<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
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For the three and nine month periods ended September 30, 2000 Commission File Number: 333-90709-04
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REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 34-1902647
--------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
3770 EMBASSY PARKWAY
AKRON, OHIO 44333-8367 (330) 670-3000
---------------------------------------- -------------------------------
(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 October 31, 2000: AS OF
OCTOBER 31, 2000, THERE WERE 840 CLASS A UNITS OF MEMBERS' INTEREST, 1,000 CLASS
B UNITS OF MEMBERS' INTEREST AND 30,000 CLASS C UNITS OF MEMBERS' INTEREST
OUTSTANDING.
<PAGE> 2
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND
SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
------------------------------
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Item 1. Unaudited Financial Statements
Consolidated/Combined Statements of Operations for the Three
Months Ended September 30, 2000 and the Periods from August
13, 1999 to September 30, 1999 and July 1, 1999 to August 12,
1999 3
Consolidated/Combined Statements of Operations for the Nine
Months Ended September 30, 2000 and the Periods from August
13, 1999 to September 30, 1999 and January 1, 1999 to August
12, 1999 4
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999 5
Consolidated/Combined Statements of Members'
Interest/Stockholders' Deficit for the Period from January 1,
1999 to August 12, 1999 and the Period from August 13, 1999 to
December 31, 1999 and the Nine Months Ended September 30, 2000
6
Consolidated/Combined Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and the Periods from August
13, 1999 to September 30, 1999 and January 1, 1999 to August
12, 1999 7
Notes to Consolidated/Combined Financial Statements 8-15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16-22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1 - UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2000 and the Periods
from August 13, 1999 to September 30, 1999 and July 1, 1999 to
August 12, 1999
(In thousands of dollars)
(Unaudited)
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<CAPTION>
The Company - Consolidated
------------------------------------------- The Predecessor -
Period From Combined
Three Months August 13, 1999 Period From
Ended to September 30, July 1, 1999 to
September 30, 2000 1999 August 12, 1999
-------------------- ------------------- -------------------
<S> <C> <C> <C>
Net sales $ 289,830 $ 209,768 $ 58,279
Cost of goods sold 261,691 211,992 57,627
--------- --------- ---------
Gross profit 28,139 (2,224) 652
Selling, general and administrative expense 14,469 21,251 4,174
Depreciation and amortization expense 14,885 13,367 3,070
Workforce reduction charges (Note 5) 3,337 10,598 118
Special charges (Note 8) 9,329 -- --
Other (income) expense, net (1,770) (232) (120)
--------- --------- ---------
Operating loss (12,111) (47,208) (6,590)
Interest expense, net 27,507 17,208 4,266
--------- --------- ---------
Loss before income taxes (39,618) (64,416) (10,856)
Provision for income taxes (9) 205 44
--------- --------- ---------
Loss from continuing operations (39,609) (64,621) (10,900)
Loss from disposition of discontinued
operations (Note 7) 6,703 -- --
--------- --------- ---------
Loss before extraordinary item (46,312) (64,621) (10,900)
Extraordinary loss from early
extinguishment of debt -- 23,342 --
--------- --------- ---------
Net loss $ (46,312) $ (87,963) (10,900)
========= =========
Preferred stock dividends 32
---------
Net loss applicable to common shares $ (10,932)
=========
The accompanying notes are an integral part of the consolidated/combined
financial statements.
</TABLE>
3
<PAGE> 4
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2000 and the Periods
from August 13, 1999 to September 30, 1999 and January 1, 1999
to August 12, 1999
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
The Company - Consolidated
------------------------------------------- The Predecessor -
Period From Combined
Nine Months August 13, 1999 Period From
Ended to September 30, January 1, 1999
September 30, 2000 1999 to August 12, 1999
-------------------- ------------------- -------------------
<S> <C> <C> <C>
Net sales $ 987,994 $ 209,768 $ 512,871
Cost of goods sold 902,689 211,992 485,887
--------- --------- ---------
Gross profit (loss) 85,305 (2,224) 26,984
Selling, general and administrative expense 43,857 21,251 33,822
Depreciation and amortization expense 45,983 13,367 21,889
Workforce reduction charges (Note 5) 8,557 10,598 42,065
Special charges (Note 8) 55,121 -- --
Other (income) expense, net (574) (232) (144)
--------- --------- ---------
Operating loss (67,639) (47,208) (70,648)
Interest expense, net 81,344 17,208 43,845
--------- --------- ---------
Loss before income taxes (148,983) (64,416) (114,493)
Provision for income taxes 242 205 420
--------- --------- ---------
Loss from continuing operations (149,225) (64,621) (114,913)
Loss from disposition of discontinued
operations (Note 7) 16,524 -- --
--------- --------- ---------
Loss before extraordinary item (165,749) (64,621) (114,913)
Extraordinary loss from early
extinguishment of debt -- 23,342 --
--------- --------- ---------
Net loss (165,749) $ (87,963) (114,913)
========= =========
Preferred stock dividends 224
---------
Net loss applicable to common shares $(115,137)
=========
</TABLE>
The accompanying notes are an integral part of the consolidated/combined
financial statements.
4
<PAGE> 5
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
(In thousands of dollars)
(Unaudited)
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<CAPTION>
September 30, 2000 December 31, 1999
------------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,876 $ 4,637
Accounts receivable, less allowances of $19,290 and $27,237,
respectively 166,435 157,166
Inventories (Note 4) 246,700 284,668
Assets held for sale (Note 7) 9,581 15,219
Prepaid expenses and other current assets 4,898 7,907
----------- -----------
Total current assets 431,490 469,597
Property, plant and equipment:
Land and improvements 15,239 15,875
Buildings and improvements 36,550 43,032
Machinery and equipment 718,082 736,300
Construction-in-progress 9,043 25,361
----------- -----------
Total property, plant and equipment 778,914 820,568
Accumulated depreciation (89,455) (56,802)
----------- -----------
Net property, plant and equipment 689,459 763,766
Assets held for sale (Note 7) 7,630 9,009
Intangible assets, net of accumulated amortization of $18,347 and $11,203,
respectively 162,441 163,479
Other assets 9,619 9,406
----------- -----------
Total assets $ 1,300,639 $ 1,415,257
=========== ===========
LIABILITIES AND MEMBERS' INTEREST
Current liabilities:
Accounts payable 212,077 196,050
Accrued interest 18,208 26,494
Accrued compensation and benefits 50,594 50,162
Other postretirement benefits 15,365 15,365
Defined benefit pension obligations 14,000 42,000
Other accrued liabilities 59,909 57,599
Current maturities of long-term debt 1,918 2,391
Revolving credit facility 346,996 336,397
----------- -----------
Total current liabilities 719,067 726,458
Long-term debt 511,096 481,062
Accrued environmental liabilities 16,955 17,373
Other postretirement benefits 215,238 204,268
Defined benefit pension obligations 78,334 56,480
Other liabilities 38,063 40,758
----------- -----------
Total liabilities 1,578,753 1,526,399
Mandatorily redeemable member's interest - Class A Units 5,000 5,500
Members' interest:
Class B Units (313,756) (146,594)
Class C Units 31,750 30,625
Accumulated other comprehensive loss (1,108) (673)
----------- -----------
Total members' interest (283,114) (116,642)
----------- -----------
Total liabilities and members' interest $ 1,300,639 $ 1,415,257
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated/combined
financial statements.
5
<PAGE> 6
<TABLE>
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REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED/COMBINED STATEMENTS OF MEMBERS' INTEREST/STOCKHOLDERS' DEFICIT
For the Period From January 1, 1999 to August 12, 1999, the Period
from August 13, 1999 to December 31, 1999 and the Nine Months Ended
September 30, 2000
(In thousands of dollars)
(Unaudited)
Bar Technologies Inc.
