<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1996
Commission File Number -- 1-5210
AMERISTEEL CORPORATION
Florida 59-0792436
5100 W. Lemon Street
Tampa, Florida 33609
Mailing Address:
P. O. Box 31328
Tampa, Florida 33631-3328
Telephone No. 286-8383 - Area Code 813
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $757,175
State the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date:
Common Stock, par value $.01 per share -- 10,094,431 shares as of the close of
the date of this filing.
Documents incorporated by reference: None
<PAGE> 2
PART I
ITEM 1. BUSINESS
AMERISTEEL CORPORATION ("the Company"), formerly known as Florida Steel
Corporation, operates four union-free minimills located in the southeastern
United States that produce steel concrete reinforcing bar ("rebar"), merchant
bars, and rods. The Company also operates the largest rebar fabricating group
in the U.S.. Rebar is used primarily for strengthening concrete in highway and
building construction and other construction applications. Merchant bars and
light structural shapes ("merchant bars"), which include rounds, squares,
flats, angles and channels, are used in a wide variety of applications
including floor and roof joists, transmission towers, and farm equipment. Rods
are used in a variety of applications, including the manufacture of welded wire
fabric and nails.
Approximately two-thirds of the Company's mill rebar production is sold
directly to distributors and independent fabricating companies in stock lengths
and sizes. Approximately one-third is transferred to the Company's 13
fabricating plants where value is added by cutting and bending the rebar to
meet engineering, architectural or other end-product specifications. Merchant
bars and rods generally are sold by the mills to fabricators, steel service
centers and original equipment manufacturers in stock lengths and sizes. For
the year ended March 31, 1996, approximately 31% of the Company's sales
revenues were derived from merchant bar, 25% from stock rebar, 24% from
fabricated rebar, 13% from other products and 7% from rods.
The Company currently operates minimills located in Jacksonville, Florida;
Charlotte, North Carolina; and Jackson and Knoxville, Tennessee. Minimills are
steel mills that use electric arc furnaces to melt scrap steel and cast the
resulting molten steel into long strands called billets in a continuous casting
process. Billets are then reheated and rolled into rebar, merchant bars, and
rods. The Company estimates that it currently has annual steel melting
capacity of 2.0 million tons and finished product rolling capacity of 1.7
million tons. The Company's operating strategy is focused on improving its
position as a low-cost producer of rebar and merchant products.
Since the acquisition by Kyoei Steel, Ltd. ("Kyoei") in late 1992, discussed
below, the Company has spent over $80 million on capital improvements to
modernize and upgrade its production facilities. The Company continued that
program in fiscal 1996, spending $37 million on equipment upgrades. With
expanded, more efficient production from the Jackson, Knoxville, Jacksonville
and Charlotte mills, the Company was able to close its high cost Tampa rolling
mill in September 1995.
As of April 1, 1996, the Company changed its name from Florida Steel
Corporation (which it had used since 1956) to AmeriSteel Corporation in order
to reflect that the Company's operations extend substantially beyond the
boundaries of the State of Florida, as they have done for many years.
The predecessor of the Company was formed in 1937 as a rebar fabricator. In
1956, it merged with five steel fabricators in Florida to form the Company,
which then commenced construction of its first minimill.
Approximately 89% of the Company's common stock is held by FLS Holdings, Inc.
("Holdings" or "FLS"), whose only business is to own Company common stock. In
turn, since a merger in December 1992 (the "Acquisition"), Holdings has been
100% owned by Kyoei, one of Japan's leading manufacturers of steel bars.
After the Acquisition, the Company changed its fiscal year-end from September
30 to March 31 in order to have its year-end coincide with that of Kyoei.
Accordingly, all references to "fiscal year" since 1993 refer to a year ended
March 31.
1
<PAGE> 3
FINANCING
As a result of the Acquisition and subsequent events, the Company's three
largest financial obligations that are currently outstanding are $100,000,000
11-1/2% First Mortgage Notes due 2000 (the "First Mortgage Notes"), a
$140,000,000 Revolving Credit Agreement (the "New Revolving Credit Agreement"),
and a $50,000,000 Junior Subordinated Intercompany Note due December 21, 2002
owing to Holdings.
The First Mortgage Notes are secured by the real property, equipment and other
collateral at the Company's minimills.
The New Revolving Credit Agreement was entered into as of June 9, 1995 and
replaced a $100,000,000 facility of like kind. This obligation is secured by
the Company's inventory and receivables and expires on June 9, 1998.
During fiscal 1996, the Company redeemed the remaining $13,000,000 of 14.5%
Subordinated Debentures due 2000 that were outstanding.
PRODUCTION AND FACILITIES
STEEL PRODUCTION. Minimills are steel mills that use electric arc furnaces to
melt scrap steel and cast the resulting molten steel into long strands called
billets in a continuous casting process. The billets are typically transferred
to a rolling mill where they are reheated, passed through roughing mills for
size reduction and then rolled into rebar, merchant bars, or rods. These
products emerge from the rolling mill and are allowed to cool uniformly on a
cooling bed. Most merchant products then pass through automated straightening
and stacking equipment. Rebar and merchant products are neatly bundled prior
to shipment to customers by rail or truck.
Steel can be produced at significantly lower costs by minimills than by
integrated steel operations. Integrated steel mills, which typically process
iron ore and other raw materials in blast furnaces to produce steel, generally
use costlier raw materials, consume more energy, consist of older facilities
that are more labor intensive and employ a larger and more highly paid labor
force. In general, minimills serve localized markets and produce a limited line
of commodity steel products.
The domestic minimill steel industry currently has excess production capacity.
This excess capacity has resulted in competitive product pricing and cyclical
pressures on industry profit margins. The high fixed costs of operating a
minimill encourage mill operators to maintain high levels of output even during
periods of reduced demand which exacerbates the pressures on profit margins. In
this environment, efficient production and cost controls are important to
domestic minimill steel producers.
The Company's Jackson, Tennessee; Jacksonville, Florida and Charlotte, North
Carolina minimills operate their melting facilities seven days per week, the
Knoxville mill five days per week, and have an annual aggregate melting
capacity of approximately 2.0 million tons. The Jackson, Charlotte and
Jacksonville mills operate their rolling facilities seven days per week. The
Knoxville, Tennessee minimill operates its rolling facility five days per week.
