<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
<TABLE>
<S> <C>
For the three month period ended April 4, 1998 Commission File Number: 333-04254
---------
</TABLE>
BAR TECHNOLOGIES INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3753384
- ----------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
5700 LOMBARDO CENTER DRIVE, SUITE 100
SEVEN HILLS, OHIO 44131 (216) 750-2100
- ------------------------------------------- ---------------------------------
(Address of principal executive offices) (Registrant's telephone number)
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.
X Yes No
--- ---
Number of shares outstanding of common stock as of April 28, 1998:
CLASS A COMMON STOCK, $0.001 PAR VALUE 204,458 SHARES
CLASS B COMMON STOCK, $0.001 PAR VALUE 536,829 SHARES
CLASS C COMMON STOCK, $0.001 PAR VALUE 536,865 SHARES
<PAGE> 2
BAR TECHNOLOGIES INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
<S> <C>
Consolidated Statements of Income (Unaudited) for the three month
periods ended April 4, 1998 and March 29, 1997...........................................3
Consolidated Balance Sheets as of April 4, 1998 (Unaudited) and
January 3, 1998........................................................................4-5
Consolidated Statement of Stockholders' Equity for the three month
period ended April 4, 1998...............................................................6
Consolidated Statements of Cash Flows (Unaudited) for the
three month periods ended April 4, 1998 and March 29, 1997...............................7
Notes to Consolidated Financial Statements............................................8-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.....................................11-13
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.......................................................................14
Item 2. Changes in Securities...................................................................14
Item 3. Defaults Upon Senior Securities.........................................................14
Item 4. Submission of Matters to a Vote of Security Holders.....................................14
Item 5. Other Information.......................................................................14
Item 6. Exhibits and Reports on Form 8-K........................................................14
Signatures..............................................................................15
</TABLE>
<PAGE> 3
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED APRIL 4, 1998 AND MARCH 29, 1997
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
April 4, 1998 March 29, 1997
------------- --------------
<S> <C> <C>
Net sales $ 81,643 $ 52,331
Cost of sales 78,776 53,501
Depreciation and amortization
1,427 1,262
Selling, general and
administrative expense
5,110 3,737
-------- --------
Loss from operations
(3,670) (6,169)
Interest expense, net
6,174 5,725
Other income
77 639
-------- --------
Loss before provision for
income taxes
(9,767) (11,255)
Provision for income taxes
163 142
-------- --------
Net income (loss)
(9,930) (11,397)
Preferred stock dividends
96 96
-------- --------
Net loss applicable to
common shares $(10,026) $(11,493)
======== ========
Net income (loss) per share - basic $ (7.84) $ (15.50)
======== ========
Net income (loss) per share - diluted $ (7.84) $ (15.50)
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 4
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
April 4, January 3,
1998 1998
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,560 $ 3,391
Accounts receivable, less allowances of
$859 and $817, respectively 46,264 34,287
Inventories 61,979 58,277
Prepaid expenses 2,120 1,935
Restricted interest escrow 41 42
--------- ---------
Total Current Assets 113,964 97,932
PROPERTY, PLANT & EQUIPMENT
Land and improvements 7,169 7,169
Buildings and improvements 18,224 18,209
Machinery and equipment 57,596 57,594
Construction-in-progress 7,316 4,037
--------- ---------
TOTAL PROPERTY, PLANT & EQUIPMENT 90,305 87,009
Accumulated depreciation (8,783) (7,432)
--------- ---------
NET PROPERTY, PLANT & EQUIPMENT 81,522 79,577
Goodwill, net of accumulated amortization
of $674 and $567, respectively 12,212 12,293
Restricted debt service fund 1,551 1,551
Other assets 13,918 14,325
--------- ---------
TOTAL ASSETS $ 223,167 $ 205,678
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
April 4, January 3,
1998 1998
------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 31,686 $ 33,339
Accrued interest 1,365 3,605
Other accrued liabilities 17,187 14,178
Current maturities of long-term debt 2,914 3,033
Revolving credit facility 82,000 53,650
--------- ---------
TOTAL CURRENT LIABILITIES 135,152 107,805
Long-term debt 130,771 130,741
Deferred income taxes 5,049 5,047
Other long-term liabilities 5,069 4,964
--------- ---------
TOTAL LIABILITIES 276,041 248,557
Redeemable Stock
Series A Preferred Stock $0.001 par value;
Authorized, 5,000 shares,
Issued and outstanding, 1,100 shares 5,500 5,500
