferred tax liabilities and assets as of
December 31, 2000, 1999 and 1998 are as follows (in thousands):
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation............................ $ 11,540 $ 10,473 $ 9,790
Inventory, net.......................... 3,930 8,505 6,566
Pension................................. 7,104 6,105 5,793
-----------------------------
Total deferred liabilities........... 22,574 25,083 22,149
-----------------------------
Deferred tax assets:
Postretirement benefits................. 1,065 1,021 952
Other, net.............................. 2,518 807 950
-----------------------------
Total deferred tax assets............ 3,583 1,828 1,902
-----------------------------
Net deferred tax liabilities................. $ 18,991 $ 23,255 $ 20,247
=============================
- --------------------------------------------------------------------------------
The components of the provision for deferred income (benefit) Federal tax
for the years ended December 31, 1999 and 2000, 1998, are as follows
(in thousands):
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Depreciation................................. $ 908 $ 614 $ 1,526
Inventory, net............................... (3,982) 1,714 1,424
Pension/Postretirement benefits.............. 954 218 157
Other, net................................... (1,448) 321 (687)
-----------------------------
$ (3,568) $ 2,867 $ 2,420
=============================
- --------------------------------------------------------------------------------
A reconciliation between the statutory Federal income tax amount and the
effective amounts at which taxes were actually (benefited) provided is as
follows (in thousands):
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Federal (benefit) income tax at
statutory rates............................. $ (838) $ 5,144 $ 10,755
State income taxes, net of Federal
income tax benefits.......................... (109) 669 1,448
Other........................................ 227 171 4
-----------------------------
Income tax (benefit) provision............... $ (720) $ 5,984 $ 12,207
=============================
- --------------------------------------------------------------------------------
(4) Long-term debt
Long-term debt consisted of the following at December 31, 2000, 1999 and 1998
(in thousands):
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Revolving credit agreement (a) (c).............. $ 46,541 $ -- $ 49,179
6.49% insurance company term loan, due in
equal installments from 2004 through 2008.... 20,000 20,000 20,000
7.53% insurance company term loan due in
equal installments through 2005.............. 3,286 3,943 4,600
Industrial development revenue bonds at a
4.3% weighted average rate, due in
varying amounts through 2010 (b)(c).......... 14,591 15,358 16,225
7.54% insurance company loan due in equal
installments from 2005 through 2009.......... 25,000 25,000 25,000
6.54% average rate insurance company loan
due in varying installments from 2001
through 2012................................. 55,000 55,000 55,000
9.3% insurance company term loan, due in
equal installments through 2000.............. -- 1,640 3,310
Other........................................... 142 5,599 2,764
-----------------------------
Total........................................... 164,560 126,540 176,078
Less--current portion........................... (3,425) (3,915) (3,765)
-----------------------------
Total long-term portion......................... $161,135 $122,625 $172,313
=============================
- --------------------------------------------------------------------------------
The carrying value of long term debt does not differ materially from their
estimated fair value as of December 31, 2000.
(a) The Company has revolving credit agreements of $100.0 million domestically
and $26.0 million with foreign banks. The credit facilities are five-year
revolvers and can be extended annually by mutual agreement. Under these credit
arrangements all borrowings are considered to be long-term debt for balance
sheet presentation purposes.
Interest rate options on the domestic facility are based on Eurodollar
Interbank Rates, Reference Rates or competitive Bid Rates from five
participating banks. The weighted average interest rate in 2000 was 6.9%. A
commitment fee of .22% of the unused portion of the commitment is required on
the domestic facility.
(b) The industrial revenue bonds are based on a variable rate demand bond
structure and are backed by a letter of credit.
(c) The most restrictive provisions of the loan agreements require the Company
to maintain minimum funded debt to total capitalization ratios. At December 31,
2000, the Company was in compliance with all restrictive covenants.
(d) Aggregate annual principal payments required on current and long-term debt
(including obligations under capital leases) are due as follows (in thousands):
A. M. Castle & Co. 19
<PAGE>
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------
Year ending December 31,
- ---------------------------------------------------------------
2001........................................ $ 3,425
2002........................................ 3,321
2003........................................ 3,299
2004........................................ 10,823
2005........................................ 12,132
Later years................................. 131,560
--------
Total debt.................................. $164,560
========
- ---------------------------------------------------------------
Total net book value of assets collateralized under financing arrangements
approximated $1.7 million at December 31, 2000.
Net interest expense reported on the accompanying Consolidated Statements
of Income was reduced by interest income of $0.01 million in 2000, 1999 and
1998.