--------------------------------
Members' Interest Series B Class A
------------------------------
Class B Class C Preferred Common
Units Units Stock Stock
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance, January 1, 1999 $ - $ -
Net loss
Other comprehensive income:
Foreign currency translation
adjustment
Minimum pension liability
adjustment
Preferred stock dividends
------------- -------------- -------------- --------------
Balance, August 12, 1999 - -
Exchange of members' interest to
effect combination $ 67,468 $ 30,000
Preferred return (786) 625
Distribution of preferred return
Net loss (213,276)
Other comprehensive income:
Foreign currency translation
adjustment
------------- -------------- -------------- --------------
Balance, December 31, 1999 (146,594) 30,625 $ - $ -
============== ==============
Preferred return (1,413) 1,125
Distribution of preferred return
Redemption of Class A Units
Net loss (165,749)
Other comprehensive income:
Foreign currency translation
adjustment
------------- --------------
Balance, September 30, 2000 $(313,756) $ 31,750
============= ==============
</TABLE>
<TABLE>
<CAPTION>
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED/COMBINED STATEMENTS OF MEMBERS' INTEREST/STOCKHOLDERS' DEFICIT
For the Period From January 1, 1999 to August 12, 1999, the Period
from August 13, 1999 to December 31, 1999 and the Nine Months Ended
September 30, 2000
(In thousands of dollars)
(Unaudited)
Republic
Bar Technologies Inc. Engineered
-----------------------------------------------
Class B Class C Steels, Inc. Additional
Common Common Warrants Common Paid-In
Stock Stock Outstanding Stock Capital
--------------- --------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1999 $ 1 $ 1 $ 5,119 $ - $ 158,510
Net loss
Other comprehensive income:
Foreign currency translation
adjustment
Minimum pension liability
adjustment
Preferred stock dividends
--------------- --------------- -------------- ---------------- --------------
Balance, August 12, 1999 1 1 5,119 - 158,510
Exchange of members' interest to
effect combination (1) (1) (5,119) (158,510)
Preferred return
Distribution of preferred return
Net loss
Other comprehensive income:
Foreign currency translation
adjustment
--------------- --------------- -------------- ---------------- --------------
Balance, December 31, 1999 $ - $ - $ - $ - $ -
=============== =============== ============== ================ ==============
Preferred return
Distribution of preferred return
Redemption of Class A units
Net loss
Other comprehensive income:
Foreign currency translation
adjustment
Balance, September 30, 2000
</TABLE>
<TABLE>
<CAPTION>
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED/COMBINED STATEMENTS OF MEMBERS' INTEREST/STOCKHOLDERS' DEFICIT
For the Period From January 1, 1999 to August 12, 1999, the Period
from August 13, 1999 to December 31, 1999 and the Nine Months Ended
September 30, 2000
(In thousands of dollars)
(Unaudited)
Total
Accumulated Members'
Other Interest/
Accumulated Comprehensive Stockholders' Comprehensive
Deficit Income (Loss) Deficit Income (Loss)
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance, January 1, 1999 $ (230,004) $ (3,682) $ (70,055) $ (116,746)
================
Net loss (114,913) (114,913) $ (114,913)
Other comprehensive income:
Foreign currency translation
adjustment 157 157 157
Minimum pension liability
adjustment 2,491 2,491 2,491
Preferred stock dividends (224) (224)
--------------- ---------------- ---------------- ----------------
Balance, August 12, 1999 (345,141) (1,034) (182,544) $ (112,265)
================
Exchange of members' interest to
effect combination 345,141 278,978
Preferred return
Distribution of preferred return (161)
Net loss (213,276) $ (213,276)
Other comprehensive income:
Foreign currency translation
adjustment 361 361 361
--------------- ---------------- ---------------- ----------------
Balance, December 31, 1999 $ - (673) (116,642) $ (212,915)
=============== ================
Preferred return
Distribution of preferred return (288)
Redemption of Class A units (500)
Net loss (165,749) $ (165,749)
Other comprehensive income:
Foreign currency translation
adjustment (435) (435) (435)
---------------- ---------------- ----------------
Balance, September 30, 2000 $ (1,108) $ (283,114) $ (166,184)
================ ================ ================
</TABLE>
The accompanying notes are an integral part of the consolidated/combined
financial statements.
6
<PAGE> 7
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and the Periods
from August 13, 1999 to September 30, 1999 and January 1, 1999
to August 12, 1999
(In thousands of dollars)
(Unaudited)
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The Company - Consolidated
----------------------------------------- The Predecessor-
Period From Combined
Nine Months August 13, 1999 Period From
Ended September to September January 1, 1999 to
30, 2000 30, 1999 August 12, 1999
-------------------- ----------------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(165,749) $ (87,963) $(114,913)
Adjustments to reconcile net cash used
in operating activities:
Gain on sale of fixed assets (4,318) -- --
Special charges 55,121 -- --
Extraordinary loss from early extinguishment of debt -- 23,342 --
Depreciation and amortization 45,983 13,367 21,889
Accretion of original issue discount 1,972 409 5,750
Amortization of deferred financing cost 2,395 1,656 1,483
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (9,269) 44,943 (61,295)
(Increase) decrease in inventory 37,968 (21,256) (6,645)
(Increase) decrease in other current assets 3,009 15,509 (3,237)
Increase (decrease) in accounts payable 16,027 (85,771) 111,959
Increase (decrease) in accrued compensation and
benefits 432 (4,867) 2,774
(Decrease) increase in defined benefit pension
obligations (6,146) 17,608 (3,140)
Increase in other postretirement benefits 10,970 8,987 14,720
(Decrease) increase in accrued environmental
liabilities (1,043) (3,671) 1,805
Decrease in other current liabilities (24,415) (8,669) (3,349)
Other 4,121 (24,254) (23,228)
--------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES (32,942) (110,630) (55,427)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,336) (2,543) (21,788)
Disposition of property, plant and equipment 8,665 -- --
Acquisition, net of cash acquired -- 14,621 --
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,329 12,078 (21,788)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 30,000 419,950 387
Net proceeds under revolving credit facilities 10,599 235,833 80,816
Repayments of long-term debt (2,411) (685,021) (3,277)
Preferred stock dividends -- -- (224)
Redemption of Class A members' interest (500) -- --
Payment of preferred return (288) -- --
Deferred financing costs (6,113) (30,274) --
Proceeds from capital contributions -- 155,025 --
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 31,287 95,513 77,702
--------- --------- ---------
Effect of exchange rate changes on cash (435) 254 157
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (761) (2,785) 644
Cash and cash equivalents - beginning of period 4,637 6,592 5,948
--------- --------- ---------
Cash and cash equivalents - end of period $ 3,876 $ 3,807 $ 6,592
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized $ 45,258 $ 10,416 $ 41,224
========= ========= =========
Cash paid for income taxes $ 901 $ -- $ 156
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated/combined
financial statements.
7
<PAGE> 8
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED/COMBINED FINANCIAL STATEMENTS
(In thousands of dollars, except as otherwise noted)
(Unaudited)
1. NATURE OF OPERATIONS, ORGANIZATION AND OTHER RELATED INFORMATION
Republic Technologies International Holdings, LLC and subsidiaries ("Holdings"
or the "Company") manufactures and markets special bar quality ("SBQ") steel bar
and rod products. SBQ steel products are high quality hot-rolled and
cold-finished carbon and alloy steel bars and rods used primarily in critical
applications in the automotive and industrial equipment industries. The Company
produces a wide range of SBQ steel products and supplies a diverse customer base
that includes leading automobile and industrial equipment manufacturers and
their first tier suppliers.
The Company was formed in a combination completed on August 13, 1999 (the
"Combination"). The Combination was completed through a series of mergers, asset
transfers and related steps as set forth in a Master Restructuring Agreement
among Bar Technologies Inc. ("BarTech"), Republic Engineered Steels, Inc.
("Republic"), USS/Kobe Steel Company and various of their affiliates. Following
the Combination, Republic Technologies International, LLC ("Republic
Technologies"), a newly formed legal entity and wholly owned subsidiary of the
Company, directly or indirectly owns and operates all of the assets of BarTech,
Republic and USS/Kobe Steel Company's SBQ steel products business ("USS/Kobe").
BarTech and Republic have been operated under common management and ownership
control since prior to the Combination. The consolidated financial statements of
Holdings are being presented from the date of the Combination. Comparative
combined financial statements are being presented for BarTech and Republic for
the periods that they were under common control prior to the Combination (the
"Predecessor").
The Company and the individual companies included in the Combination (BarTech,
Republic and USS/Kobe) have historically incurred substantial losses. As a
result of the Combination, the Company has substantial indebtedness and is
highly leveraged. The Company's future performance is subject to the success of
its consolidation plan, which is intended to create a more efficient, higher
quality network of production facilities operated by a smaller and more flexible
workforce. The success of the consolidation plan will depend on many factors
including the Company's ability to rationalize its production facilities and
headcount, enhance the productivity of its remaining facilities through facility
specialization and targeted capital investment, eliminate redundant overhead
costs and produce internally more raw materials currently purchased from third
parties. The Company's future success will also depend on general economic
conditions and financial, competitive, regulatory, labor and other factors, many
of which cannot be predicted and are beyond the Company's control.
The Company's lower than expected sales in the first nine months of 2000 and its
lower than expected performance during the third and fourth quarters of 1999
caused the Company's liquidity to be negatively affected. The Company's
liquidity position has also been negatively impacted by the implementation of
the Company's consolidation plan as a result of the time lag between the
incurrence of certain costs and the receipt of the expected cash flow benefits,
such as in the case of headcount reductions requiring lump sum payouts. The
Company's availability on its revolving credit facility at September 30, 2000
was $22,594.
