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.
In the last three years, sales mix in the Company's core business was approximately as follows:
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, 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 one-half of all sales.
In the United States, the Company serves the wide range of industrial companies within the $600 billion producer durable equipment sector of the economy. 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 6% 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.
In Canada, the Company serves a wide range of businesses similar to the market profile in the United States. These markets are serviced by the Company's Canadian subsidiary A. M. Castle & Co. (Canada) Inc.
In Mexico, the Company operates through a joint venture, Castle d Mexico, S.A. de C.V., and targets a wide range of businesses within the producer durable goods sector.
Markets in western Europe, South America and the Pacific Rim are serviced through the Company's International Sales Department located in the Franklin Park location, and starting in late 1996, the Company's new United Kingdom based subsidiary, A. M. Castle & Co. Limited, a U.K. Corporation.
The Company's Hy-Alloy Steels Co. division, located in Bedford Park, Illinois, a Chicago suburb, is a distributor of alloy bars stocked as rounds, squares, hexes, and flats; and of alloy tubing. In 1993 a value-added bar processing center, H-A Industries, was added. From this facility, the Company operates a heat treat line producing quench and tempered alloy bar product, an annealing line, and a bar turning and straightening line producing cold finished bars.
The Company also operates two subsidiaries acquired in 1996 whose businesses complement the Company's distribution and value added focus. Total Plastics, Inc., acquired in January 1996, is a Midwest based distributor serving a wide variety of users of industrial plastics. Cutter Precision Metals, Inc., acquired in April 1996, is a Pacific Northwest based metals distributor which has added highly specialized sawing and grinding capabilities to the Company's range of processing services.
The Company also holds a one-third joint venture interest in Kreher Steel Co., a midwest based distributor, focusing on customers whose primary need is for immediate, reliable delivery of large quantities of alloy, SBQ and stainless bars.
In general, the Company purchases metals from many producers. In the case of nickel alloys, it is single sourced. Satisfactory alternative sources, however, 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.
The major portion of 1996 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 1500 full-time employees in its operations throughout the United States, Canada and the United Kingdom. Approximately 300 of these are represented by collective bargaining units, principally the United Steelworkers of America.
ITEM 2.
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:
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(1) Leased: See Note 5 in the 1996 Annual Report to Stockholders, incorporated herein by this specific reference, for information regarding lease agreements.
ITEM 3.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7.
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, 6, and 7) in Form 10-K has been included in the 1996 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, 6, and 7 are incorporated herein by this specific reference to the 1996 Annual Report to Stockholders: "Common Stock Information", page 15, "Eleven-Year Financial and Operating Summary", pages 12 and 13, and "Financial Review", pages 14 and 15.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Part IV, Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS OF THE REGISTRANT
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 10, 1997 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.
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 10, 1997, filed with the Securities and Exchange Commission, pursuant to Regulation 14A entitled "Management Remuneration" and is hereby incorporated by this specific reference.
ITEM 12.
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 10, 1997, 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 10q-K pursuant to Regulation 14A, which involves the election of Directors.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Financial statements (incorporated by reference to the 1996 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 1996.
A. M. CASTLE & CO. INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Except for Exhibits C, F and G, exhibits listed above 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, 1995.
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.
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To A. M. Castle & Co.:
We have audited in accordance with generally accepted auditing standards, the financial statements included in the A. M. Castle & Co. 1996 Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 3, 1997. 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.
[/S/ ARTHUR ANDERSEN LLP]
Arthur Andersen LLP
Chicago, Illinois, February 3, 1997
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 3, 1997 included in this Annual Report on Form 10-K for the year ended December 31, 1996; and
2. Our report dated February 3, 1997 incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 1996.
[/S/ ARTHUR ANDERSEN LLP]
Arthur Andersen LLP
Chicago, Illinois March 15, 1997
SCHEDULE II
A. M. CASTLE & CO. ACCOUNTS RECEIVABLE--ALLOWANCE FOR DOUBTFUL ACCOUNTS VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994 (DOLLARS IN THOUSANDS)
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 1, 1997
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.
SIGNATURE TITLE DATE - ------------------------------ ------------------------- --------------------
/s/ MICHAEL SIMPSON - ------------------------------ Chairman of the Board March 1, 1997 Michael Simpson
/s/ RICHARD G. MORK President--Chief - ------------------------------ Executive Officer, and March 1, 1997 Richard G. Mork Director
/s/ EDWARD F. CULLITON Vice President--Chief - ------------------------------ Financial Officer, and March 1, 1997 Edward F. Culliton Director
/s/ WILLIAM K. HALL - ------------------------------ Director March 1, 1997 William K. Hall
/s/ ROBERT S. HAMADA - ------------------------------ Director; Chairman, Audit March 1, 1997 Robert S. Hamada Committee
/s/ JOHN W. MCCARTER, JR. - ------------------------------ Director March 1, 1997 John W. McCarter, Jr.
/s/ WILLIAM J. MCDERMOTT - ------------------------------ Director March 1, 1997 William J. McDermott
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