On June 15, 1994, the Tampa melting facility was closed and on September 25,
1995 the Tampa rolling facility was closed.
2
<PAGE> 4
The following table sets forth the estimated annual production capacity and
actual production of the Company's four minimills in thousands of tons at March
31, 1996.
<TABLE>
<CAPTION>
Annual FY 1996 Capacity FY 1996 Capacity
Start-Up Melting Melting Utilization Rolling Rolling Utilization
Location Date Capacity Production Percentage Capacity Production Percentage
-------- -------- -------- ---------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jackson, TN 1981 600 568 95% 480 401 84%
Jacksonville, FL 1976 600 417 70 500 369 74
Charlotte, NC 1961 450 428 95 400 317 79
Knoxville, TN 1987(a) 330 305 92 360 312 87
----- ----- -- ----- ----- --
Total 1,980 1,718 87% 1,740 1,399 80%
===== ===== == ===== ===== ==
</TABLE>
(a) Purchase Date
JACKSON MINIMILL. The Jackson minimill produces mostly merchant bars and some
rebar. This minimill is the Company's largest single producer of merchant bars.
The merchant bars are marketed primarily in the southeastern United States, as
well as into southern Illinois, Indiana, and Ohio.
The Jackson minimill, constructed in 1981, is the newest of the Company's steel
making facilities. Jackson's melting equipment includes an electric arc
furnace, a continuous caster, and material handling equipment. The rolling mill
consists of a reheat furnace, 16 in-line mill stands, a cooling bed, an in-line
straightener, a cut-to-length product shear, an automatic stacker, and
associated shipping and material handling facilities. The mill is currently
installing new quick-change mill stands that will decrease change time,
increase production and lower conversion costs.
The facility has 294 employees.
JACKSONVILLE MINIMILL. The Jacksonville minimill produces rebar and rods. The
rebar is marketed primarily in Florida, the nearby Gulf Coast states and Puerto
Rico, with coiled and 3/8 inch diameter rebar, being shipped throughout the
Company's marketing area. The rod products are sold throughout the southeastern
United States.
Jacksonville's melting equipment consists of an electric arc furnace,
continuous caster, and material handling equipment. The rolling mill includes a
reheat furnace, a #1-stand in-line mill, a 10-stand rod block, two cooling
beds, a cut-to-length product shear, and associated shipping and material
handling facilities. During fiscal 1996 a new transformer was installed in the
melt shop and a new cooling bed was installed in the rolling mill to increase
capacity and lower conversion cost.
The facility has 265 employees.
3
<PAGE> 5
CHARLOTTE MINIMILL. The Charlotte minimill produces rebar and merchant bars.
Rebar produced in Charlotte is marketed in the states from South Carolina to
Pennsylvania. Merchant bar produced in Charlotte is marketed along the eastern
seaboard states from Florida to Pennsylvania.
Charlotte melting equipment includes an electric arc furnace, a continuous
scrap feeding and preheating system and a ladle refining station, all of which
were installed in 1989. The melting facilities also include a continuous caster
and material handling equipment. Charlotte's rolling mill, which was upgraded
in 1988, includes a reheat furnace, 15 in-line mill stands, a cooling bed, a
cut-to-length shear, and an automated material bundling unit. The rolling mill
is currently installing new finishing end equipment that will improve merchant
bar quality, increase production and lower conversion costs.
The facility has 282 employees.
KNOXVILLE MINIMILL. The Knoxville minimill, which the Company acquired in
1987, produces almost exclusively rebar and some merchant bars. The rebar is
marketed throughout the Ohio Valley, including all areas of Ohio and Kentucky
and parts of Illinois, Indiana, Virginia, West Virginia, Tennessee and rebar is
sold in portions of North and South Carolina, Georgia and Alabama.
Knoxville melting equipment includes two electric arc furnaces, a continuous
caster, and material handling equipment. The rolling mill, which was installed
in 1986, consists of a reheat furnace, 16 in-line mill stands, a cooling bed, a
cut-to-length shear line and associated shipping and material handling
facilities.
The facility has 209 employees.
FABRICATION. The Company's 13 fabricating plants are located throughout the
southeastern United States and have an annual capacity of 334 thousand tons.
The following table shows the plant locations and approximate annual tonnage on
a two-shift per day, five days per week operating basis.
<TABLE>
<CAPTION>
FABRICATING PLANT CAPACITY IN TONS
------------------------------------------------------------
<S> <C>
Ft. Lauderdale, FL................................. 30,000
Jacksonville, FL.................................... 30,000
Orlando, FL......................................... 20,000
Plant City, FL (Tampa).............................. 40,000
Duluth, GA (Atlanta)................................ 30,000
Louisville, KY...................................... 20,000
Charlotte, NC....................................... 30,000
Raleigh, NC......................................... 18,000
Aiken, SC........................................... 16,000
Collierville, TN (Memphis).......................... 20,000
Knoxville, TN....................................... 40,000
Nashville, TN....................................... 20,000
St. Albans, WV...................................... 20,000
-------
Total............................................... 334,000
=======
</TABLE>
4
<PAGE> 6
OTHER OPERATIONS. The Company's railroad spike operations, located in
Lancaster, South Carolina and Paragould, Arkansas, forge steel squares into
railroad spikes that are sold on an annual contract basis to various railroad
companies. The Company's facility in New Orleans, Louisiana, produces wire
from steel rod. The wire is then either manufactured into welded wire fabric
for concrete pavement or converted into collated nails for use in high-speed
nail machines.
CAPITAL EXPENDITURES
Over the years, the Company has expanded capacity by means of modernizing and
upgrading facilities together with selective acquisitions. Capital
expenditures were $36.9 million for the year ended March 31, 1996, $25.8
million for the year ended March 31, 1995 and $18.2 million for the year ended
March 31, 1994.