(5) Lease agreements
(a) Description of leasing arrangements--The Company has capital and operating
leases covering certain warehouse facilities, equipment, automobiles and trucks,
with lapse of time as the basis for all rental payments plus a mileage factor
included in the truck rentals.
(b) Capital leases--Obligations under capitalization of leases are not
significant.
(c) Operating leases--Future minimum rental payments under operating leases that
have initial or remaining noncancelable lease terms in excess of one year as of
December 31, 2000, are as follows (in thousands):
- ---------------------------------------------------------------
Year ending December 31,
- ---------------------------------------------------------------
2001...................................... $ 7,855
2002...................................... 7,418
2003...................................... 7,005
2004...................................... 6,583
2005...................................... 5,862
Later years................................ 19,093
---------
Total minimum payments required............ $ 53,816
=========
- ---------------------------------------------------------------
(d) Rental expense--Total rental payments charged to expense were $13.0 million
in 2000, $10.9 million in 1999 and $9.8 million in 1998.
(e) Sale and leaseback of assets--During 2000, 1999 and 1998 the Company sold
and leased back equipment under operating leases with terms ranging from six to
nine years. The assets sold at approximately net book value for proceeds of
$8.3, $7.4, and $9.6 million respectively. The leases allow for a purchase
option at the end of the lease term of $2.2 million in 2000, $2.0 million in
1999 and $2.6 million in 1998. Annual rentals are $1.2 million for 2000, $1.0
million for the 1999 leases and $1.3 million for the 1998 leases.
(6) Retirement, profit-sharing and incentive plans
Substantially all employees who meet certain requirements of age, length of
service and hours worked per year are covered by Company-sponsored retirement
plans. These retirement plans are defined benefit, noncontributory plans.
Benefits paid to retirees are based upon age at retirement, years of credited
service and average earnings.
The assets of the Company-sponsored plans are maintained in a single trust
account. The majority of the trust assets are invested in common stock mutual
funds, insurance contracts, real estate funds and corporate bonds. The Company's
funding policy is to satisfy the minimum funding requirements of ERISA.
Components of net pension benefit cost for 2000, 1999 and 1998 (in
thousands):
- -----------------------------------------------------------------------------
2000 1999 1998
- -----------------------------------------------------------------------------
Service cost........................... $ 1,621 $ 2,196 $ 1,769
Interest cost.......................... 5,362 5,135 4,497
Expected return on assets.............. (9,089) (8,273) (6,832)
Amortization of transition assets...... -- -- --
Amortization of prior service cost..... 93 93 69
Amortization of actuarial(gain) loss... (169) 118 80
--------------------------------
Net periodic benefit cost.............. $ (2,182) $ (731) $ (417)
================================
- -----------------------------------------------------------------------------
Status of the plans at December 31, 2000, 1999 and 1998 was as follows (in
thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Change in projected benefit obligation:
Benefit obligation at beginning of year $ 68,713 $ 69,135 $ 63,969
Service cost............................................ 1,621 2,196 1,769
Interest cost........................................... 5,362 5,136 4,497
Benefit payments........................................ (3,882) (3,504) (3,338)
Actuarial loss (gain)................................... 484 (4,539) 2,142
Plan amendments......................................... -- 289 96
----------------------------------------
Benefit obligation at end of year....................... $ 72,298 $ 68,713 $ 69,135
========================================
Change in plan assets:
Fair value of assets at beginning of year............... $ 103,357 $ 90,004 $ 77,957
Actual (loss) return on assets.......................... (4,220) 16,844 15,372
Employer contributions.................................. 13 13 13
Benefit payments........................................ (3,882) (3,504) (3,338)
----------------------------------------
Fair value of plan assets at year end................... $ 95,268 $ 103,35 $ 90,004
========================================
Reconciliation of funded status:
Funded status........................................... $ 22,972 $ 34,647 $ 20,869
Unrecognized prior service cost......................... 13 106 (91)
Unrecognized actuarial gain............................. (5,249) (19,212) (5,989)
----------------------------------------
Net amount recognized................................... $ 17,736 $ 15,541 $ 14,789
========================================
Amounts recognized in balance sheet consist of:
Prepaid benefit cost.................................... $ 20,896 $ 18,314 $ 16,964
Accrued benefit liability............................... (3,815) (3,475) (2,994)
Intangible assets....................................... 102 169 236
Accumulated comprehensive income........................ 553 533 583
----------------------------------------
Net amount recognized................................... $ 17,736 $ 15,541 $ 14,789
========================================
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The assumptions used to measure the projected benefit obligations, future
salary increases, and to compute the expected long-term return on assets for the
Company's defined benefit pension plans are as follows:
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Discount rate....................................... 8.00% 8.25% 7.00%
Projected annual salary increases................... 4.75 4.75 4.75
Expected long-term rate of return on plan assets.... 10.00 10.00 9.50
- --------------------------------------------------------------------------------
The Company has profit sharing plans for the benefit of salaried and other
eligible employees (including officers). The Company's profit sharing plan
includes features under Section 401(K) of the Internal Revenue Code. The plan
includes a provision whereby the Company partially matches employee
contributions up to a maximum of 6% of the employees' salary. The plan also
includes a supplemental contribution feature whereby a Company contribution
would be made to all eligible employees upon achievement of specific return on
investment goals as defined by the plan.