Management has sought to improve the Company's liquidity position by taking a
number of actions including increasing spot sales prices, reducing
administrative staff, implementing cost cutting programs, closing operations at
its Johnstown melt facility, as well as, its Canton 12" rolling facility (see
Note 8) and announcing plans to close its Baltimore, Maryland Specialty Steel
facility (see Note 7), and reducing inventories. The Company has also reduced
its planned capital expenditures from $48,000 to $13,500 for the year 2000,
obtained deferrals of approximately $46,000 of certain quarterly 2000 and 2001
Pension Benefit Guaranty Corporation ("PBGC") funding requirements until 2002
and 2003, obtained a deferral from the Ohio Environmental Protection Agency (the
"Ohio EPA") of $1,200 of committed environmental expenditures until 2001,
restructured Republic Technologies' revolving credit facility, and deferred the
redemption of Cumulative Preferred Stock issued by Republic Technologies
International, Inc. (the "Parent Company") and held by Bethlehem Steel
Corporation (see Note 9). Additionally, on July 17, 2000, the Company obtained
loans aggregating approximately $30,000 from certain of its direct and indirect
equity investors in exchange for notes of Republic Technologies and warrants to
purchase Class D common stock of Republic Technologies International, Inc. (see
Note 9).
The Company is in the process of exiting of its Specialty Steels Division and
expects to complete this in 2001 (see Note 7). The Company is also in the
process of selling certain real estate from facilities closed as part of the
consolidation plan.
8
<PAGE> 9
Notwithstanding these efforts, the Company may need to obtain additional
financing to meet its cash flow requirements, including financing from the sale
of additional debt or equity securities. Restrictive covenants included in the
indenture relating to the senior secured notes and other debt obligations limit
the Company's ability to incur additional indebtedness, or sell assets (most of
which are pledged), and may otherwise limit the operational and financial
flexibility of the Company. The ability to sell assets may also be constrained
by the provisions of the Company's labor agreement.
2. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated/combined financial statements contain results for
BarTech and Republic for the three and nine months ended September 30, 2000 and
1999, and the results for USS/Kobe for the three and nine months ended September
30, 2000, and the period from August 13, 1999 to September 30, 1999. Prior
period results are not comparable with the current periods due to the
acquisition USS/Kobe on August 13, 1999.
These consolidated/combined statements 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 the audited financial
statements and notes thereto for the year ended December 31, 1999 included in
the Company's Form 10-K, filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of Holdings and its
wholly owned subsidiaries. The combined financial statements include the
accounts of BarTech and its wholly owned subsidiaries and Republic and its
wholly owned subsidiaries for the periods that they were under common control
prior to the Combination. All significant intercompany balances have been
eliminated in consolidation. Certain reclassifications have been made to prior
period financial statements to conform to current period presentation.
Republic has been under common management and control with BarTech since
September 8, 1998, the date BarTech's controlling shareholders acquired control
of Republic. The acquisition of Republic has been accounted for as a purchase.
The combining of BarTech and Republic in the Combination has been accounted for
as a common control merger like a pooling of interests. The acquisition of
USS/Kobe as part of the Combination has been accounted for as a purchase. See
Note 3 for additional information related to the common control combination of
BarTech and Republic and information related to the acquisition of USS/Kobe.
The Company operates in three separate segments: hot-rolled, cold-finished and
specialty steels. In connection with the acquisition of Republic, the
Predecessor determined its intent to exit the specialty steels segment of the
business. The Company manages the reportable segments as separate strategic
business units. Differences between the segments include manufacturing
techniques and equipment, competition and end-users. The Company is in the
process of exiting its Specialty Steels Division. The accompanying
consolidated/combined financial statements reflect the Specialty Steel Division
as a discontinued business in accordance with Accounting Principles Board
Opinion No. 30. See Note 7 for further information related to discontinued
operations.
3. BUSINESS COMBINATIONS
On August 13, 1999, the Combination of BarTech, Republic and USS/Kobe was
completed. The Combination occurred through a series of mergers, asset transfers
and related steps that resulted in the formation of the Company. Assuming
exercise of outstanding warrants and conversion of outstanding convertible
preferred stock of the Company's parent and exchange of Members' Interests by
USX Corporation ("USX") and Kobe Steel, Ltd. ("Kobe"), Blackstone Capital
Partners II Merchant Banking Fund L.P. and its affiliates (together,
"Blackstone") indirectly owns approximately 52.15 percent and Veritas Capital
Fund, L.P. and its affiliates (together, "Veritas") indirectly owns
approximately 14.14 percent of the combined operations, while USX indirectly
owns 17.18 percent and Kobe indirectly owns approximately 4 percent of the
combined operations. In conjunction with the Combination, the Company entered
into a new credit facility and applied proceeds from borrowings under this new
credit facility, together with proceeds of an offering of the senior secured
notes and warrants, including warrants sold separately from the senior secured
notes concurrent with the Combination, and new equity contributions, to
refinance a substantial portion of the indebtedness of Republic, RES Holding
(Republic's parent), BarTech and USS/Kobe.
9
<PAGE> 10
Combined and separate results of BarTech and Republic during the periods
preceding the Combination, while under common control, were as follows:
<TABLE>
<CAPTION>
BarTech Republic Adjustment Combined
-------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
Period from July 1, 1999 to
August 12, 1999
Net sales $ 16,125 $ 42,154 -- $ 58,279
Net loss (7,067) (3,833) -- (10,900)
Period from January 1, 1999 to
August 12, 1999
Net sales $ 152,494 $ 360,377 -- $ 512,871
Net loss (25,277) (89,634) -- (114,913)
</TABLE>
The adjustments made to conform accounting policies of the two companies had no
impact on the combined financial results presented above.
The acquisition of USS/Kobe has been accounted for using the purchase method of
accounting. The purchase price for USS/Kobe totaled approximately $102,743,
including transaction costs and net of cash acquired of $14,621. Consideration
in the transaction included equity to the sellers valued at approximately
$83,756 and seller debt assumed of $23,844. Under purchase accounting, the total
purchase cost is allocated to the assets acquired and liabilities assumed of
USS/Kobe based on their respective fair values as of August 12, 1999. The excess
of the fair value of the net assets of USS/Kobe over the purchase price (i.e.,
purchase discount) of $945 has been recorded as a reduction of property, plant
and equipment.
The purchase price has been allocated to the assets purchased and liabilities
assumed based upon the fair values on the date of the acquisition as follows:
USS/Kobe
---------------------
Purchase price:
Fair value of equity consideration $ 83,756
Additional seller debt assumed 23,844
Acquisition fees and expenses 9,764
---------------------
Total purchase price 117,364
Book value of net assets acquired 206,859
---------------------
Purchase discount from book value
of net assets acquired (89,495)
Allocation of purchase discount:
Increase in inventory (3,290)
Decrease in prepaids and other current assets 1,077
Decrease in property, plant and equipment 6,838
Decrease in intangible and other assets 2,475
Decrease in accounts payable (217)
Increase in accrued expenses 8,388
Increase in other postretirement benefits 47,032
Increase in defined benefit pension obligation 26,247
---------------------
Purchase discount $ ( 945)
=====================
10
<PAGE> 11
The following pro forma information presents the consolidated results of
operations assuming the Combination was completed as of the beginning of January
1999:
Nine Months Ended
(in millions) September 30, 1999
------------------
Net sales $ 997.2
Net loss from continuing operations $(222.9)
The pro forma results have been prepared for comparative purposes only and
include certain adjustments, such as reduced depreciation expense as a result of
fair value adjustments to the basis of property, plant and equipment, net of the
purchase discount, and increased interest expense resulting from borrowings
under the revolving credit facility and senior secured notes. They do not
purport to be indicative of the results of operations which actually would have
resulted had the Combination occurred on January 1, 1999.
4. INVENTORIES
The components of inventories are as follows:
September 30, 2000 December 31, 1999
-------------------- ---------------------
Raw materials $ 23,552 $ 52,833
Semi-finished and finished goods 223,148 231,835
-------------------- ---------------------
Total $246,700 $284,668
==================== =====================
At September 30, 2000 and December 31, 1999, inventories are net of market
reserves and obsolescence reserves aggregating $6,205 and $13,585, respectively.