RAW MATERIALS AND ENERGY COSTS
Scrap steel, which is the Company's primary raw material and comprises
approximately 49% of finished steel products cost, is presently supplied by one
company, David Joseph, Inc. ("David Joseph"). David Joseph is a scrap broker
and scrap yard operator headquartered in Cincinnati, Ohio, with locations
throughout the United States. David Joseph buys substantially all of the scrap
required by the Company for which it receives a fixed brokerage fee per ton and
operates shredders for the Company at the Jacksonville, Florida and Jackson,
Tennessee minimill sites for a fixed gross profit amount per ton. Although the
Company obtains its scrap steel from David Joseph, management believes that the
Company readily could obtain adequate supplies of scrap, if necessary, from
suppliers other than David Joseph at competitive prices. In fiscal 1995, the
Company consolidated the scrap purchasing activities under the newly
established position of Vice President of Material Procurement. This position
will focus on optimizing the purchasing, scheduling, and delivery of scrap and
other related items.
The Company's manufacturing processes consume large amounts of energy in the
form of electricity and natural gas. The Company purchases its electricity
from regulated utilities under interruptible service contracts. Under such
contracts, the utility provides service at discount rates in return for the
right to interrupt service during peak demand periods. These interruptions are
generally limited to several hours and have occurred on no more than five to
ten days per year. Since deregulation of the natural gas industry, natural gas
requirements generally have been provided through negotiated contract purchases
of well-head gas with supplemental transportation through local pipeline
distribution networks.
The other important raw or stock materials required for the Company's business,
such as refractories, ferro alloys, carbon electrodes, etc., are supplied by
various domestic and foreign firms. The Company has historically obtained
adequate quantities of scrap steel and other raw materials to permit efficient
mill operations.
5
<PAGE> 7
PRODUCTS AND MARKETS
The following tables set forth the tonnage shipped and average selling price
per ton of the Company's five major product groups.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
PRODUCT (TONS) 1996 1995 1994
- ---------------- ---------- ---------- ----------
<S> <C> <C> <C>
Stock Rebar 508,283 535,358 465,824
Merchant Bar (a) 543,841 549,151 468,004
Fabricated Rebar 314,971 346,484 329,647
Rods (a) 132,832 129,337 121,539
Billets 175,153 141,271 263,074
--------- --------- ---------
TOTAL TONNAGE 1,675,080 1,701,601 1,648,088
========= ========= =========
</TABLE>
(a) Includes products that are further fabricated by the Company.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
PRODUCT (PRICE PER TON) 1996 1995 1994
- ------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
Stock Rebar $ 310 $ 326 $ 283
Merchant Bar (a) 362 359 332
Fabricated Rebar (Plain) 460 421 371
Rods (a) 336 338 329
Billets 233 228 219
</TABLE>
(a) Includes products that are further fabricated by the Company.
REBAR PRODUCTS. The Company produces rebar products at its minimills in
Knoxville, Jacksonville and Charlotte, and to a lesser degree in Jackson.
The Company's rebar either is sold directly to distributors and independent
fabricating companies in stock lengths and sizes or is transferred to the
Company's 13 fabricating plants where it is cut and bent to meet engineering,
architectural or other end product specifications. Rebar is used primarily for
strengthening concrete in highway and building construction and other
construction applications. Rebar is consumed in a wide variety of private
sector applications and public works projects. Private sector applications
include construction of commercial and industrial buildings, apartments and
hotels, utility construction, agricultural uses and various maintenance and
repair applications. Public works projects include construction of highways,
streets and bridges, public buildings, water treatment facilities and other
projects.
Based on data reported by the Concrete Reinforcing Steel Institute (a rebar
fabricators' trade association), rebar consumption in the U.S. is approximately
5 million tons per year. The Company is the second largest rebar producer in
the U.S. with approximately 18% market share (included both stock and
fabricated rebar).
6
<PAGE> 8
MERCHANT BARS. The Company produces merchant bars at its minimills in Jackson,
Tennessee and Charlotte, North Carolina, and to a lesser degree in Knoxville,
Tennessee. Merchant bars consist of rounds, squares, flats, angles and
channels. Merchant bars are generally sold to fabricators, steel service
centers, and manufacturers who fabricate the steel to meet engineering or end
product specifications. Merchant bars are used to manufacture a wide variety of
products, including gratings, transmission towers, steel floor and roof joists,
safety walkways, ornamental furniture, stair railings, and farm equipment.
Merchant bar products typically require more specialized processing and
handling than rebar, including straightening, stacking, and specialized
bundling. Because of the greater variety of shapes and sizes, merchant bars
typically are produced in shorter production runs, necessitating more frequent
changeovers in rolling mill equipment. Merchant products generally command
higher prices and produce higher profit margins than rebar.
RODS. The Company produces steel rod at its Jacksonville, Florida minimill.
Most of this rod is sold directly to third-party customers, while the
remainder, depending on market conditions, is shipped to the Company's New
Orleans, Louisiana facility, where the rod is drawn down to wire for use in the
manufacture of welded wire fabric and nails.
MARKETING AND CUSTOMERS. The Company conducts its marketing operation through
its own sales personnel who specialize in either mill products or fabricated
rebar. Sales personnel for mill products including stock rebar and merchant
bars are located in close proximity to the Company's major markets and
customers. Metallurgical service representatives located at the Company's
minimills provide technical and sales support to the mill products sales force
and fabricated rebar sales force, where needed. The Company's inside sales
force is located at the Tampa headquarters where all order taking and shipping
instructions are centrally processed and coordinated. Fabricated rebar sales
personnel are located at the Company's 13 fabricating facilities where
engineering service representatives provide technical and sale support.
Principal customers of the Company include steel distributors, steel service
centers, rebar steel fabricators, other metal fabricators and manufacturers,
railroads, building material dealers, and contractors. Its fabricated rebar
products are sold to contractors performing work for residential and
nonresidential building, road, bridge, public works, utility and other
miscellaneous construction.
The Company's business is not dependent upon any particular, single customer.