STOCKHOLDERS' EQUITY (DEFICIT)
Series B Preferred Stock $0.001 par value;
Authorized, issued and outstanding, 1 share --- ---
Class A Common Stock, $0.001 par value;
Authorized, 1,000,000 shares,
Issued and outstanding, 204,458 and 204,458 shares,
respectively --- ---
Class B Common Stock, $0.001 par value;
Authorized, 600,000 shares,
Issued and outstanding, 536,829 and 536,829 shares,
respectively 1 1
Class C Common Stock, non-voting $0.001 par value;
Authorized, 600,000 shares,
Issued and outstanding, 536,865 and 536,865 shares,
respectively 1 1
Additional paid-in-capital 63,055 63,055
Warrants outstanding 5,119 5,119
Accumulated deficit (126,087) (116,061)
Cumulative translation adjustment (463) (494)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (58,374) (48,379)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 223,167 $ 205,678
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTH PERIOD ENDED APRIL 4, 1998
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
Series B Class A Class B Class C
Preferred Stock Common Stock Common Stock Common Stock Additional
--------------- ---------------- ---------------- ---------------- Paid-in Warrants
Shares Amount Shares Amount Shares Amount Shares Amount Capital Outstanding
------ ------ ------ ------ ------ ------ ------ ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 3, 1998 1 $ - 204,458 $ - 536,829 $ 1 536,865 $ 1 $ 63,055 $ 5,119
Net loss
Other comprehensive
income - foreign currency
translation adjustments,
net of tax of $0
Comprehensive income
------ ------ ------- ------ ------- ------ ------- ------ -------- --------
1 $ - 204,458 $ - 536,829 $ 1 536,865 $ - $ 63,055 $ 5,119
====== ====== ======= ====== ======= ====== ======= ====== ======== ========
<CAPTION>
Accumulated
Other
Accumulated Comprehensive Comprehensive
Deficit Income(1) Income
------- ------ ------
<S> <C> <C>
Balance January 3, 1998 $(116,061) $ (494)
Net loss (10,026) $ (10,026)
Other comprehensive
income - foreign currency
translation adjustments,
net of tax of $0 31 31
---------
Comprehensive income $ (9,995)
=========
--------- --------
Balance, April 4, 1998 $(126,087) $ (463)
========= ========
<FN>
1 - Represents foreign currency translations adjustments
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH
PERIODS ENDED APRIL 4, 1998 AND MARCH 29, 1997
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
April 4, 1998 March 29, 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (9,930) $(11,397)
Adjustments to reconcile net cash
used by operating activities
Depreciation and amortization 1,427 1,262
Accretion of original issue discount 325 302
Amortization of deferred financing cost 529 546
Increase in accounts receivable (11,977) (8,696)
(Increase) decrease in inventory (3,702) 3,398
(Increase) decrease in prepaid expenses (185) 494
Increase (decrease) in accounts payable (1,653) 8,495
Increase (decrease) in other current liabilities 769 (463)
Other (9) 611
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (24,406) (5,448)
-------- --------
Cash flows from investing activities
Net capital expenditures (3,295) (710)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (3,295) (710)
-------- --------
Cash flows from financing activities
Net receipts under revolving credit agreement 28,350 750
Repayment of debt (414) (330)
Preferred stock dividends (96) (96)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 27,840 324
-------- --------
Effect of exchange rate changes on cash 30 (32)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 169 (5,866)
Cash and cash equivalents-beginning of period 3,391 7,034
-------- --------
Cash and cash equivalents-end of period $ 3,560 $ 1,168
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 7,790 $ 5,411
======== ========
Cash paid for income taxes $ -- $ --
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 8
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands of dollars, except per share data)
1. BASIS OF PRESENTATION
The consolidated financial statements and other pro forma information included
herein have been prepared by Bar Technologies Inc. ("BarTech") and are
unaudited. Certain information and footnote disclosures normally prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Although management believes that all adjustments, including normal
recurring adjustments, necessary for a fair presentation have been made, interim
periods are not necessarily indicative of the results of operations for a full
year. As such, these financial statements should be read in conjunction with
audited financial statements and notes thereto for the fiscal year ended January
3, 1998, included in the Company's Form 10K, filed with the Securities and
Exchange Commission.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The consolidated financial statements presented include the accounts of BarTech
and its wholly owned subsidiary Bliss & Laughlin Industries, Inc. after
elimination of intercompany accounts and transactions.