5. WORKFORCE REDUCTION CHARGES
The new Master Collective Bargaining Agreement and settlement agreement entered
into in 1998 (collectively, the "Master CBA") requires Republic Technologies to
offer Early Retirement Buyouts ("ERBs") to at least 1,000 employees and permits
Republic Technologies to offer a Voluntary Severance Plan ("VSP"). The purpose
of these programs is to reduce the hourly workforce by a net reduction of over
1,900 hourly employees over four years. These programs are substantially
voluntary in nature. Accordingly, the costs associated with these workforce
reductions are being recognized as charges to operations as the offers for ERB's
and VSP's are accepted by the employees and intended to be awarded by Republic
Technologies. Through September 30, 2000, 780 voluntary ERB packages were
accepted. As such, Republic Technologies has recorded $103,759 of workforce
reduction charges to date for early retirement benefits (excluding ERBs related
to the Specialty Steels Division which are recorded as loss on disposition of
discontinued operations-see Note 7), including pension and other postretirement
obligations and special termination payments. During the nine months ended
September 30, 2000 and 1999, 31 and 396, respectively, voluntary ERB packages
were accepted and corresponding workforce charges of $4,578 and $52,663,
respectively, were recorded. There were also VSP charges of $54 thousand in
the current year.
Under the terms of the Master CBA, if the ERBs and VSPs do not achieve
targeted headcount reductions, Republic Technologies will have the flexibility
to reduce the hourly workforce by approximately 300 employees in addition to the
number of accepted ERBs and VSPs. Pursuant to the Master CBA, employees
represented by the United Steelworkers of America (the "USWA") will be eligible
for Supplemental Unemployment Benefits (SUB) and the continuation of certain
health insurance benefits.
During the nine months ended September 30, 2000, workforce reduction charges
included $3,925 of severance related costs for administrative staff reductions.
6. SEGMENT INFORMATION
The Company operates in three reportable segments: hot-rolled, cold-finished and
specialty steels. As discussed previously in Note 1, the Company intends to
dispose of its Specialty Steels Division and, accordingly, the accompanying
consolidated/combined financial statements reflect that division as a
discontinued operation in accordance with Accounting Principles Board Opinion
No. 30. As such the following tables do not reflect specialty steels as a
reportable segment. The
11
<PAGE> 12
Company manages the reportable segments as separate strategic business units.
Differences between the segments include manufacturing techniques and equipment,
competition, and end-users. The Company measures segment performance based on
earnings before net interest expense, income taxes, depreciation and
amortization expense, other postretirement benefit charges, workforce reduction
charges and other (income) loss, net ("EBITDA, as defined").
HOT-ROLLED
Hot-rolled bars and rods are processed from blooms and billets on rolling mills
to change the internal physical properties, size or shape of the steel.
Desirable characteristics of hot-rolled products include internal soundness,
uniformity of chemical composition and freedom from surface imperfection. The
Company's hot-rolled products include rounds, squares and hexagons, in both
cut-lengths and coils. Customers for hot-rolled products include manufacturers
of automotive parts, industrial equipment, independent forgers, steel service
centers and converters. The Company's hot-rolled products are used in the
manufacture of end-use products such as automotive drive trains, engine and
transmission parts, bearings and tractor components.
COLD-FINISHED
Cold-finishing is a value-added process which improves the physical properties
of hot-rolled bars and rods. Cold-finished products are produced from hot-rolled
bars by cold-drawing, turning, grinding, thermal treating or a combination of
these processes. The manufacturing process allows for production of products
with more precise size and straightness tolerances, as well as improved strength
and surface finish, that provides customers with a more efficient means of
producing a number of end products by often eliminating processing steps in the
customers' use of the products. The Company's cold-finished products include
rounds, squares, hexagons, and flats, all of which can be further processed by
turning, grinding or polishing, or a combination thereof. Customers for
cold-finished products include manufacturers of automotive parts, industrial
equipment, steel service centers and distributors. The Company's cold-finished
products are used in the manufacture of end-use products such as automotive
steering assemblies, electrical motor shafts, ball and roller bearings, valves
and hand tools.
Intersegment sales are made at an agreed upon transfer cost which is adjusted
quarterly and are eliminated in consolidation. Selling, general and
administrative and other costs are allocated 80% to hot-rolled and 20% to
cold-finished. Pension costs are allocated based on the amount of payroll
incurred by each segment.
<TABLE>
<CAPTION>
For the Three Months Ended September 30, 2000
--------------------------------------------------------------------------------------
Inter Segment
Cold- Total Elimination/
Hot-Rolled Finished Segments Other Consolidated
<S> <C> <C> <C> <C> <C>
Net sales $289,597 $ 64,594 $ 354,191 $(64,361) $ 289,830
Depreciation and amortization 13,723 1,162 14,885 -- 14,885
Segment profit (EBITDA,
as defined) 14,934 2,851 17,785 -- 17,785
Capital expenditures 1,953 167 2,120 -- 2,120
For the Period from August 13, 1999 to September 30, 1999
--------------------------------------------------------------------------------------
Inter Segment
Cold- Total Elimination/
Hot-Rolled Finished Segments Other Consolidated
Net sales $167,550 $ 47,709 $ 215,259 $ (5,491) $ 209,768
Depreciation and amortization 11,824 1,543 13,367 -- 13,367
Segment profit (EBITDA,
as defined) (21,378) 484 (20,894) -- (20,894)
Capital expenditures 2,407 136 2,543 -- 2,543
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
For the Period from July 1, 1999 to August 12, 1999
--------------------------------------------------------------------------------------
Inter Segment
Cold- Total Elimination/
Hot-Rolled Finished Segments Other Consolidated
<S> <C> <C> <C> <C> <C>
Net sales $ 48,078 $ 22,550 $ 70,628 $ (12,349) $ 58,279
Depreciation and amortization 2,825 245 3,070 -- 3,070
Segment profit (EBITDA,
as defined) 2,425 (5,243) (2,818) -- (2,818)
Capital expenditures 2,518 269 2,787 -- 2,787
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 2000
--------------------------------------------------------------------------------------
Inter Segment
Cold- Total Elimination/
Hot-Rolled Finished Segments Other Consolidated
<S> <C> <C> <C> <C> <C>
Net sales $921,936 $ 222,466 $1,144,402 $ (156,408) $ 987,994
Depreciation and amortization 42,410 3,573 45,983 -- 45,983
Segment profit (EBITDA,
as defined) 44,197 9,838 54,035 -- 54,035
Capital expenditures 6,970 480 7,450 (114) 7,336
</TABLE>
<TABLE>
<CAPTION>
For the Period from January 1, 1999 to August 12, 1999
--------------------------------------------------------------------------------------
Inter Segment
Cold- Total Elimination/
Hot-Rolled Finished Segments Other Consolidated
<S> <C> <C> <C> <C> <C>
Net sales $ 346,550 $ 199,295 $ 545,845 $ (32,974) $ 512,871
Depreciation and amortization 17,051 4,838 21,889 -- 21,889
Segment profit (EBITDA,
as defined) 953 (3,449) (2,496) -- (2,496)
Capital expenditures 18,784 1,574 20,358 -- 20,358
</TABLE>
7. DISCONTINUED OPERATIONS
In connection with its acquisition of Republic, the Predecessor determined its
intent to exit its Specialty Steels Division and, accordingly, the accompanying
consolidated financial statements reflect that division as a discontinued
operation in accordance with Accounting Principles Board Opinion No. 30. An
estimate of the operating results of the Specialty Steels Division during the
phase-out period from the acquisition date to the estimated ultimate disposition
date was made and included as a fair value adjustment as part of the allocation
of the Republic purchase price. Adjustments to this estimate have been made from
time to time and are reflected in the Company's results of operations.
From April 1999 to June 13, 2000, Haynes International Ltd., an affiliate
company controlled by Blackstone, managed the Company's Specialty Steels
Division. Management responsibilities are currently being handled internally.
During the second quarter of 2000, the Company and a potential acquirer broke
off negotiations for the sale of the division. In September 2000, the Company
announced that it was closing its Baltimore, Maryland facility, and expected the
closure to be completed in the fourth quarter of 2000. The Company is continuing
the process of exiting the remainder of its Specialty Steels Division and
anticipates this to be completed by June 2001. The Company recorded a charge of
$9,821 for an additional loss on the disposition of discontinued operations
during the second quarter of 2000. A charge for employee separation costs of
$6,703 was booked in the third quarter of 2000 related to the closure of the
Baltimore facility.