The Company's customer base is fairly stable from year to year, and during
fiscal 1996 no one customer accounted for more than 3.1% of sales and the five
largest customers accounted for 11.0% of sales. The Company's business is
seasonal with orders in the second and third calendar quarters tending to be
strongest and those in the rest of the year tending to be the weakest. Stock
rebar and merchant bar are generally sold from inventory. Fabricated rebar is
generally produced in response to specific customer orders, rather than selling
from inventory. The amount of sales order backlog pertaining to fabrication
contracts was approximately $85 million at March 31, 1996, as compared to $86
million at March 31, 1995. Almost all of the backlog at March 31, 1996 is
expected to be filled during fiscal 1997. None of the business for the 1996
fiscal year is subject to renegotiation or termination of subcontract at the
election of the government.
The Company's payment terms to customers are generally determined based on
market conditions given the cyclical nature of its sales. However, the Company
generally does not offer extended payment terms to customers.
Despite the commodity characteristics of the stock rebar and merchant bar
markets, the Company believes that it is able to distinguish itself from its
competitors to some extent due to its product quality, its consistent delivery
record, its capacity to service large orders and its ability to fill most
orders quickly from inventory. Moreover, while construction and infrastructure
projects are generally nonrecurring in nature, the steel fabricators,
distributors and service centers which supply many of these projects directly
tend to be long-time customers of the Company. The Company's reputation for
quality and service is among the highest in industry.
7
<PAGE> 9
LITIGATION
The Company is involved in routine litigation arising in the normal course of
business. See "Environmental Matters", under Management's Discussion and
Analysis, for a discussion of the Company's cleanup liabilities with state and
federal regulators regarding the investigation and/or cleanup of certain
Superfund and non-Superfund sites. There are no other legal matters which
management believes will have a material impact on its business.
COMPETITION
The Company experiences substantial competition in the sale of each of its
products from a large number of domestic companies in its geographic markets.
Rebar and merchant bars are commodity steel products, making price the primary
competitive factor. Due to the high cost of freight relative to the value of
the Company's steel products, competition from non-regional producers is
limited; and rebar deliveries are generally concentrated within a 350 mile
radius of a minimill while merchant bar deliveries are generally concentrated
within a 500 mile radius of a minimill. Except in unusual circumstances, the
customer's delivery expense is limited to freight charges from the nearest
competitive minimill and any incremental freight charges must be absorbed by
the supplier. The level and degree of foreign competition faced by the Company
within the Florida rebar market have varied from time to time depending upon
factors including foreign government subsidies and currency exchange rates.
The Company's competitive environment varies by product. The following is a
discussion of the Company's competitive environment with respect to its five
major product categories: stock rebar, fabricated rebar, merchant bars, rods
and billets.
STOCK REBAR. The boundary of the current market area for the Company's rebar
products is roughly defined by a line running through New Orleans, Louisiana;
Little Rock, Arkansas; Kansas City, Kansas; St. Louis, Missouri; Indianapolis,
Indiana; Columbus, Ohio; and Baltimore, Maryland. The Company has found
shipping outside of this market area to be only marginally profitable because
of freight cost considerations.
MERCHANT BAR. The Company's primary marketing area for merchant bars
encompasses the southeastern and midwestern United States. The Company did not
enter the merchant bar market in a significant way until 1982 and does not have
the same market strength as it does in the rebar market. The Company's presence
in the southeastern and midwestern markets has grown steadily, and its merchant
bar sales now represent approximately 31% of the Company's total sales.
The market for merchant bars is very competitive, with price being the primary
competitive factor. In the last two years, the Company has upgraded its
rolling mill facilities at Charlotte, to increase the Company's ability to
shift production from rebar to merchant bar depending upon market conditions
and demand.
RODS. The Company produces rods at its Jacksonville minimill. The Company's
primary marketing area for rods includes Florida, South Carolina, Georgia,
Alabama and Louisiana. The Company does not intend to geographically expand its
marketing beyond these states due to the relatively low margins and prohibitive
freight cost inherent to rod products. While the market for rods can be heavily
influenced by foreign imports, rod sales by foreign competitors did not have a
material effect on the Company's rod sales in the last three years.
8
<PAGE> 10
FABRICATED REBAR. With 13 fabricating plants located throughout the
southeastern United States, all within good support distance from one of the
Company's five minimills, the Company is a major factor in all markets it
serves. In the sale of fabricated rebar, the Company competes with other steel
fabricators in its marketing area some of whom purchase their stock rebar from
the Company.
BILLETS. The Company produces billets (semi-finished steel) for conversion to
rebar, merchant bar and rods. When the market for finished product is down,
the Company sells the excess billet production.
EMPLOYEES
The Company has approximately 1,840 employees, none of whom is covered by a
collective bargaining agreement. The Company believes that its relations with
its employees are good and a participatory style of labor-management relations
is important to the efficiency of the Company's operations.
On January 1, 1995 an incentive plan based on production tons, was put into
effect at the mills. Each mill has a melting and rolling target which provide
a 1.5% increase in pay for each 1% increase in production. Effective April 1,
1995, the fabricating group, the mill sales group and the corporate
administrative group pay policy included monthly incentives based on certain
performance criteria. The executive group (approximately 40 key executives)
are covered by an incentive plan that is based on return on capital employed.
ITEM 2. PROPERTIES
The Company's buildings are of various ages and forms of construction and are
all properly maintained and adequately equipped for the purposes for which they
are used. The Company's four minimills are owned in fee simple and serve as
the collateral for the First Mortgage Notes together with the other collateral.
9
<PAGE> 11
The following tables present information with respect to the buildings and
facilities:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
OF BUILDING OWNED
LOCATION ACREAGE FLOOR SPACE OR LEASED
- -------- ------- ----------- ---------
<S> <C> <C> <C>
MILLS (A)
Jacksonville, FL......................... 160.9 288,564 Owned
Charlotte, NC............................ 77.2 299,401 Owned
Jackson, TN.............................. 300.1 424,878 Owned
Knoxville, TN(b)......................... 49.9 217,988 Owned
</TABLE>
(a) The First Mortgage Notes are secured by a first priority lien on
substantially all the real property, machinery, equipment, and fixtures
of each of the Company's four minimills.