Since its formation, the Company has incurred substantial losses as a result of
the start up and ongoing maintenance of its facilities and its general and
administrative expenses. Any substantial delay in achieving or a failure to
bring the facilities up to commercial volumes and productivity levels, or to
sell its products in its target markets could have a material adverse effect on
the Company's financial condition and results of operations. In the event of a
substantial delay in the implementation of its plans or substantial
unanticipated costs associated with the implementation of its plans, the Company
may need to borrow funds under its credit facilities or, to the extent funds are
not available thereunder, to obtain additional financing to meet its cash flow
requirements. As a result of the Recapitalization, the Company is highly
leveraged. Restrictive covenants included in the indenture and other debt
obligations may have the effect of limiting the Company's ability to incur
additional indebtedness, sell assets, or acquire other entities and may
otherwise limit the operational and financial flexibility of the Company. Based
on its fiscal 1998 plan, the Company believes that its cash flow from
operations, combined with the available funds under its Credit Agreement, will
be sufficient to enable it to meet its debt service requirements when due and to
fund its capital expenditure, working capital and general corporate
requirements.
2. COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS No. 130"), which requires
companies to report all changes in equity during a period, except those
resulting from investments by owners, in a financial statement for the period in
which they are recognized. The Company has chosen to disclose Comprehensive
Income, which encompasses net losses and foreign currency translation
adjustments, in the Consolidated Statement of Stockholders' Equity.
3. 1997 EQUITY INVESTMENT AND REVOLVING CREDIT AGREEMENT
On September 11, 1997, the Company's principal owners, Blackstone Capital
Partners II Merchant Banking Fund and its affiliates ("Blackstone") and certain
affiliates of the successor to Veritas Capital Inc., purchased 536,865 shares of
Class C non-voting common stock for $30.0 million.
Also in third quarter 1997, the Company and its commercial banks negotiated an
amendment to its existing $90,000 Revolving Credit Agreement (the "Amended
Agreement"). The Amended Agreement provides for the addition of a new revolving
Sub-Facility and amends certain portions of its original Revolving Credit
Agreement. The Sub-
<PAGE> 9
Facility component of the Amended Agreement provides the Company with up to
$15,000 of additional borrowing capacity based on a higher receivable and
inventory advance rate than in the Revolving Credit Agreement. The Sub-Facility
component of the Amended Agreement expires on September 1, 1999. The maturity
date of the Amended Agreement remains April 2, 2000.
Borrowings under the Amended Agreement bear interest at a rate per annum equal
to, at the Company's option, either a prime rate plus 2.0% or adjusted LIBOR
plus 3.0%, subject to upward adjustment in certain circumstances. Sub-Facility
borrowings bear interest at a rate per annum equal to, at the Company's option,
either a prime rate plus 3.5% or LIBOR plus 4.5%. Borrowings outstanding under
the Amended Agreement including the Sub-Facility were $82,000 and $53,650 at
April 4 and January 3, 1998, respectively.
The Amended Agreement contains a number of covenants similar to those in the
Revolving Credit Agreement. Additionally, under the Amended Agreement, the
Company will be required to maintain a minimum Consolidated Interest Coverage
Ratio beginning with annualized results for the quarter ended September 30,
1998. The Amended Agreement also contains provisions that will prohibit any
modifications of the Indenture Agreement dated April 2, 1996 to the Senior
Secured Notes in any manner adverse to the Lenders and that will limit the
Company's ability to refinance the Senior Notes without the consent of such
Lenders.