The Company has a management incentive bonus plan for the benefit of its
officers and key employees. Incentives are paid to line managers based on
performance, against objective, of their respective operating units.
20 2000 Annual Report
<PAGE>
- --------------------------------------------------------------------------(LOGO)
Incentives are paid to corporate officers on the basis of total Company
performance against objective. Amounts accrued and charged to income under each
plan are included as part of accrued payroll and employee benefits at each
respective year-end. The amounts charged to income are summarized below (in
thousands):
- -----------------------------------------------------------------------
2000 1999 1998
- -----------------------------------------------------------------------
Profit sharing and 401-K................ $ 427 $ 415 $ 1,211
==========================
Management incentive.................... $ 286 $ 120 $ 1,360
==========================
- -----------------------------------------------------------------------
The Company also provides declining value life insurance to its retirees
and a maximum of three years of medical coverage to qualified individuals who
retire between the ages of 62 and 65. The Company does not fund these plans.
Components of net postretirement benefit cost for 2000, 1999 and 1998 (in
thousands):
- -----------------------------------------------------------------------
2000 1999 1998
- -----------------------------------------------------------------------
Service.................................. $ 56 $ 68 $ 79
Interest cost............................ 125 126 150
Amortization of prior service cost....... 22 22 22
Amortization of actuarial gain........... (79) (54) (35)
-----------------------
Net periodic benefit cost................ $124 $162 $216
=======================
- -----------------------------------------------------------------------
The status of the plans at December 31, 2000, 1999 and 1998 was as follows
(in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
2000 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Change in projected benefit obligations:
Benefit obligation at beginning of year..... $ 1,927 $ 2,293 $ 2,750
Service cost................................ 56 68 79
Interest cost............................... 125 126 150
Benefit payments............................ (123) (84) (180)
Actuarial gains............................. (276) (476) (506)
Curtailments................................ -- -- --
------------------------------------
Benefit obligation at end of year........... $ 1,709 $ 1,927 $ 2,293
====================================
Change in plan assets:
Fair value of assets at beginning of year... $ -- $ -- $ --
Employer contributions......................... 123 84 180
Benefit payments............................ (123) (84) (180)
------------------------------------
Fair value of plan assets at year-end.......... $ -- $ -- $ --
====================================
Reconciliation of funded status:
Funded status............................... $(1,709) $(1,926) $(2,293)
Unrecognized prior service cost............. 398 420 441
Unrecognized actuarial gain................. (1,181) (986) (578)
------------------------------------
Net amount recognized....................... $(2,492) $(2,492) $(2,430)
====================================
Amounts recognized in balance sheet consist of:
Accrued benefit liabilities................. $(2,492) $(2,492) $(2,430)
------------------------------------
Net amount recognized....................... $(2,492) $(2,492) $(2,430)
====================================
- -----------------------------------------------------------------------------------------
</TABLE>
Future benefit costs were estimated assuming medical costs would increase
at a 8.75% annual rate for the current year, with annual increases decreasing by
1% per year thereafter until an ultimate trend rate of 5.75% is reached. A 1%
increase in the health care cost trend rate assumptions would have increased the
accumulated postretirement benefit obligation at December 31, 2000 by $75,000
with no significant effect on the 2000 postretirement benefit expense. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.00% in 2000, 8.25% in 1999 and 7.00% in
1998.