(b) Includes a fabricating plant, which is not a part of the collateral
package.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
OF BUILDING OWNED
LOCATION ACREAGE FLOOR SPACE OR LEASED
- -------- ------- ----------- ---------
<S> <C> <C> <C>
FABRICATING PLANTS (C)
Ft. Lauderdale, FL....................... 7.3 55,254 Owned
Jacksonville, FL......................... 8.0 56,565 Owned
Orlando, FL.............................. 2.8 22,929 Owned
Plant City, FL (Tampa)................... 9.2 63,892 Owned
Duluth, GA (Atlanta)..................... 6.5 48,500 Owned
Louisville, KY........................... 4.3 37,338 Owned
Charlotte, NC............................ 7.0 57,867 Owned
Raleigh, NC.............................. 7.2 39,836 Owned
Aiken, SC................................ 7.5 32,340 Owned
Nashville, TN............................ 5.0 46,760 Owned
Collierville, TN (Memphis)............... 2.7 26,664 Owned
St. Albans, WV........................... 5.0 27,300 Leased
</TABLE>
(c) These properties do not constitute collateral for either the First
Mortgage Notes or the New Revolving Credit Agreement.
10
<PAGE> 12
<TABLE>
<CAPTION>
SQUARE FEET
OF BUILDING OWNED
OTHER (D) USE ACREAGE FLOOR SPACE OR LEASED
- --------------- ------------------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Tampa, FL Corporate offices - 28,000 Leased
Tampa, FL Closed minimill 65.2 200,000 Owned
Tampa, FL Land held for sale 432.4 - Owned
Indiantown, FL Closed minimill 151.5 130,340 Owned
New Orleans, LA Wire fabric and
nail facility 5.0 120,000 Leased
Lancaster, SC Rail spike facility 41.0 52,000 Owned
Paragould, AR Rail spike facility 7.7 23,000 Owned
</TABLE>
(d) These properties do not constitute collateral for either the First
Mortgage Notes or the Revolving Credit Agreement.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
MARKET PRICE AND CASH DIVIDENDS
No established public trading market exists for the Company's common stock.
During the last fiscal year, 48,836 shares were sold to employees through an
employee stock purchase plan based on a sales price of 85% of fair market
value, as established by an independent third party appraisal. Repurchases at
such fair market value of $12.50 per share have been made by the Company upon
the termination of employment of any employee owning stock.
No dividends have been declared or paid on the Company's common stock during
any of the applicable reporting periods.
As of March 31, 1996, there were approximately 1,300 holders of record of the
Company's common stock.
11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The summary financial information presented below should be read in conjunction
with the Financial Statements of AMERISTEEL CORPORATION and the notes thereto
($ in thousands except per share data):
<TABLE>
<CAPTION>
Predecessor
---------------------------
Year Ended Year Ended Year Ended Three Months Ended Year Ended
March 31, March 31, March 31, March 31, December 31, September 30,
1996 1995 1994 1993 1992 1992
---------- ---------- ---------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $628,404 $639,908 $547,118 $122,736 $108,358 $465,233
Operating expenses:
Cost of sales, excluding
depreciation 533,965 545,725 498,692 109,607 99,355 404,750
Selling and administrative 29,605 29,959 22,993 5,459 6,071 24,398
Depreciation 14,619 14,046 15,369 3,770 3,890 15,643
Amortization of goodwill 4,130 4,130 4,061 1,015 667 2,670
Other operating expenses 16,013 - 15,220 - - 9,000
-------- -------- -------- -------- -------- --------
598,332 593,860 556,335 119,851 109,983 456,461
-------- -------- -------- -------- -------- --------
Income (loss) from operations 30,072 46,048 (9,217) 2,885 (1,625) 8,772
Other expense:
Interest 22,000 23,330 21,027 5,290 14,482 35,465
Amortization of deferred
financing costs 1,956 2,863 2,552 653 288 1,276
-------- -------- -------- -------- -------- --------
23,956 26,193 23,579 5,943 14,770 36,741
-------- -------- -------- -------- -------- --------
Income (loss) before income
taxes (benefit), extraordinary
item, and cumulative effect of
change in accounting principle 6,116 19,855 (32,796) (3,058) (16,395) (27,969)
Income taxes (benefit) 3,996 9,354 (10,833) (769) (6,001) (8,030)
-------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item and cumulative effect of
change in accounting principle 2,120 10,501 (21,963) (2,289) (10,394) (19,939)
Extraordinary item, net of income
tax benefit - - (748) - (4,185) -
Cumulative effect of change in
accounting principle, net of
income tax benefit - - - - - (4,270)
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS) $ 2,120 $ 10,501 $(22,711) $ (2,289) $(14,579) $(24,209)
======== ======== ======== ======== ======== ========
Earnings (loss) per share $ 0.21 $ 1.05 $ (2.27) $ (0.23)
======== ======== ======== ========
</TABLE>
12
<PAGE> 14
The following table shows the percentage of the Company's revenues derived from
each product category in the relevant time period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1994
-------------- -------------- ---------------
<S> <C> <C> <C>
Fabricated Rebar 24% 23% 23%
Stock Rebar 25 27 24
Merchant Bars 31 31 28
Rods 7 7 8
Other (includes billets) 13 12 17
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
AS OF AS OF AS OF AS OF ----------------------
MARCH 31, MARCH 31, MARCH 31, MARCH 31, AS OF SEPTEMBER 30,
1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
($ in thousands)
Current assets $200,109 $223,444 $187,672 $148,335 $146,061 $138,372
Current liabilities 85,588 102,080 76,006 59,530 352,599 214,576
Working capital (deficit) 114,521 121,364 111,666 88,805 (206,538) (76,204)
Current ratio 2.3 2.2 2.5 2.5 (0.4) (0.6)
Property, plant and equipment, net 247,009 231,108 222,861 229,665 222,620 236,613
Goodwill 89,903 94,033 98,163 100,530 95,893 98,563
Deferred financing costs 3,457 4,504 7,367 9,725 7,622 8,325
Total assets 554,896 561,748 523,706 495,884 479,827 489,961
Long-term borrowings 252,525 243,030 247,128 212,002 284,568 286,875
Other liabilities 20,336 18,388 28,721 24,490 16,153 3,000
Deferred tax liabilities 54,700 60,500 46,852 52,151 59,285 71,385
Redeemable preferred stock - - - - 94,717 80,079
Shareholders' equity (deficit) 141,747 137,750 124,999 147,711 (42,908) (4,079)
</TABLE>
13
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
($ in thousands)
<TABLE>
<CAPTION>
APRIL 1, APRIL 1, APRIL 1,
1995- 1994- 1993-
MARCH 31, MARCH 31, MARCH 31,
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales $628,404 $639,908 $547,118
Cost of sales excluding
depreciation 533,965 545,725 498,692
Selling and administrative 29,605 29,959 22,993
Depreciation 14,619 14,046 15,369
Amortization of goodwill 4,130 4,130 4,061
Other operating expenses 16,013 - 15,220
Interest 22,000 23,330 21,027
Amortization of deferred
financing costs 1,956 2,863 2,552
Extraordinary item net of
income tax benefit - - (748)
Income tax (benefit) 3,996 9,354 (10,833)
Net income (loss) 2,120 10,501 (22,711)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company's total outstanding borrowings were $267.5
million of which $14.9 million is due within fiscal 1997. Outstanding
borrowings under the New Revolving Credit Agreement totaled $72.0 million.
