10-K405 1 c68076e10-k405.txt ANNUAL REPORT 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) For the fiscal year ended December 31, 2001 Commission File Number: 1-5415 ----------------- ------ A. M. CASTLE & CO. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 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 - $0.01 per share 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 1, 2002 was $160,372,663. The number of shares outstanding of the registrant's common stock on March 1, 2002 was 14,726,599 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, 2001 Proxy Statement dated March 15, 2002 Part III furnished to Stockholders in connection with registrant's Annual Meeting of Stockholders ================================================================================ 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: 2001 2000 1999 ---- ---- ---- Carbon and Stainless 71% 73% 76% Non-Ferrous Metals 29% 27% 24% ---- ---- ---- 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 41% of all core 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 3%. 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 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 (U.K.), a U.K. Corporation. Total Plastics, Inc., headquartered in Michigan, serves a wide variety of users of industrial plastics. Keystone Tube Company, LLC 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-half 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 LP, 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 2001, the Company is utilizing a special purpose, non-owned, bankruptcy remote company (Castle Funding Corp.) for the sole purpose of buying receivables from the Company and selected subsidiaries and selling an undivided interest in all eligible trade accounts receivable to a commercial paper conduit. Castle Funding Corp. retains an undivided percentage interest in the pool of accounts receivable to a commercial paper conduit. Since Castle Funding Corp.'s sole purpose is to purchase accounts receivable from the company, it is required by the Financial Accounting Standards Board (FASB) that the special purpose company be consolidated with the Company even though it is non-owned. 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 4 OF 15 The major portion of 2001 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 1,700 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. 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 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 Cleveland area - Bedford Heights, Ohio 374,400 Dallas, Texas 78,000 Edmonton, Alberta 38,300 (1) Fairfield, Ohio 226,000 (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 Stockton, California 60,000 (1) Toronto area - Mississauga, Ontario 60,000 (1) Wichita, Kansas 58,800 (1) Winnipeg, Manitoba 50,000 Worcester, Massachusetts 56,000 --------- Total Castle Metals 2,413,400 A. M. Castle & Co. Limited (U.K.) --------------------------------- Blackburn, U.K 43,000 (1) Christchurch, U.K 12,000 (1) --------- 55,000 H-A Industries -------------- Hammond, Indiana 243,000 (1) --------- Keystone Tube Company LLC ------------------------- Riverdale, Illinois 115,000 (1) KSI, LLC -------- La Porte, Indiana 90,000 Keystone Honing Company ----------------------- Titusville, Pennsylvania 92,000 PAGE 6 of 15 Approximate Floor Area in Locations Square Feet --------- ------------- Total Plastics, Inc. -------------------- Baltimore, Maryland 24,000 (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 (1) Pittsburgh, Pennsylvania 4,400 (1) Rockford, Michigan 53,600 (1) South Bend, Indiana 7,500 (1) --------- 329,700 Oliver Steel Plate Company -------------------------- Twinsburg, Ohio 120,000 (1) GRAND TOTAL 3,458,100 ========= Sales Offices (Leased) ---------------------- Cincinnati, Ohio Detroit, Michigan Milwaukee, Wisconsin Pittsburgh, Pennsylvania Phoenix, Arizona San Diego, California Tulsa, Oklahoma (1) Leased: See Note 5 in the 2001 Annual Report to Stockholders, incorporated herein by this specific reference, for information regarding lease agreements. 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 8 OF 15 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. Item 6.