Sales and related losses for the discontinued operations were as follows (net
loss on discontinued operations has been reflected in the Company's financial
statements as a reduction in the accrual for losses on the discontinued
operations that was provided as part of the estimated loss on disposition):
13
<PAGE> 14
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------------- -----------------------------------------------
2000 1999 2000 1999
---------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 10,763 $ 9,894 $36,710 $35,780
Gross loss (1,404) (1,197) (5,249) (3,114)
---------------------------------------------- -----------------------------------------------
Net loss $ (2,265) $(1,814) $(8,474) $(5,057)
</TABLE>
The components of net assets of discontinued operations included in the
Company's consolidated balance sheets as assets held for sale were as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
----------------------- -----------------------
<S> <C> <C>
Assets held for sale, current- Inventories $ 9,581 $15,219
======================= =======================
Assets held for sale, non-current - Property, plant
and equipment $ 7,630 $ 9,009
======================= =======================
</TABLE>
8. SPECIAL CHARGES
The Company announced during the second quarter of 2000 its plans to shutdown
two of its production facilities; the Johnstown, Pennsylvania melt shop facility
and the Canton, Ohio 12" rolling mill facility. The Johnstown facility closed in
August 2000, while the Canton 12" roll facility subsequently closed during the
fourth quarter of 2000. These actions are being undertaken in an attempt to
reduce costs and increase productivity and efficiency.
As a result, the Company recorded special charges of $45,792 in the second
quarter of 2000 related to the Johnstown facility. The special charges consisted
of a $40,557 write-down of fixed assets, $3,235 in additional environmental
remediation required as a result of the closure and $2,000 in other shutdown
costs. The rationalization charge taken in the second quarter of 2000 did not
include any amount for employee separation costs as these costs are not fully
defined under the current labor agreement with the USWA and could not be
reasonably estimated at that time. The Company and the USWA, under direction of
an arbitrator, are currently negotiating in order to resolve this issue. An
estimated liability of $8,775 in employee termination charges was recorded in
the third quarter of 2000. Future charges may be required pending final
resolution of this matter based on the status of negotiations.
Unlike the closure of the Johnstown facility, the closure of the Canton 12" roll
facility was part of the Company's original consolidation plan contemplated at
the time of the Combination. Fair value adjustments to the fixed assets and
shutdown reserves related to the Canton 12" roll facility were recorded at the
date of the Republic acquisition. No charges have been recorded for employee
separation costs. It is currently anticipated that most affected employees will
be offered suitable alternative employment at other nearby facilities or a
combination of voluntary ERBs and VSPs.
The Company has previously recorded a reserve for the reduction of non-union
labor amounting to $7,776. The balance of this reserve at September 30, 2000 was
$1,309. The Company also recorded, as discussed above, a fair value adjustment
and shutdown reserves at the date of the Republic acquisition related to the
manufacturing locations selected for closure amounting to $12,705 and $1,917,
respectively. No activity has been recorded in the shutdown reserves.
9. FINANCIAL RESTRUCTURING
On July 17, 2000, the Company underwent a financial restructuring
("Restructuring") to improve its liquidity position and to assist in making the
semiannual interest payment on its senior secured notes. The Restructuring
consists of the following four components.
- Several of the Company's direct and indirect equity investors made
loans aggregating approximately $30,000 to Republic Technologies.
In exchange for these loans, the lenders received notes of $30,000
aggregate principal amount and warrants to purchase an aggregate
of 15,000 shares of Class D common stock, par value $0.001 per
share of the Parent Company. These notes mature on August 1,
2010, and may be prepaid in certain instances and must be prepaid
upon a change of control of the Company. The interest rate on the
notes is 9.5% and is payable in arrears on each February 1 and
August 1, 2006 or earlier if the lenders consent.
- The PBGC agreed to defer approximately $46,000 of payments due
under the original memorandum of understanding between the Company
and the PBGC in 2000 and 2001, to the years 2002 and 2003. The
deferred amount is due in eight equal quarterly installments
starting on January 1, 2002.
14
<PAGE> 15
- USX agreed to further defer $30,000 in payables deferred at the
time of the Combination. These payables, which were originally due
in July 2001, have been deferred to July 2003 with the same terms.
- The Company restructured Republic Technologies' revolving credit
facility with Fleet National Bank (formerly known as BankBoston,
N.A), which permitted the new subordinated debt mentioned above,
as follows:
a) the cap on the amount to be borrowed against the Canton bloom
and rolling facility is reduced from $125,000 to $92,000, with
the reduction in the eligible fixed asset cap being deferred
until the quarter after December 31, 2001, with subsequent
decreases of $7,500 per quarter until July 2004;
b) the commitment cap was reduced from $425,000 to $395,000, with
subsequent reductions through January 1, 2002;
c) the reserve of $50,000 was eliminated;
d) a minimum liquidity requirement of $3,000 was established;
e) minimum EBITDA requirements were established through June
2004;
f) the acquisition of off-balance sheet financing for the new
four stand mill ("4-Stand Project") and large bar
finishing/inspection equipment and certain other projects is
now permitted; and
g) capital expenditure caps were revised for fiscal years 2000
through 2004.
On October 6, 2000, Bethlehem Steel Corporation and the Parent Company arranged
for the deferral of the redemption of $5,500 Cumulative Preferred Stock, issued
by the Parent Company. The original redemption date was September 26, 2000. On
September 29, 2000, the Company redeemed $500 of Class A Members' Interest so
that the Parent Company could redeem the same amount of Cumulative Preferred
Stock. An additional $800 of Class A Members' Interest was redeemed by the
Company in October of 2000. The parties have acknowledged that the redemption
will be made in installments during 2000 and 2001.
The restructured revolving credit facility required the Company to deliver a
financing commitment with respect to the 4-Stand Project or a satisfactory
alternative project by October 13, 2000. The Company was unable to deliver such
a financing commitment, which constitutes a default pursuant to the credit
agreement. The banks have waived and extended the requirement to deliver the
financing commitment until November 30, 2000.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------
GENERAL
The Company is the largest producer of special bar quality steel products in the
United States with a market share of approximately 22%, based on 1999 calendar
year pro-forma shipments. SBQ steel products are high quality hot-rolled and
cold-finished carbon and alloy steel bar and rod used primarily in critical
applications in automotive and industrial equipment. SBQ steel products are sold
to customers who require precise metallurgical content and quality
characteristics. SBQ steel products generally contain more alloys and sell for
substantially higher prices than merchant and commodity steel bar and rod
products. The Company produces the widest range of SBQ steel products in the
United States and supplies a diverse customer base that includes leading
automobile and industrial equipment manufacturers and their first tier
suppliers.
RESULTS OF OPERATIONS
The consolidated/combined results of operations include BarTech and Republic for
the three and nine months ended September 30, 2000 and 1999. The results for
USS/Kobe are included in the Company's consolidated results of operations from
USS/Kobe's acquisition date, August 13, 1999. Accordingly, prior period results
are not comparable with the current period. The results for the three and nine
months ended September 30, 2000, are not necessarily indicative of the results
to be expected for the full year ended December 31, 2000.
The Company announced during the second quarter of 2000 its plans to shutdown
two of its production facilities; the Johnstown, Pennsylvania melt shop facility
and the Canton, Ohio 12" rolling mill facility. These actions are being
undertaken in an attempt to reduce costs and increase productivity and
efficiency.
As a result, the Company recorded special charges of $45,792 in the second
quarter of 2000 related to the Johnstown facility. The special charges consisted
of a write-down of fixed assets, additional environmental remediation required
as a result of the closure and other shutdown costs. The original special charge
did not include any amount for employee separation costs as these costs are not
fully defined under the current labor agreement with the USWA and could not be
reasonably estimated at the time. The Company and the USWA under direction of an
arbitrator are currently negotiating in order to resolve this issue. An
estimated liability of $8,775 in employee termination charges was recorded in
the third quarter of 2000. Further charges may be required pending final
resolution of this matter based on the status of negotiations.
Unlike the closure of the Johnstown facility, the closure of the Canton 12" roll
facility was part of the Company's original consolidation plan contemplated at
the time of the Combination. Fair value adjustments to the fixed assets and
shutdown reserves related to the Canton 12" roll facility were recorded at the
date of the Republic acquisition as adjustments to the purchase price.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1999
Net sales for the three months ended September 30, 2000 totaled $289.8 million
on shipments of approximately 585,196 net tons compared with net sales of $268.0
million for the three months ended September 30, 1999 on shipments of
approximately 517,270 net tons. The increase in net sales and tons shipped
reflects the inclusion of the results of USS/Kobe in the results for the full
three month period ended September 30, 2000 as compared to a six week period
from the date of the acquisition of USS/Kobe in August 1999. Net sales for the
full three month period ended September 30, 2000 were comprised of $225.2
million of hot-rolled net sales and $64.6 million of cold-finished net sales,
compared with hot-rolled net sales of $197.8 million and cold-finished net sales
of $70.2 million for the three months ended September 30, 1999.