Effective June 1995 the Company negotiated a New Revolving Credit Agreement to
replace the Revolving Credit Agreement and provide additional liquidity. See
Note E - Notes to Financial Statements for additional details concerning the
new agreement.
14
<PAGE> 16
Net cash provided by operating activities of $44.1 million improved
substantially in fiscal 1996 as a result of lower working capital requirements.
Capital expenditures increased to $36.9 million as compared with $25.8 million
in fiscal 1995.
The First Mortgage Notes and the New Revolving Credit Agreement contain certain
restrictions to incur additional indebtedness and other covenants deemed
appropriate. As of year end, the Company had $29.4 million of available credit
under the Revolving Credit Agreement and $6.2 million in cash. The Company
believes that the available borrowings and the cash flow generated from
operations will be sufficient to fund the current operations and the current
capital expenditure program. The Company is currently in compliance with all
of the covenants of its loan agreements.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
The Company is subject to federal and state requirements governing the
remediation of environmental contamination associated with past releases of
hazardous substances (collectively, "Environmental Cleanup Laws") and to
extensive federal, state, and local laws and regulations governing discharges
to the air and water as well as the handling and disposal of solid and
hazardous wastes (collectively, "Environmental Regulatory Laws"). Governmental
authorities have the power to enforce compliance with these requirements, and
violators may be subject to civil or criminal penalties, injunctions or both.
Third parties also may have the right to sue to enforce compliance. The
Company anticipates that it will incur significant costs under Environmental
Cleanup Laws and Environmental Regulatory Laws, as discussed below.
The Company is subject to federal and state hazardous substance cleanup laws
that impose liability for the costs of cleaning up contamination resulting from
past spills, disposal, or other releases of hazardous substances. In
particular, the Company may be subject to liability under the federal
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"
or "Superfund") and similar state laws that impose liability--without a showing
of fault, negligence, or regulatory violation--on the generation of hazardous
substances that have caused, or may cause, environmental contamination. The
current owner and operator of contaminated property also are liable for cleanup
of the property even if they have not contributed to the contamination of such
property. The Company expects to incur assessment, remediation, and related
costs at Company-owned minimills and at certain off-site locations.
Courts have interpreted CERCLA generally to impose joint and several liability
for cleanup (and certain other) costs on all potentially responsible parties
(PRP). This means that each PRP conceivably could be held liable for the
entire amount of necessary cleanup costs.
Based on past use of certain technologies and remediation methods by third
parties, evaluation of those technologies and methods by the Company's
consultants and quotations and third-party estimates of costs of
remediation-related services provided to the Company or of which the Company
and its consultants are aware, the Company and its consultants continue to
believe that the Company's cost estimates are reasonable. The Company has
estimated its potential costs for further remediation under Environmental
Cleanup Laws at on-site and off-site locations through 2009 to be approximately
$14 million and has included this amount in the Company's recorded liabilities
as of March 31, 1996.
The Company anticipates that it will incur potentially significant costs to
comply with Environmental Regulatory Laws, including correcting existing
noncompliance with such laws and achieving compliance with anticipated future
standards for air emissions.
15
<PAGE> 17
Based on a preliminary EPA determination, the Company no longer expects to
incur significant costs to comply with the recent amendments to the federal
Clean Air Act under which the EPA was expected to promulgate strict standards
that would govern the emission of hazardous air pollutants from electric arc
furnaces such as those used by the Company. The EPA regulations are not
scheduled to be promulgated until 1997, with compliance expected to be required
by 2000, and it is not known when a final determination as to electric arc
furnaces will be made by the EPA.
SEASONALITY
The Company's business is seasonal with orders in the second and third calendar
quarters tending to be stronger than the rest of the year.
IMPACT OF INFLATION
The Company's primary costs include ferrous scrap, energy and labor which can
be affected by inflationary conditions. The Company has been able to pass on
cost increases through price adjustments, however the ability to pass on these
increases depends on the level of construction activity. Another factor that
may limit the Company's ability to increase prices is the over-capacity in the
industry.
FISCAL 1996 VERSUS FISCAL 1995
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) SELLING PRICES (PER TON)
------------------------ ------------------------
FY 1996 FY 1995 FY 1996 FY 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Stock Rebar 508 535 310 $326
Merchant Bar 544 549 362 359
Fabricated Rebar 315 347 460 421
Rods 133 129 336 338
Billets 175 141 233 228
----- -----
1,675 1,701
===== =====
</TABLE>
SALES. Net sales for fiscal 1996 were 1.8% lower than fiscal 1995 because of
lower volume and lower mill average selling prices. While billet shipments
were 24.1% higher than a year ago, finished product shipments were down 3.8%.
Average mill selling prices were down $5 per ton, however, fabricated rebar
selling prices were up 9.3% or $39 per ton.
COST OF SALES. Cost of sales, excluding depreciation, was 85.0% of net sales
as compared with 85.3% for the previous year. Mill conversion costs were the
same while scrap cost was $131 per ton or $1 per ton higher than the previous
year.