2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Selected Financial Data ----------------------- Net Sales $ 611.2 $ 744.5 $ 707.4 $ 792.8 $ 754.9 Cost of Sales 429.8 522.9 483.1 559.1 540.3 Special charges -- 2.0 -- -- -- -------- -------- -------- -------- -------- Gross Profit 181.4 219.6 224.3 233.7 214.6 Operating Expenses 169.0 195.5 189.1 185.1 164.3 Impairment and other Operating expenses -- 6.5 -- -- -- Depreciation and Amortization 9.4 9.7 9.9 8.5 6.6 Interest expense, net 9.6 10.3 10.6 9.4 4.2 Discount on sale of accounts receivable 1.3 -- -- -- -- -------- -------- -------- -------- -------- (Loss) income before taxes (7.9) (2.4) 14.7 30.7 39.5 Income taxes (2.8) (0.7) 6.0 12.2 15.7 -------- -------- -------- -------- -------- Net (loss) income $ (5.1) $ (1.7) $ 8.7 $ 18.5 $ 23.8 ======== ======== ======== ======== ======== Share Data ---------- Number of shares outstanding At year-end (in thousands) 14,111 14,161 14,048 14,043 14,041 Net (loss) income per share basic $ (0.36) $ (0.12) $ 0.62 $ 1.32 $ 1.70 Net (loss) income per share diluted $ (0.36) $ (0.12) $ 0.62 $ 1.32 $ 1.69 Cash dividend per share $ 0.495 $ 0.78 $ 0.78 $ 0.76 $ 0.66 Book value per share $ 8.31 $ 9.12 $ 10.10 $ 10.25 $ 9.74 Financial Position at Year-End ------------------------------ Total assets $ 327.4 $ 418.9 $ 413.3 $ 460.0 $ 366.4 Long-term debt $ 117.2 $ 161.1 $ 122.6 $ 172.3 $ 90.7 Stockholders equity $ 117.2 $ 129.2 $ 141.8 $ 144.0 $ 136.7
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 and 7) in Form 10-K has been included in the 2001 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 2001 Annual Report to Stockholders: "Common Stock Information", page 14, and "Financial Review", pages 12 and 13. 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. Executive Officers of The Registrant Name and Title Age Business Experience -------------- --- ------------------- Michael Simpson 63 Mr. Simpson began his employment with Chairman of the Board the registrant in 1968 and retired from fulltime employment in 2001. 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 57 Mr. McKane began his employment with the President and Chief registrant in May of 2000. Formerly, he Executive Officer had been employed by Emerson Electric since 1968. Albert J. Biemer, III 40 Mr. Biemer began his employment with the Vice President-- registrant in 2001 and was elected Vice Supply Chain President - Supply Chain. Formerly with CSC, Ltd. as Vice President, Logistics in 2000 and Carpenter Technology Corporation 1997 to 2000. Marc Biolchin 47 Mr. Biolchin began his employment with Vice President - the registrant's Keystone Tube Company Tubular Group (acquired in 1997) in 1977. He was named Vice President - Tubular Group in 1998. Edward F. Culliton 60 Mr. Culliton began his employment with Vice President and the registrant in 1965. He was elected Chief Financial Officer Corporate Secretary in 1972; Treasurer in 1975; and Vice President of Finance in 1977. He is the Chief Financial Officer. M. Bruce Herron 56 Mr. Herron began his employment with the Vice President-- registrant in 1970. He was elected to Sales West the position of Vice President - Western Region in 1989; Vice President - Sales in 1998; and Executive Vice President and Chief Operating Officer in 1999. He was named Vice President-Sales West in 2000. Stephen V. Hooks 50 Mr. Hooks began his employment with the Vice President-- registrant in 1972. He was elected to Merchandising the position of Vice President - Midwest Region in 1993, and Vice President - Merchandising in 1998. PAGE 10 OF 15 Name and Title Age Business Experience -------------- --- ------------------- Gary J. Kropf 54 Mr. Kropf began his employment with the Vice President-- registrant in 1999. He was elected to Sales East the position of Vice President - Carbon Group in 1999 and became Vice President - Sales East in 2000. Tim N. Lafontaine 48 Mr. Lafontaine began his employment with Vice President-- the registrant in 1975, and was elected Alloy Group Vice President - Alloy Group in 1998. Richard S. Meyers 45 Mr. Meyers began his employment with the Vice President-- registrant in 2000 and was elected Vice Operations President - Operations in 2001. Formerly with Kennametals, Inc. as general manager manufacturing from 1997-2000 and with Dana Corp. 1985-1987. John R. Nordin 45 Mr. Nordin began his employment with the Vice President and registrant in 1998. He was elected Vice Chief Information Officer President and Chief Information Officer in 1998. Craig