There was an overall decrease in net selling value per ton shipped of $22.93
from the three months ended September 30, 1999 to the three months ended
September 30, 2000. The Company's hot-rolled net selling value per ton shipped
decreased because of a shift in the product mix following the Combination which
includes seamless rounds and other lower priced semi-finished products from the
Company's Lorain plant that was not produced prior to the Combination. This was
partially offset with an increase in net selling price per ton shipped for the
Company's cold-finished products. The reason for this increase is due to an
improved mix of shipments.
Cost of sales totaled $261.7 million, or 90.3% of net sales, for the three
months ended September 30, 2000 compared with cost of sales of $269.6 million,
or 100.6% of net sales, for the three month period ended September 30, 1999.
Cost of sales for the three months ended September 30, 2000 consisted of $202.9
million on hot-rolled products and $58.8 million on cold-finished products
compared with $201.6 million on hot-rolled products and $68.0 million on
cold-finished products for the three months ended September 30, 1999. The
overall decrease in cost of sales as a percentage of net sales from the three
months ended September 30, 1999 to the three months ended September 30, 2000 was
primarily due to the decrease in sales of a specific cold-finished product that
sold at a negative margin. In addition, the Company's cold-finished segment
sourced significantly more hot-rolled bar internally at lower costs than that
incurred previously for purchased materials from third party vendor.
16
<PAGE> 17
Selling, general and administrative expenses were $14.5 million, or 5.0% of net
sales, for the three months ended September 30, 2000 compared with $25.4
million, or 9.5% of net sales, for the three months ended September 30, 1999.
The overall decrease in selling, general and administrative expenses as a
percentage of net sales is due in part to the continuing benefits derived from
combining selling, general and administrative functions following the
Combination. Additionally there was a further reduction in selling, general and
administrative headcount during the quarter that was not initially contemplated
as part of the Company's original consolidation plan.
Depreciation and amortization expense was $14.9 million for the three months
ended September 30, 2000, compared with $16.4 million for the three months ended
September 30, 1999. This decrease was due to the write down and disposition of
closed facilities.
Workforce reduction charges were $3.3 million for the three months ended
September 30, 2000, compared with $10.7 million for the three months ended
September 30, 1999. The reason for the decrease was due to only 22 voluntary
ERBs being accepted during the third quarter of 2000 (excluding 2 ERBs related
to the Baltimore, Maryland specialty steel facility) as compared to 83 ERBs
accepted during the third quarter of 1999. The workforce reduction charges for
the three months ended September 30, 2000 also included $300 thousand of
severance related costs for administrative staff reductions.
Special charges of $8.8 million were recorded in estimated employee termination
charges related to the shutdown of the Johnstown facility. Closing the Johnstown
facility was not contemplated as part of the Company's original consolidation
plan.
Net interest expense was $27.5 million for the three months ended September 30,
2000 compared with $21.5 million for the three months ended September 30, 1999.
The $6.0 million increase in net interest expense was attributable to the higher
average borrowings outstanding following the completion of the Combination and
higher average interest rates of the new borrowings compared to the borrowings
repaid in connection with the Combination.
The provision for income taxes for the three month periods ended September 30,
2000 and 1999, consisted of currently payable income taxes, primarily foreign
income taxes, owed by Canadian Drawn Steel Company ("CDSC").
In September 2000, the Company announced that it was closing its Baltimore,
Maryland facility, expected to be completed during the fourth quarter of 2000.
The Company recorded charges of $6.7 million related to the disposition of its
Specialty Steels Division.
In the three months ended September 30, 1999, the Company also recorded an
extraordinary loss of $23.3 million from the early extinguishment of debt. This
loss arose from the repayment of certain debt in connection with the completion
of the Combination.
As a result of the above, the Company reported a net loss of $46.3 million for
the three months ended September 30, 2000 compared with a net loss of $98.9
million for the three months ended September 30, 1999.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1999
Net sales for the nine months ended September 30, 2000 totaled $988 million on
shipments of approximately 2,013,696 net tons compared with net sales of $722.6
million for the nine months ended September 30, 1999 on shipments of
approximately 1,211,470 net tons. The increase in net sales and tons shipped
reflects the inclusion of the results of USS/Kobe in the results for the full
nine months ended September 30, 2000 as compared to only since the date of its
acquisition in August 1999 for the 1999 period. Net sales for the nine months
ended September 30, 2000 were comprised of $765.5 million of hot-rolled net
sales and $222.5 million of cold-finished net sales, compared with hot-rolled
net sales of $475.6 million and cold-finished net sales of $247.0 million for
the nine months ended September 30, 1999.
There was an overall decrease in net selling value per ton shipped of $105.86
from the nine months ended September 30, 1999 to the nine months ended September
30, 2000. The Company's hot-rolled net selling value per ton shipped decreased
because of a shift in the product mix following the Combination which includes
seamless rounds and other lower priced semi-finished products from the Company's
Lorain plant that was not produced prior to the Combination. This was partially
offset with an increase in net selling value per ton shipped for the Company's
cold-finished products. The reason for this increase is due to decreases in
shipments of a lower value cold-finished product. Additionally, there were two
spot sales price increases for both cold-finished and hot-rolled products during
the nine months ended September 30, 2000.
17
<PAGE> 18
Cost of sales totaled $902.7 million, or 91.4% of net sales, for the nine months
ended September 30, 2000 compared with cost of sales of $697.9 million, or 96.6%
of net sales, for the similar period ended September 30, 1999. Cost of sales for
the nine months ended September 30, 2000 consisted of $699.3 million on
hot-rolled products and $203.4 million on cold-finished products compared with
$470.6 million on hot-rolled products and $227.3 million on cold-finished
products for the nine months ended September 30, 1999. The overall decrease in
cost of sales as a percentage of net sales from the nine months ended September
30, 1999 to the nine months ended September 30, 2000 was primarily due to the
decrease in sales of a specific cold-finished product that sold at a negative
margin. In addition, the Company's cold-finished segment sourced significantly
more hot-rolled bar internally at lower costs than purchased materials.
Selling, general and administrative expenses were $43.9 million, or 4.4% of net
sales, for the nine months ended September 30, 2000 compared with $55.1 million,
or 7.6% of net sales, for the nine months ended September 30, 1999. The overall
decrease in selling, general and administrative expenses as a percentage of net
sales is due in part to the continuing benefits derived from combining selling,
general and administrative functions following the Combination. Additionally
there was a further reduction in selling, general and administrative headcount
during the third quarter of 2000 that was not initially contemplated as part of
the Company's original consolidation plan.
Depreciation and amortization expense was $46.0 million for the nine months
ended September 30, 2000, compared with $35.3 million for the nine months ended
September 30, 1999. Nearly all of the increase was due to the increase in
property, plant and equipment associated with the acquisition of USS/Kobe,
partially offset by decreases due to dispositions of previously closed
facilities.
Workforce reduction charges were $8.6 million for the nine months ended
September 30, 2000, compared with $52.7 million for the nine months ended
September 30, 1999. The reason for the decrease was due to only 33 voluntary
ERBs being accepted during the first nine months of 2000 (excluding 2 ERBs
related to the Baltimore, Maryland Specialty Steel facility) as compared to 396
ERBs accepted during the first nine months of 1999. The workforce reduction
charges for the nine months ended September 30, 2000 also included $3.9 million
of severance related costs for administrative staff reductions.
Special charges of $55.1 million were recorded in connection with the shutdown
of the Johnstown facility. These charges include $40.6 million related to a
write down of the property, plant, and equipment; $8.8 million related to
employee termination charges; $3.2 million related to additional environmental
remediation required as a result of the closure; and $2.5 million for other
shutdown costs. Closing the Johnstown facility was not contemplated as part of
the Company's original consolidation plan.
Net interest expense was $81.3 million for the nine months ended September 30,
2000 compared with $61.1 million for the nine months ended September 30, 1999.
The $20.2 million increase in net interest expense was attributable to the
higher average borrowings outstanding following the completion of the
Combination and higher average interest rates of the new borrowings compared to
the borrowings repaid in connection with the Combination.
The provision for income taxes for the nine month periods ended September 30,
2000 and 1999, consisted of currently payable income taxes, primarily foreign
income taxes, owed by CDSC.
The Company recorded charges of $16.5 million related to the disposition of its
Specialty Steels Division, including $6,700 recorded in the third quarter of
2000 in conjunction with the September 2000 announcement to close the Baltimore,
Maryland facility, $6,700 and $9,800 recorded in the second quarter of 2000
following the termination of negotiations for the proposed sale of the division.
In the nine months ended September 30, 1999, the Company also recorded an
extraordinary loss of $23.3 million from the early extinguishment of debt. This
loss arose from the repayment of certain debt in connection with the completion
of the Combination.
As a result of the above, the Company reported a net loss of $165.7 million for
the nine months ended September 30, 2000 compared with a net loss of $202.9
million for the nine months ended September 30, 1999.