SELLING AND ADMINISTRATION EXPENSES. Selling and administrative expenses were
slightly lower in fiscal 1996 versus fiscal 1995 and were 4.7% of net sales for
both years.
DEPRECIATION. Depreciation expense for fiscal 1996 was higher than fiscal 1995
because of new capital additions that were placed in service.
16
<PAGE> 18
OTHER OPERATING EXPENSES. Other operating expenses in fiscal 1996 were
primarily the result of the shut-down of the Tampa rolling mill ($15 million)
of which $12 million was a non-cash write down of fixed assets to market value
and $3 million for employee severance benefits and other closing costs. The
Company charged off approximately $752 thousand after vacating the former
Washington D.C. fabricating plant. This write-off was the balance of a
long-term lease.
INTEREST EXPENSE. Interest expense was lower in fiscal 1996 versus fiscal 1995
primarily because of lower average rates and higher capitalized interest.
Average borrowings were higher in the current year versus the prior year.
Capitalized interest in fiscal 1996 was $2.1 million versus $654 thousand in
fiscal 1995 as a result of higher capital expenditure projects.
AMORTIZATION OF DEFERRED FINANCING COSTS. Amortization of deferred financing
costs were lower in fiscal 1996 as compared with fiscal 1995 because of higher
financing costs associated with the Revolving Credit Agreement in fiscal 1995.
INCOME TAXES. The effective federal and state income tax rate for fiscal 1996
was 39% compared with 38.8% for the previous year excluding the effect of
goodwill amortization which is not deductible for income tax purposes.
FISCAL 1995 VERSUS FISCAL 1994
SALES. Net sales for fiscal 1995 were 17% higher than fiscal 1994 as a result
of both higher volume and improved selling prices. Shipments for all finished
products were up 12.6% while billet shipments, primarily export shipments at
low margins, were lower. All selling prices were higher this year over last
year with mill finished products 10.3% higher and fabricated rebar 13.5% higher.
COST OF SALES. Cost of sales excluding depreciation was 85.3% of net sales as
compared with 91.2% for the previous year. The substantial improvement was the
result of the increased sales volume and prices and a $11 per ton decrease in
mill conversion costs. While scrap costs increased $12 per ton the spread
between mill finished products average selling prices and scrap increased $20
per ton in fiscal 1995 versus fiscal 1994.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses for
fiscal 1995 were higher than fiscal 1994 primarily because of employment costs
related to the hiring of the new Chairman of the Board and Chief Executive
Officer and higher wages and benefits.
17
<PAGE> 19
DEPRECIATION. Depreciation expense was lower in fiscal 1995 versus fiscal 1994
because of the shut down of the Tampa melt shop in June 1994.
INTEREST. Interest expense was higher in fiscal 1995 versus fiscal 1994 as a
result of higher rates and higher average borrowings. The Company capitalized
$654 thousand of interest in the current year versus zero a year ago.
AMORTIZATION OF DEFERRED FINANCING COSTS. Amortization of deferred financing
costs were higher in fiscal 1995 versus a year ago primarily because of higher
financing costs associated with the Revolving Credit Agreement.
INCOME TAXES. The effective federal and state income tax rate for fiscal 1995
was 38.8% compared with 36.5% for the previous year, excluding the effect of
goodwill amortization which is not deductible for income tax purposes. The
increased rate reflects the higher federal rate and to a lesser extent higher
state rates, based on net income levels.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to index in Item 14 for financial statements and supplementary data filed
as a part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
18
<PAGE> 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
GENERAL. The Bylaws of the Company provide that the business shall be managed
by a Board of Directors.
The name, age, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of the
Company are set forth below. All officers serve at the pleasure of the Board.
Directors serve no specific term of office. Each director and executive
officer listed below is a citizen of the United States, except as noted below.
Refer to Item 13 for information on other directorships held by each director.
<TABLE>
<CAPTION>
NAME AND AGE
------------ PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
DIRECTORS AND FIVE-YEAR EMPLOYMENT HISTORY
--------- ------------------------------------------
<S> <C>
Koichi Takashima (73) Chairman of the Board of AMERISTEEL from December 21, 1992 through May 31, 1994.
Director of AMERISTEEL since December 21, 1992. Chairman of Kyoei Steel for more
than five years. Citizen of Japan.
Phillip E. Casey (53) Chairman of the Board and Chief Executive Officer, Director of AMERISTEEL since
June 1, 1994. Prior to that date was an officer with Birmingham Steel Corporation
for more than five years.
Thomas G. Creed (62) Chief Operating Officer; President and Chief Operating Officer of AMERISTEEL for
more than five years. Director since 1987.
J. Donald Haney (59) Vice President; Group Vice President Fabricated Reinforcing Products of AMERISTEEL
for more than five years. Director since 1988.
Akihiko Takashima (59) Director of AMERISTEEL since December 21, 1992. Director, Kyoei Steel for more
than five years. Citizen of Japan. Mr. A. Takashima is the brother of Mr. K. Takashima.
Hideichiro Takashima (38) Director of AMERISTEEL since May 22, 1995. Executive of Kyoei Steel for more than five years.
Citizen of Japan and son of Koichi Takashima.
Ryutaro Yoshioka (57) Director of AMERISTEEL since May 22, 1995. Executive of Kyoei Steel since July 1, 1994.
Executive of Bank of Tokyo for more than five years. Citizen of Japan.
Takeshi Fujimura (71) Director of AMERISTEEL and Chairman of the Executive Committee since December 21, 1992.
Advisor to President, Kyoei Steel since 1990. Prior to that date was Executive Vice
President of Sumikin Bussan Kaisha, LTD., for more than two years. Citizen of Japan.
Shoji Nakamura (60) Vice President--Engineering and Director of AMERISTEEL since December 21, 1992. Managing
Director, Kyoei Steel since April 1990. Prior to that date, Director for more than three years.
Citizen of Japan.
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<S> <C>
Tom J. Landa (44) Vice President; Chief Financial Officer and Secretary since April 1, 1995. Prior to that time,
spent almost 20 years in various financial management positions with Exxon Corporation and its
affiliates worldwide.