4. SENIOR SECURED NOTES
The Company issued Senior Secured Notes ("Senior Notes") on April 2, 1996 in the
amount of $91,609. Interest on the Senior Notes is at 13-1/2% per annum and is
payable semi-annually. The Senior Notes are callable after three years, with the
exception noted below, at the following redemption price:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999 106.750%
2000 103.375%
</TABLE>
The Senior Notes are fully and unconditionally guaranteed on a senior basis,
jointly and severally, by the Company's subsidiary, Bliss & Laughlin Industries
Inc. ("BLI") and its subsidiary, Canadian Drawn Steel Corporation ("CDSC"). Each
of the subsidiary guarantors is a wholly owned subsidiary of the Company. The
subsidiary guarantors comprise all of the direct and indirect subsidiaries of
the Company.
5. CONDENSED FINANCIAL INFORMATION OF BLISS & LAUGHLIN INDUSTRIES INC.
The following is the condensed information of the subsidiary guarantors on a
combined basis. Separate financial statements and other disclosures concerning
the subsidiary guarantors are not presented because management does not believe
they are material to investors.
<TABLE>
<CAPTION>
April 4, January 3,
FOR THE PERIOD ENDED: 1998 1998
--------- -----------
<S> <C> <C>
Current assets $ 60,285 $ 56,948
Noncurrent assets 37,664 37,868
Current liabilities 44,570 43,180
Noncurrent liabilities 13,717 13,611
April 4, March 29,
FOR THE THREE-MONTH PERIOD ENDED: 1998 1997
--------- ----------
Net sales $ 47,724 $ 39,503
Gross profit 5,445 4,415
Operating income 2,219 1,245
Net income 1,605 580
</TABLE>
<PAGE> 10
6. INVENTORIES
Inventories are valued at the lower of cost or market (net realizable value).
Cost is determined under the first-in, first-out (FIFO) method.
Inventory costs include material, labor and overhead. The components of
inventory were as follows:
<TABLE>
<CAPTION>
April 4, January 3,
1998 1998
--------- -----------
<S> <C> <C>
Raw Materials $ 14,981 $ 14,569
Work-in-process 21,279 22,341
Finished goods 25,719 21,367
--------- ---------
Total $ 61,979 $ 58,277
========= =========
</TABLE>
7. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
April 4, January 3,
1998 1998
---------- ----------
<S> <C> <C>
Deferred financing costs, net of amortization
of $4,946 and $4,351 $ 8,595 $ 9,188
Deferred income taxes 1,214 1,214
Other 4,109 3,923
---------- --------
Total $ 13,918 $ 14,325
========== ========
</TABLE>
8. NET (LOSS) PER SHARE
The weighted average number of common and common stock equivalent shares used in
the calculation of basic and diluted net loss per common share were 1,278,152
and 741,287 for the three months ended April 4, 1998 and March 29, 1997,
respectively. Securities totaling 137,416 shares at April 4, 1998 were excluded
from the diluted earnings per share calculation due to their antidilutive
effect.
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
- -------------
Following is management's discussion and analysis of financial condition, which
provides information with respect to the results of operations of the Company
for the three month periods ended April 4, 1998 and March 29, 1997. The
discussion should be read in connection with the information in the Unaudited
Consolidated Financial Statements and the notes pertaining thereto.
OVERVIEW
The Company acquired certain steelmaking and bar rolling assets from the former
Bar, Rod and Wire Division of Bethlehem Steel Corporation ("Bethlehem") in
September 1994. The Bethlehem Bar, Rod and Wire Division ceased operations in
December 1992, and therefore no historical results are presented for the
Bethlehem BRW Division due to the noncomparability of the Company's operations,
management and cost structure. Pursuant to its modernization and expansion plan,
the Company restarted operations at its Lackawanna hot bar rolling mill in
February 1996 and commissioned its continuous caster and restarted its melt shop
in its Franklin, Pennsylvania facility in August 1996.
In April 1996, the Company completed a recapitalization that resulted in the
issuance of $91.6 million in aggregate principal amount of 13 1/2% Senior Notes
due 2001 for proceeds of approximately $90.0 million. At the same time, the
Company's principal owners, Blackstone Capital Partners II Merchant Banking Fund
L. P. and its affiliates ("Blackstone") purchased 536,829 shares of Class B
common stock of the Company for $30.0 million. In addition, the Company also
entered into a senior revolving credit agreement ("Revolving Credit Agreement")
which was subsequently amended in September 1997, which provided for an initial
aggregate principal amount of $90.0 million. Subsequent amendments ("Amended
Agreement") to this facility provided the Company with an additional
sub-facility up to $15.0 million and amended certain portions of the agreement.