(7) Common stock
Changes in the common and treasury stock accounts during 2000, 1999 and 1998
were as follows (dollars in thousands):
- --------------------------------------------------------------------------------
Common Stock Treasury Stock
- --------------------------------------------------------------------------------
Shares
Issued Amount Shares Amount
- --------------------------------------------------------------------------------
December 31, 1997........... 14,885,943 $27,293 845,019 $ 5,378
Stock options exercised..... 3,500 65 918 23
Other....................... -- 107 1 --
December 31, 1998........... 14,889,44 $27,465 845,938 $ 5,401
Stock options exercised..... 13,312 160 8,747 133
Other....................... -- -- -- --
December 31, 1999........... 14,902,755 $27,625 854,685 $ 5,534
Stock options exercised..... -- -- -- --
Other....................... -- -- (112,494) (1,375)
December 31, 2000........... 14,902,755 $27,625 742,191 $ 4,159
- --------------------------------------------------------------------------------
During 2000 a lettered stock award of 100,000 shares with a value of $1.2
million was granted. The award vests in various amounts over a three year
period. An expense of $400,000 was recorded in 2000 in order to recognize the
compensation ratably over the vesting period.
The Company has long-term stock incentive and stock option plans for the
benefit of officers, directors, and key management employees. The plans and
related activity are summarized below.
The 1989 Long-Term Incentive Plan authorized up to 421,875 shares of common
stock for use under the plan. Compensation expense is recognized ratably over
the vesting period as determined by the plan. Activity under the plan for 2000,
1999 and 1998 is as follows:
- ---------------------------------------------------------------------------
2000 1999 1998
- ---------------------------------------------------------------------------
Compensation expense.................. $ -- $ -- $ 190,000
=============================
Shares awarded........................ -- -- --
=============================
- ---------------------------------------------------------------------------
The Company currently has several stock option plans in effect. The 1990
Restricted Stock and Stock Option Plan authorizes up to 656,250 shares of common
stock; the 1995 Directors Stock Option Plan authorizes up to 187,500 shares; the
1996 Restricted Stock and Stock Option Plan authorizes 937,500 shares; and the
2000 Restricted stock and Stock Option Plan authorizes 1,200,000 shares for use
under these plans. A summary of the activity under the plans is shown below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Option Wtd. Avg.
Shares Exercise Price Range
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1997................. 324,684 $ 18.64 $ 6.60 $ 21.88
Granted........................... 270,610 20.51 20.25 23.13
Forfeitures.................... (3,869) 6.60 6.60
Exercised...................... (3,500) 18.52 12.07 18.75
-------------------------------------------------
December 31, 1998................. 587,925 19.58 12.07 23.38
Granted........................... 296,000 15.96 15.06 16.00
Forfeitures.................... (61,587) 18.73 12.07 21.88
Exercised...................... (13,312) 12.07 12.07
-------------------------------------------------
December 31, 1999................. 809,026 18.45 12.07 23.38
Granted........................... 622,400 10.73 10.00 12.50
Forfeitures.................... (100,785) 15.90 10.00 22.44
Exercised...................... -- -- --
-------------------------------------------------
December 31, 2000................. 1,330,641 $ 15.03 $ 10.00 $ 23.38
- -----------------------------------------------------------------------------------------
</TABLE>
As of December 31, 2000, 745,941 of the 1,330,641 options outstanding were
exercisable and had a weighted average contractual life of 7.7 years with a
weighted average exercise price of $17.53. The remaining 584,700
A. M. Castle & Co. 21
<PAGE>
________________________________________________________________________________
shares were not exercisable and had a weighted average contractual life of 9.3
years, with a weighted average exercise price of $11.82. The weighted average
fair value of the current year's option grant is estimated to be $1.31 per
share. The fair value has been estimated on the day of the grant using the Black
Scholes option pricing model with the following assumptions, risk free interest
rate of 5.25% in 2000 (6.5% in 1999 and 1998), expected dividend yield of 7.4%
in 2000 (3.0% in 1999 and 1998), option life of 10 years, and expected
volatility of 30 percent.
The Company has chosen to account for the stock option plans in accordance
with APB Opinion No. 25 under which no compensation expense has been recognized.
Had compensation cost for these plans been determined under SFAS No. 123, the
Company's 2000 net income would have been reduced by approximately $0.4 million
or $0.03 per share, 1999 net income would have been reduced by approximately
$0.8 million or $0.06 per share and 1998 net income would have been reduced by
approximately $1.0 million or $0.07 per share.
(8) Asset Impairment Special Charges
In 2000, as part of a strategic review of the Company's operations, special
charges of $8.5 million were recorded for inventory and other assets
impairments.
Impairment and other operating expenses of $6.5 million were taken on
non-productive assets ($2.8 million), a processing facility ($1.9 million)and a
joint venture ($1.8 million)in anticipation of their sale over the next year.