R. Wilson 50 Mr. Wilson began his employment with the Vice President -- registrant in 979. He was elected to the Advanced Material position of Vice President - Eastern Group Region in 1997; Vice President - Business 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. Paul J. Winsauer 50 Mr. Winsauer began his employment with Vice President - the registrant in 1981. In 1996, he was Human Resources elected to the position of Vice- President - Human Resources. James A. Podojil 59 Mr. Podojil began his employment with Chief Accounting Officer the registrant in 1968. In 1977 he was and Treasurer/Controller elected to the position of Controller and in 1985 was elected to the additional post of Treasurer. Jerry M. Aufox 59 Mr. Aufox began his employment with the Secretary and Corporate registrant in 1977. In 1985 he was Counsel elected to the position of Secretary and Corporate Counsel. He is responsible for all legal affairs of the registrant. 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 15, 2002 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 15, 2002, 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 15, 2002, 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 2001 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 2001. PAGE 12 OF 15 A. M. CASTLE & CO. INDEX TO FINANCIAL STATEMENTS AND SCHEDULES 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 2001 Annual Report to Stockholders of A. M. Castle & Co., included herein - Consolidated Statements of Income - For the years ended December 31, 2001, 2000 and 1999.................................. Page 15 Consolidated Statements of Reinvested Earnings - For the years ended December 31, 2001, 2000 and 1999............................ Page 15 Consolidated Balance Sheets - December 31, 2001, 2000 and 1999.... Page 16 Consolidated Statements of Cash Flows - For the years ended December 31, 2001, 2000, and 1999........................... Page 17 Notes to Consolidated Financial Statements........................Pages 18-23 Report of Independent Public Accountants.......................... Page 23 Exhibits: 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 - Description of management incentive plan...................... Exhibit D 10 - 2000 restricted stock and stock option plan................... Exhibit E 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, 2000 and as exhibits to the registrants definitive proxy statement dated March 15, 2002 filed with the Securities Exchange Commission pursuant to Regulation 14A. 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 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. 2001 Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 4, 2002. 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 18, 2002 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 18, 2002 included in this Annual Report on Form 10-K for the year ended December 31, 2001; and 2. Our report dated February 18, 2002 incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 2001. Arthur Andersen LLP Chicago, Illinois March 13, 2002 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, 2001, 2000 AND 1999 (Dollars in thousands) 2001 2000 1999 ---- ---- ---- Balance, beginning of year $ 590 $ 580 $ 638 Add - Provision charged to income 600 1,814 318 - Recoveries 327 77 102 Less - Uncollectible accounts charged against allowance (871) (1,881) (478) ------ ------ ----- Balance, end of year $ 646 $ 590 $ 580 ====== ====== ===== 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, 2002 ------------------ 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 as shown following their name on the dates indicated. /s/ Michael Simpson /s/ John McCartney /s/ John W. McCarter, Jr. ------------------------------------- ------------------------------- ----------------------------------- Michael Simpson, John McCartney, Director John W. McCarter, Jr., Director Chairman of the Board Chairman, Audit Committee Member, Audit Committee March 2, 2002 March 2, 2002 March 2, 2002 /s/ G. Thomas McKane /s/ William K. Hall ------------------------------------- ------------------------------- G. Thomas McKane, President - William K. Hall, Director Chief Executive Officer, and Director Member, Audit Committee March 2, 2002 March 2, 2002 /s/ Edward F. Culliton /s/ John P. Keller ------------------------------------- ------------------------------- Edward F. Culliton, Vice President - John P. Keller, Director Chief Financial Officer, and Director Member, Audit Committee March 2, 2002 March 2, 2002