The Amended Agreement expires on September 1, 1999. The original maturity date
of the Revolving Credit Agreement remains April 2, 2000. Also in September 1997,
Blackstone and certain affiliates of the successor to Veritas Capital Inc.,
purchased 536,865 shares of Class C non-voting common stock for $30.0 million.
RESULTS OF OPERATIONS
During first quarter 1997, the Company began the transition from initial
operational and organizational start-up activities to a focused commercial
effort. Since first quarter 1997, the Company has begun to receive
qualifications from certain Tier I and II suppliers to the U.S. automotive
market. As a result of these qualifications, the Company has experienced a shift
of its product mix from lower to higher margins and product grades. This
qualification process will continue throughout the next one to three years,
depending on the length of the customer qualification process and the Company's
ability to meet the particular customer qualification standards.
THREE MONTHS ENDED APRIL 4, 1998 COMPARED WITH THE THREE MONTHS ENDED MARCH 29,
1997
The Company recorded net sales of $81.6 million for the three months ended April
4, 1998, as compared with net sales of $52.3 million for the comparable prior
year period. The $29.3 million, or 56.0% increase for the first quarter of
fiscal 1998 is due to an increase in hot rolled bar shipments to outside
customers and to an increase in the sales mix toward higher price per unit
products. The shipment increase was supported by increased production by the
additions of a third and fourth production shift at the Company's Lackawanna,
New York facility, which began during April and August 1997, respectively.
Cost of sales rose to $78.8 million for the three months ended April 4, 1998, as
compared with $53.5 million for the comparable prior year period. This increase
reflects the increase in sales and production volumes as the Company achieved
record production levels during the first quarter fiscal 1998. As a result, the
Company experienced improved production efficiencies resulting in gross profit
of $2.9 million for the three months ended April 4, 1998, compared with negative
gross profit of $1.2 million for the comparable prior year period.
The Company incurred selling, general and administrative expenses of $5.1
million for the three months ended April 4, 1998, or 6.3% of net sales, as
compared with $3.7 million, or 7.1% of net sales, for the comparable prior
<PAGE> 12
year period. The decrease in selling, general and administrative expenses as a
percent of net sales is due to the fixed nature of the majority of these
expenses benefiting from the increase in net sales as the Company completed its
start-up activities and transitioned into a full steelmaking and bar rolling
operation.
Interest expense, net increased to $6.2 million for the three months ended April
4, 1998, as compared with interest expense, net of $5.7 million for the
comparable prior year period. The $0.5 million, or 7.8% increase for the three
month period, is primarily attributable to higher average amounts borrowed under
the revolving credit facility and its related sub-facility.
The provision for income taxes consisted primarily of a provision for foreign
taxes related to the Company's Canadian subsidiary.
IMPACT OF INFLATION AND CHANGING PRICES
The Company does not believe that inflation has or will have a significant
impact on its results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity consist of available cash and cash
equivalents, borrowings under its revolving credit facility and cash flow from
operations. At May 15, 1998, the Company had liquidity available from both cash
and cash equivalents plus availability under its revolving credit facility
totaling approximately $12.4 million.
Borrowings under the Company's amended credit agreement ("Amended Agreement")
bear interest at a rate per annum equal to, at the Company's option, either a
prime rate plus 2.0%, or adjusted LIBOR plus 3.0%, subject to upward adjustment
in certain circumstances. Borrowings under the Amended Agreement's sub-facility
("Sub-Facility") bear interest at a rate per annum equal to, at the Company's
option, either a prime rate plus 3.5%, or LIBOR plus 4.5%. Amounts outstanding
under the Amended agreement, including amounts outstanding under its
Sub-Facility, were $82.0 million at April 4, 1998, compared with $53.7 million
at January 3, 1998. Weighted average interest rates on borrowings under the
Amended Agreement and the Sub-Facility at April 4, 1998 were 9.22% and 11.0%,
respectively. At January 3, 1998, weighted average interest rates under the
Amended Agreement and the Sub-Facility were 8.98% and 11.00%, respectively.