The carrying value of these assets was written down to the Company's estimate of
realizable value. Fair value was either based on appraisal value or other
estimates of their worth. Accordingly results could vary significantly from such
estimates.
The Company intends to operate the processing facility and participate in
the joint venture while pursuing alternatives for their sale. At December 31,
2000 these assets have a remaining carrying value of $9.2 million. Together, the
two entities recorded pre-tax losses of $1.6 million and $2.1 million in 2000
and 1999, and a pre-tax profit of $0.4 million in 1998.
The Company also had a $2.0 million write-down of slow moving inventories
in preparation for re-manufacturing them into more saleable items.
(9) Contingent liabilities
At December 31, 2000 total exposure under guarantees issued for banking
facilities of unconsolidated affiliates was $12.5 million. The Company was
contingently liable as endorser on discounted trade acceptances aggregating $5.5
million at December 31, 2000. Also, the Company has $1.6 million of irrevocable
letters of credit outstanding to comply with the insurance reserve requirements
of its workers' compensation insurance carrier.
The Company is the defendant in several lawsuits arising out of the conduct
of its business. These lawsuits are incidental and occur in the normal course of
the Company's business affairs. It is the opinion of counsel that no significant
uninsured liability will result from the outcome of the litigation, and thus
there is no material financial exposure to the Company.
(10) Acquisitions
During 2000 a subsidiary of the Company purchased a 90% interest in a plastics
distributor. The aggregate cash consideration paid was $4.0 million. The
acquisition has been accounted for as a purchase and is included in the
financial statements from the date of acquisition. Also in 2000 the Company
invested in an e-commerce company, MetalSpectrum, LLC, which is being accounted
for on an equity basis from the date of acquisition. Pro-forma results are not
presented, as the amounts do not significantly differ from historical results.
(11) Selected quarterly data (unaudited) The unaudited quarterly results of
operations for 2000 and 1999 are as follows (dollars in thousands, except per
share data--Note 7):
<TABLE>
<CAPTION>
=================================================================================================
First Second Third Fourth+
Quarter Quarter Quarter Quarter
=================================================================================================
<S> <C> <C> <C> <C>
2000 quarters
Net sales...................................... $ 195,239 $ 192,27 $ 184,958 $ 172,034
Gross profit................................... 59,294 58,382 54,604 47,366
Net income (loss).............................. 3,766 2,836 1,379 (9,656)
Net income (loss) per share basic.............. $ .27 $ .20 $ .10 $ (.69)
Net income (loss) per share diluted............ $ .27 $ .20 $ .10 $ (.69)
1999 quarters
Net sales...................................... $ 183,460 $ 179,992 $ 177,097 $ 166,916
Gross profit................................... 56,825 57,152 54,070 56,292
Net income..................................... 2,755 3,134 1,354 1,471
Net income per share basic .................... $ .20 $ .22 $ .10 $ .10
Net income per share diluted .................. $ .20 $ .22 $ .10 $ .10
=================================================================================================
</TABLE>
+Fourth quarter includes special charges to cost of sales of $2.0 million and
$6.5 million of impairment and other operating expenses.
22 2000 Annual Report
<PAGE>
- ------------------------------------------------------------------------- [LOGO]
Report of Independent Public Accountants
To the Stockholders and Board of
Directors of A. M. Castle & Co.:
We have audited the accompanying consolidated balance sheets of A.M. Castle &
Co. (a Delaware corporation) and Subsidiaries as of December 31, 2000, 1999 and
1998, and the related consolidated statements of income, reinvested earnings and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of A. M. Castle & Co. and
Subsidiaries as of December 31, 2000, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.
Arthur Andersen LLP
Chicago, Illinois
February 1, 2001
A. M. Castle & Co. 23
<PAGE>
________________________________________________________________________________
<TABLE>
<CAPTION>
Directors
<S> <C> <C>
Daniel T. Carroll Robert S. Hamada John McCartney
Chairman Dean Vice Chairman
The Carroll Group, Inc. a Graduate School of Business University of Chicago Datatec, Ltd.
management consulting firm A technology holding company
Patrick J. Herbert, III
Edward F. Culliton President G. Thomas McKane
Vice President and Chief Simpson Estates, Inc. a President and Chief
Financial Officer private management firm Executive Officer
Robert W. Grubs John P. Keller John Puth
President and Chief Executive Officer of President Managing Member J.W. Puth
Anixter International and President and Chief Keller Group, Inc. Associates, LLC
Executive Officer of Anixter, Inc. a an industrial manufacturing & a consulting firm
distributor of communication products and coal mining company
wire and cable Michael Simpson
John W. McCarter, Jr. Chairman of the Board
William K. Hall President
President and Chief The Field Museum (Chicago)
Executive Officer Procyon a natural history museum
Technologies, Inc.