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<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs relate to working capital needs, funding
requirements relating to its agreement with the PBGC, capital expenditures and
other costs relating to the Company's consolidation plan, debt service
requirements and tax distributions to the Company's members. On July 17, 2000,
the Company underwent the Restructuring to improve its liquidity position. The
Restructuring was comprised of several components, each briefly discussed
throughout the following sections.
PBGC Obligations
----------------
In connection with the Combination, Republic Technologies agreed with the PBGC
to fund $178 million into the Republic Engineered Steels, Inc. USWA Defined
Benefit Plan, a defined benefit pension plan for employees represented by the
USWA in connection with the headcount reduction and related early retirement
benefits contemplated by the Company's consolidation plan. Of the $178 million,
$62.5 million has been funded through September 30, 2000. One component of the
Restructuring was the agreement by the PBGC to defer approximately $46 million
of the remainder due. The new payment schedule for Republic Technologies is as
follows: $2.0 million per quarter for the next five payments, $14.9 million per
quarter for the next three payments, $14.3 million per quarter for the next four
payments and a final payment of $5.6 million. In addition, pursuant to the
Company's consolidation plan, Republic Technologies will offer a combination of
ERB and VSP packages to its employees, which the Company currently expects will
include expenditures outside its defined benefit plan of up to approximately $36
million over the next 4 years. The actual cost of the ERB packages and voluntary
severance plans will depend on the mix of such arrangements offered to and
accepted by the hourly employees represented by the USWA.
Additionally, with respect to the USS/Kobe Union Eligible Pension Plan, a
defined benefit plan for union employees, Republic Technologies has agreed with
the PBGC to maintain a specified level of funding based on statutory funding
requirements. The contributions shall be made as follows: for the year 2000, an
amount necessary to avoid an accumulated funding deficiency plus $4 million ($6
million); for 2001, an amount so that the December 31, 2001 credit balance
equals that of December 31, 2000 with interest plus $2 million; for 2002, an
amount so that the December 31, 2002 credit balance equals that of December 2001
with interest plus $2 million; for 2003, an amount so that the December 31, 2003
credit balance equals that of December 31, 2002 with interest plus $2 million.
Beginning with 2004, Republic Technologies shall make contributions to maintain
the December 31, 2003 credit balance with interest. As security for such
obligation, Republic Technologies has provided the PBGC with a $5 million letter
of credit. The Company currently estimates that approximately $53.6 million of
fundings will be required in connection with these obligations.
Capital Expenditures
--------------------
The Company has invested approximately $7.4 million in capital expenditures
during the first nine months of 2000. The amendment of Republic Technologies'
revolving credit facility, another component of the Restructuring, limits
capital expenditures to $19.0 million in 2000, $24 million in 2001, $27 million
in 2002, $33.5 million in 2003 and $23.0 million in 2004. The Company's four
year consolidation plan originally contemplated construction of new large bar
mill which management estimates would cost approximately $90 million. As part of
the amended revolving credit facility, the Company may obtain off-balance sheet
financing to fund this construction. The plan to construct this facility is
currently under review. Additionally, under the terms of the amended revolving
credit facility the Company may obtain off-balance sheet financing of up to $66
million for three other capital projects.
Debt Service Requirements
-------------------------
In connection with the Restructuring mentioned above, on July 17, 2000, several
equity investors made loans of approximately $30 million in aggregate principal
amount to Republic Technologies. In exchange for these loans, the lenders
received notes of $30 million aggregate principal amount and warrants to
purchase an aggregate of 15 million shares of Class D common stock, par value
$0.001 per share, of the Parent Company. These notes mature on August 1, 2010,
and may be prepaid in certain instances and must be prepaid upon a change of
control of the Company. The interest rate on the notes is 9.5% and is payable in
arrears on each February 1 and August 1 commencing on August 1, 2006 or earlier
if the lenders consent. The notes are secured by a second mortgage on the Canton
bloom and rolling facility.
In conjunction with the Combination, Republic Technologies completed a private
offering of $425 million of senior secured notes and warrants and entered into a
$425 million revolving credit facility. The proceeds of this private offering,
together with approximately $239 million of borrowings under the revolving
credit facility and the proceeds from new equity
19
<PAGE> 20
contributions, were applied to refinance a substantial portion of the
indebtedness of Republic, RES Holding, BarTech and USS/Kobe at the time of the
Combination. As part of the Restructuring referred to above, commitments under
the revolving credit facility were reduced from $425 million to $395 million.
As a result of the Combination and the other transactions, the Company and
Republic Technologies have significant amounts of debt, with the interest
payments on the senior secured notes and interest and principal repayments under
the new credit facility representing significant obligations. The senior secured
notes require semi-annual interest payments on January 15 and July 15 every year
until they mature on July 15, 2009. The senior secured notes require that tender
offers be made for such securities with certain proceeds from asset sales in the
event that such proceeds are not applied to specified purposes within certain
time periods. The loans under the revolving credit facility require periodic
payments of interest and mature on August 13, 2004. The revolving credit
facility requires prepayment of loans and reductions of commitments with net
proceeds of specified asset dispositions, casualty and condemnation recovery
events, issues of equity and incurrences of permitted indebtedness.
Additionally, the amendment of the revolving credit facility, as discussed in
Note 9, establishes minimum requirements for EBITDA and liquidity. In addition,
the $5.5 million Series A Preferred Stock of the Parent Company was redeemable
on September 26, 2000. The Parent Company has made payments of $1.3 million of
the amount redeemable through October 31, 2000. The remaining amount will be
paid on a weekly basis with any unpaid preferred return due with the last
payment. The redeemable preferred stock is expected to be paid off during 2001.
The senior secured notes and the revolving credit facility each contain
significant affirmative and negative covenants including separate provisions
imposing restrictions on additional borrowings, certain investments, certain
payments, sale or disposal of assets, payment of dividends and change of control
provisions, in each case, subject to certain exceptions. The ability of Holdings
to receive distributions from Republic Technologies and its subsidiaries is
significantly restricted by the terms of the senior secured notes and the
revolving credit agreement. Under the terms of the senior secured notes, subject
to certain exceptions, generally neither Republic Technologies nor its
subsidiaries may declare or pay any dividend or make any other distribution or
payment on or in respect of capital stock, unless, at the time of and after
giving effect to the proposed payment, (1) no Default (as defined in the senior
secured note indenture) shall have occurred and be continuing, (2) immediately
after giving effect to such payment, the Consolidated Fixed Charge Coverage
Ratio (as defined in the senior secured note indenture) of Republic Technologies
would be equal to or greater than 2.5 to 1, and (3) the aggregate amount of all
restricted payments declared or made from and after the issue date would not
exceed 50% of the Consolidated Net Income (as defined in the senior secured note
indenture) of Republic Technologies accrued on a cumulative basis during the
period, taken as one accounting period, beginning on October 1, 1999 and ending
on the last day of the fiscal quarter of Republic Technologies immediately
preceding the date of such proposed restricted payment or, if such aggregate
cumulative Consolidated Net Income of Republic Technologies for such period
shall be a deficit, minus 100% of such deficit, plus the cash proceeds from
certain equity offerings and value of certain investments. Under the terms of
the revolving credit facility, neither Republic Technologies nor its
subsidiaries may declare or pay any dividend to Holdings or make any other
distribution or payment to Holdings on or in respect of capital stock other than
distributions or payments for certain limited purposes and in limited amounts.
The senior secured notes are secured, subject to exceptions and limitations, by
(1) a first priority lien on, and security interest in, substantially all of the
existing assets of the issuers and the restricted subsidiaries, other than (a)
the Canton bloom and rolling and Cartersville, Georgia facilities, (b)
inventory, (c) accounts receivable and (d) intellectual property and related
assets, and (2) a first priority lien, shared on an equal and ratable basis with
the lenders under the revolving credit facility, on the equity interests of
Republic Technologies and its restricted subsidiaries. This collateral is
subject to release without substitution under a limited number of circumstances.
Borrowings under the revolving credit facility are secured by a first priority
perfected security interest in (1) the equity interests of Republic Technologies
and its restricted subsidiaries, shared on an equal and ratable basis with the
senior secured notes and (2) all presently owned and subsequently acquired
accounts, inventory, intellectual property and related assets of Republic
Technologies and guarantors and the real estate and fixed assets comprising, and
the intellectual property relating to, the bloom and rolling facility, including
the related melt shop.
The obligations under the senior secured notes are unconditionally and
irrevocably guaranteed jointly and severally by Holdings and each of its
subsidiaries other than Republic Technologies, RTI Capital Corp. (the co-issuer
of the senior secured notes) and Oberlin Insurance Company. The obligations
under the revolving credit facility are unconditionally and irrevocably
guaranteed jointly and severally by Holdings and each of its subsidiaries other
than Republic Technologies and Oberlin Insurance Company.