The Company has various financing arrangements in place in addition to its
Amended Agreement that are committed to funding its working capital and
corporate requirements. The Company had an aggregate amount of approximately
$133.7 million of borrowings outstanding under these committed agreements.
Cash used by operating activities increased to $24.4 million for the three month
period ended April 4, 1998, an increase of $19.0 million from the $5.4 million
for the comparable period in the prior year. Contributing to the increase was an
increase in accounts receivable resulting from higher sales volume in the first
quarter of 1998. The Company also experienced higher inventory levels as it
achieved record production levels during this period. These increases were
partially offset by a decrease in accounts payable during the first quarter
1998.
There are no restrictions on the ability of the Company's wholly-owned
subsidiary, Bliss & Laughlin Industries Inc. to transfer funds to the Company.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Many computer systems will experience problems handling dates beyond the year
1999. Certain of the Company's computer systems will be affected by the Year
2000 issue. The Company is currently in the process of replacing its existing
computer systems in an effort to improve its processes related to financial and
operational information. These initiatives include technology which will be Year
2000 compliant when implemented. The Company's installation plans for its new
systems are in place and are scheduled for completion in early fiscal 1999.
Statements included in this filing with the Securities and Exchange Commission
(including those portions of Management's Discussion and Analysis that refer to
the future) may contain forward-looking statements that are not historical facts
but refer to management's intentions, beliefs, or expectations for the future.
It is important to note
<PAGE> 13
that the Company's actual results could differ materially from those projected
in such forward-looking statements. Certain factors that could cause actual
results to differ from those in such forward-looking statements include, but are
not limited to, the following: i.) any substantial delay in the implementation
of the Company's plans or substantial unanticipated costs associated with its
plans for a successful transition into a full steelmaking and bar rolling
operation; ii.) the ability of the Company to sell its products in its targeted
markets at gross margins necessary to produce and maintain positive operating
income. The Company's success is dependent on its ability to increase sales. The
Company is in the process of enhancing its sales and customer service programs;
and iii.) the Company is subject to a variety of competitive factors such as
pricing, the financial strength of its competitors and the Company's ability to
establish a favorable position in the steelmaking and bar rolling industry. The
Company's competitive position could also be adversely affected by any
consolidation of its competition in the steelmaking industry.
In the event of a substantial delay in the implementation of its plans or
substantial unanticipated costs associated with the implementation of its plans,
the Company may need to borrow funds under the Credit Agreement or, to the
extent funds are not available thereunder, to obtain additional financing to
meet its cash flow requirements. As a result of the Recapitalization, the
Company is highly leveraged. Restrictive covenants included in the indenture and
other debt obligations may have the effect of limiting the Company's ability to
incur additional indebtedness, sell assets, or acquire other entities and may
otherwise limit the operational and financial flexibility of the Company.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1997 and early 1998, two accounting pronouncements were issued by the
Financial Accounting Standards Board that apply to the Company: Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures About Segments of
an Enterprise and Related Information," and SFAS No. 132, "Employers' Disclosure
About Pensions and Other Postretirement Benefits." Both new standards are
effective for the Company's 1998 fiscal year. SFAS No. 131 introduces a new
model for segment reporting called the "management approach". The management
approach is based on the way the chief operating decision-maker organizes
segments within a company for making operating decisions and assessing
performance. SFAS No. 132 standardizes disclosures and requires additional
disclosures for pension and postretirement benefits. Implementation of the new
pronouncements is not expected to have a significant effect on the Company's
disclosures.
<PAGE> 14
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
The Company and its subsidiaries are occasionally involved in various legal
proceedings occurring in the ordinary course of business. It is the opinion of
management, after consultation with legal counsel, that these matters will not
materially affect the Company's consolidated financial position or results of
operations.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
- --------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
None.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BAR TECHNOLOGIES INC.
Date: May 15, 1998 By: /s/ Thomas N. Tyrrell
----------------------------------------------
Thomas N. Tyrrell
President and Chief Executive Officer
Date: May 15, 1998 By: /s/ Frederick L. Deichert
----------------------------------------------
Frederick L. Deichert
Vice President of Finance and Chief Financial
Officer
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