An aerospace/defense component manufacturer
Officers
Michael Simpson Tim N. Lafontaine James A. Podojil
Chairman of the Board Vice President-Alloy Group Treasurer-Controller
G. Thomas McKane John R. Nordin Jerry M. Aufox
President and Chief Executive Officer Vice President and Chief Information Officer Secretary-Legal Counsel
Edward F. Culliton Gise Van Baren Total Plastics, Inc.
Vice President and Chief Financial Officer Vice President-H-A Industries Steven E. Hulbert
President
Marc Biolchin Craig R. Wilson
Vice President-Tubular Group Vice President-Advanced Materials Group Thomas L. Garrett
Vice President
M. Bruce Herron Paul J. Winsauer
Vice President-Sales West Vice President-Human Resources Oliver Steel Plate Company
James E. Stevenson
Stephen V. Hooks Henry C. Winters President
Vice President-Merchandising Vice President-Operations
Gary J. Kropf
Vice President-Sales East
</TABLE>
24 2000 Annual Report
<PAGE>
- ------------------------------------------------------------------------- [LOGO]
Stockholder Information
General Offices
3400 North Wolf Road
Franklin Park, IL 60131
847-455-7111
General Counsel
Mayer, Brown & Platt
Transfer Agent & Registrar
American Stock Transfer and Trust Company
Common Stock Traded
American Stock Exchange
Chicago Stock Exchange
Independent Auditors
Arthur Andersen LLP
Dividend Reinvestment Plan
All registered holders of A. M. Castle & Co. Common stock are eligible to
participate in a convenient and economical Dividend Reinvestment Plan.
Participants may also make voluntary cash payments. The company pays all
commissions and fees associated with stock purchased under the Plan. If you own
Castle common stock in "street name" (no certificates), please contact your
brokerage firm for further information.
Dividend Payment Dates
Dividends are paid approximately four weeks following the regular Board meeting
which are held on the fourth Thursday of January, April, July and October.
Annual Meeting
The Annual Meeting of the Company's shareholders will be held at our corporate
headquarters on Thursday, April 26, 2001 at 10 a.m. Central Daylight Savings
Time. Our corporate headquarters address is 3400 North Wolf Road, Franklin Park,
Illinois 60131.
Form 10-K
A. M. Castle & Co. will be pleased to make its annual report on Form 10-K, filed
with the Securities and Exchange Commission, available at no cost to interested
stockholders on written request to the corporate secretary.
- --------------------------------------------------------------------------------
A Caution Concerning Forward-Looking Statement
Under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the Company cautions investors that any forward-looking statements or
projections, including those made in this document, are subject to risks and
uncertainties that may cause actual results to differ materially from those
expected.
- --------------------------------------------------------------------------------
<PAGE>
A. M. Castle & Co.
Castle Metals Locations
Atlanta, Buffalo, Charlotte, Chicago, Cincinnati, Cleveland, Dallas,
Detroit, Edmonton, Houston, Kansas City, Los Angeles, Milwaukee,
Minneapolis, Montreal, Philadelphia, Phoenix, Pittsburgh, San Diego,
Seattle, Stockton, Toronto, Tulsa, Wichita, Winnipeg, Worcester
Divisions
H-A Industries - Hammond
Subsidiaries
A. M. Castle & Co. Limited - Blackburn, Christchurch Keystone
Tube Company - LaPorte, Riverdale, Titusville Oliver Steel
Plate Company - Cleveland
Total Plastics, Inc. - Baltimore, Chicago, Cleveland, Detroit, Fort Wayne,
Grand Rapids, Harrisburg, Indianapolis, Kalamazoo,
Pittsburgh, South Bend
Joint Ventures
Castle de Mexico, S.A. de C.V. - Monterrey
Energy Alloys, L.P. - Houston
Kreher Steel Company, L.L.C. - Chicago, Dallas, Detroit, Houston
Laser Precision, L.L.C. - Chicago
Paramont Machine Company, L.L.C. - New Philadelphia
Metal Express, L.L.C.
[LOGO]
A. M. Castle & Co.
3400 North Wolf Road
Franklin Park, IL 60131
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----