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<PAGE> 21
The high level of long-term debt relative to total capitalization could have
important consequences, including, among others, the following:
- Holdings and Republic Technologies may be unable to obtain
additional financing for working capital, capital expenditures,
debt service requirements and general corporate purposes;
- a substantial portion of cash flow from operations will need to be
used to pay principal and interest on indebtedness, which will
reduce the funds available for other purposes, including
operations and future business opportunities;
- borrowings under the revolving credit facility as well as other
future borrowings, may be at variable rates of interest, which
carry the risk of increased interest rates; and
- this leverage may make Holdings and Republic Technologies more
vulnerable to economic downturns and competitive pressures.
Tax Distributions
-----------------
The Company and Republic Technologies are limited liability companies that are
expected to be treated as a partnership for income tax purposes and,
accordingly, are not an income taxpaying entity. However, pursuant to the
limited liability company agreement of the Company's parent, the Company's
parent will be required to make cash distributions to its members to the extent
necessary to satisfy tax obligations regarding members' investment in the Parent
Company. To the extent the Company's parent is required to make these tax
distributions, Republic Technologies will be required to make equivalent cash
distributions to the Company. However, the Company believes that certain of its
parent's members have net operating loss carryforwards which may be available to
offset a significant portion of their taxable income attributable to their
investment in the Company's parent and reduce, but not eliminate, the need for
tax distributions. Use of these net operating losses is subject to various
limitations and uncertainties and, accordingly, the Company cannot make any
assurances that these net operating loss carryforwards will reduce the need for
tax distributions or that they will not be otherwise utilized.
Liquidity Sources and Other Factors Affecting Liquidity
-------------------------------------------------------
The Company intends to fund its working capital, pension contribution
requirements, employee termination costs, capital expenditure, debt service
requirements and tax distributions to its parent company's members through cash
flows generated from operations and borrowings under its $395.0 million
revolving credit facility. Under the above mentioned Restructuring, availability
under the revolving credit facility has been amended and is now limited to a
borrowing base equal to the lesser of $395.0 million or (1) 60% of eligible
inventory, plus (2) 85% of eligible accounts receivable, plus (3) the lesser of
67% of the appraised value of the Canton bloom and rolling facility and $92
million, which will decrease by $7.5 million per quarter beginning the quarter
ended December 31, 2001, with the reserve being eliminated. The Canton bloom and
rolling facility is subject to reappraisal after March 31, 2001 or upon a
default under the revolving credit facility. The Company's net availability on
its revolving credit facility as of October 31, 2000 was approximately
$15,600.
In connection with the Combination, the Parent Company issued 30,000 shares of
its Series C convertible preferred stock. The Series C convertible preferred
stock accrues dividends at a rate of 5% per year, which can be paid in cash or
by the issuance of additional shares of Series C convertible preferred stock at
the election of the Parent Company.
The Company's lower than expected sales in the first nine months of 2000 and
it's lower than expected performance during the third and fourth quarters of
1999 caused the Company's liquidity to be negatively affected. The Company's
liquidity position has also been negatively impacted by the implementation of
the Company's consolidation plan as a result of the time lag between the
incurrence of certain costs and the receipt of the expected cash flow benefits,
such as in the case of headcount reductions requiring lump sum payouts.
Management has sought to improve the Company's liquidity position by taking a
number of actions including increasing spot sale prices, reducing administrative
staff, implementing cost cutting programs, closing operations at its Johnstown
melt facility, closing operations at its Canton 12" rolling facility in the
fourth quarter announcing plans to close its Baltimore, Maryland Specialty Steel
facility, and reducing inventories. The Company has also reduced its planned
capital expenditures from $48,000 to $13,500 for the year 2000, obtained
deferrals of approximately $46,000 of certain quarterly 2000 and 2001 Pension
Benefit Guaranty Corporation ("PBGC") funding requirements until 2002 and 2003,
obtained a deferral from the Ohio Environmental Protection Agency (the
21
<PAGE> 22
"Ohio EPA") of $1,200 of committed environmental expenditures until 2001,
restructured Republic Technologies' revolving credit facility, and obtained a
deferral from Bethlehem Steel Company on the redemption of Cumulative Preferred
Stock issued by Bar Tech and currently an obligation of Republic Technologies.
Additionally, on July 17, 2000, Republic Technologies received approximately
$30,000 aggregate principal amount of loans made from certain of its direct and
indirect equity investors in exchange for notes of Republic Technologies and
warrants to purchase Class D common stock of Republic Technologies
International, Inc.
As previously discussed, the closure of the Johnstown facility caused the
Company to take a special charge of $55,100 in the first nine months of 2000.
This amount includes an estimate of $8,800 for employee separation costs related
to the shutdown of the Johnstown facility.
The Company has announced plans in September 2000 to close the Baltimore,
Maryland specialty steel facility during the fourth quarter of 2000 and will
continue with the process of disposing the remainder of its Specialty Steels
Division and expects to complete this in 2001. The Company is also in the
process of selling certain real estate from facilities closed as part of the
consolidation plan.
Notwithstanding these efforts, the Company may need to obtain additional
financing to meet its cash flow requirements, including financing from the sale
of additional debt or equity securities. Restrictive covenants included in the
indenture relating to the senior secured notes and other debt obligations limit
the Company's ability to incur additional indebtedness, or sell assets (most of
which are pledged), and may otherwise limit the operational and financial
flexibility of the Company. The ability to sell assets may also be constrained
by the provisions of the Company's labor agreement.
As a result of the factors mentioned above, the Company is highly leveraged and
could be considered a risky investment. Further information regarding the risk
factors of the Company can be found in the Company's Registration Statement on
Form S-4.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), was recently enacted by
the Financial Accounting Standards Board. SFAS No. 133, as amended by SFAS No.
137, establishes accounting and reporting standards for derivative instruments
and hedging activities and is effective for fiscal years beginning after June
15, 2000. The Company is currently analyzing the impact that the adoption of
this standard will have on its financial statements.
The Securities and Exchange Commission (the "SEC") Staff Accounting Bulletin
("SAB") No. 101, Revenue Recognition in Financial Statements, issued to address
significant revenue recognition issues encountered by companies that file with
the SEC, has been delayed until no later than the fourth fiscal quarter of
fiscal years beginning after December 15, 1999. The Company has not yet
completed its evaluation of SAB No. 101 and has not determined the impact that
the adoption of this standard will have on its financial statements.
FORWARD LOOKING STATEMENTS
Statements included in this filing with the SEC (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 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:
- the Company's ability to increase sales to existing and new customers,
particularly sales to automotive and industrial equipment
manufacturers;
- the Company's ability to implement its consolidation plan and to
realize the expected benefits of the Combination in the time frame and
at the costs currently contemplated;
- charges, including employee termination charges, related to the closure
of Johnstown, and other facilities;
- market conditions and general risks associated with the steel industry;
and
- the matters discussed under the caption "Risk Factors" in the Company's
Registration Statement on Form S-4.
The reader should not place undue reliance on the forward-looking statements
contained in this report.
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<PAGE> 23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
The Company is exposed to market risks due to changes in interest rates with
respect to its debt. The fair value of the Company's senior secured notes was
determined using quoted market prices. At September 30, 2000, the fair value of
the Company's senior secured notes was $78.6 million based on the quoted price
of $18.50 per $100 of par value. There was no significant change in the fair
value of the remainder of the Company's debt from December 31, 1999.
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<PAGE> 24
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
--------------------------
The Company and its subsidiaries are involved in various legal proceedings
occurring in the ordinary course of business. It is the opinion of management,
after consultation with legal counsel, that except for certain environmental
proceedings (which is discussed in detail in the Company's Annual Report filed
on Form 10-K), these matters will not materially affect the Company's
consolidated financial position, results of operations or cash flows.
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
-----------------------------------------
(27) Financial Data Schedule
a.) Reports on Form 8-K
None.
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<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
REPUBLIC TECHNOLOGIES INTERNATIONAL HOLDINGS, LLC
Date: October 31, 2000 By: /s/Joseph F. Lapinsky
---------------------
Joseph F. Lapinsky
Chief Executive Officer,
President and Chief
Operating Officer
Date: October 31, 2000 By: /s/Stephen Graham
---------------------
Stephen Graham
Executive Vice President and
Chief Financial Officer
Date: October 31, 2000 By: /s/ Joseph A. Kaczka
---------------------
Joseph A. Kaczka
Vice President of Finance, Controller
and Chief Accounting Officer
25