James C. Hogue (63) Vice President Human Resources of AMERISTEEL for more than five years.
Robert P. Muhlhan (46) Vice President Material Procurement since February 1995, two years as Regional Vice President
of National Material Trading and prior to that time was a manager with LTV Steel Company for
more than five years.
Horoyoshi Tsuchiya (57) Vice President Strategic Planning since May 1, 1994. Prior to that date held management positions
at Mitsubishi Corporation in Japan and Canada for more than five years. Citizen of Japan.
James N. McCullohs (39) Vice President Mill Sales since August 1995. Prior to that date, has held several management
positions with AmeriSteel for more than five years.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
AMERISTEEL'S Board of Directors has an Executive Committee consisting of Mr.
Casey, Mr. Fujimura, and Mr. Creed. The Company also has an Executive
Compensation Committee and an Audit Committee. Committees of the Board of
Directors may be appointed by the Board of Directors in accordance with the
Bylaws of AMERISTEEL.
20
<PAGE> 22
ITEM 11. EXECUTIVE COMPENSATION
The tables and descriptive information set forth below are intended to comply
with the amendments adopted by the SEC to the executive compensation
requirements applicable to, among other filings, this report. This information
is being furnished with respect to those persons who, were the Company's Chief
Executive Officer and its four most highly compensated executive officers,
other than the Chief Executive Officer, whose salary and bonus exceeded
$100,000 for the most recent fiscal year (together, the "named executive
officers"). Tables have been omitted where no compensation was awarded to,
earned by or paid to any of the named executives required to be reported in any
fiscal year covered by that table.
SUMMARY COMPENSATION TABLE
The following table provides information concerning the annual compensation of
each of the named executive officers of the Company for services rendered to
the Company in each of the Company's last three fiscal years.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
YEAR SALARY BONUS AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION $ $ $ $ # $(1)
- --------------------------- ---- ------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Phillip E. Casey 1996 255,000 80,453 - 4,617
Chairman of the Board 1995 249,167 2,692,170 (2) 4,500,000 (2),(3) 250,000 (3)
and Chief Executive Officer
Thomas G. Creed 1996 256,308 82,671 - 2,481
President 1995 282,204 221,779 - 4,748
and Chief Operating Officer 1994 272,328 - - 4,500
J. Donald Haney 1996 196,974 64,445 - 2,620
Vice President Fabricating 1995 216,594 140,995 - 4,137
Reinforcing Products 1994 209,016 - - 3,437
Tom J. Landa
Vice President 1996 160,389 153,019 (4) 150,000 (5) 12,000
and Chief Financial Officer
James C. Hogue 1996 155,712 50,944 - 2,735
Vice President Human Resources 1995 180,936 105,872 - 3,422
1994 171,210 - 3,200
</TABLE>
(1) These amounts include Company matching contributions made pursuant to the
Company's Savings Plan.
(2) 750,000 shares were awarded as of June 1, 1994 and vest at the rate of
20% a year beginning as of June 1, 1995. At the end of fiscal 1996,
600,000 of the shares, valued at $7,500,000 in the aggregate, were still
subject to forfeiture and held by Mr. Casey. Dividends, if declared and
paid on the Company's common stock generally, are payable on the shares.
The 1995 bonus includes a $500,000 signing bonus and a $1,946,000 tax
bonus.
(3) The number of shares shown have been adjusted to reflect a 49,999 for 1
stock dividend effected during fiscal 1996.
(4) Includes a $100,000 signing bonus pursuant to Mr. Landa's employment
offer.
(5) 12,000 shares were awarded as of November 2, 1995 and vest 1/3 as of
April 1, 1997, 1/3 as of April 1, 1998 and 1/3 as of April 1, 1999. At
the end of fiscal 1996, all 12,000 shares, valued at $150,000 in the
aggregate, were still subject to forfeiture and held by Mr. Landa.
Dividends, if declared and paid on the Company's common stock generally,
are payable on the shares.
21
<PAGE> 23
OPTIONS GRANTS TABLE
The following table shows information concerning stock options granted during
fiscal 1996 for the individuals shown in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
----------------- ASSUMED ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR OPTION TERM
UNDERLYING GRANTED TO OR BASE ----------------------------
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) (1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------- --------------- ------------ -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Phillip E. Casey 0
Thomas G. Creed 1,718 0.75% $ 12.50 9/28/05 13,505 34,226
J. Donald Haney 1,368 0.57% $ 12.50 9/28/05 10,692 27,094
Tom J. Landa 12,000 5.04% $ 12.50 11/1/05 94,336 239,064
960 0.40% $ 12.50 9/28/05 7,546 19,125
James C. Hogue 1,080 0.45% $ 12.50 9/28/05 8,490 21,516
</TABLE>
(1) The grant options for 12,000 shares to Mr. Landa was made as of November
2, 1995 and vests 1/3 as of April 1, 1997, 1/3 as of April 1, 1998 and 1/3
as of April 1, 1999. The other options were granted under the terms of
the Company's 1995 Stock Purchase/Option Plan ("Shares in Success"); they
vest 1/3 as of September 29, 1997, 1/3 as of September 29, 1998 and 1/3 as
of September 29, 1999.
OPTION EXERCISES AND YEAR-END VALUE TABLE
No stock options were exercised by any of the Company's executive officers
during fiscal 1996. The following table shows information concerning stock
option values as of the end of fiscal 1996.
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR-END OPTION VALUES
----------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- ----------------- ------------------------------- -----------------------------
<S> <C> <C>
Phillip E. Casey 0 0
Thomas G. Creed 0 / 1,788 0
J. Donald Haney 0 / 1,368 0
Tom J. Landa 0 / 12,960 0
James C. Hogue 0 / 1,080 0
</TABLE>
(1) The latest appraisal of the Company's common stock, made as of March 31,
1996, sets forth a fair market value per share of $12.50, which is the
exercise price of all options, none of which are currently exercisable.
22
<PAGE> 24
DIRECTORS COMPENSATION
The Company's directors are not compensated for their services as a director
but are paid reasonable travel expenses.
EMPLOYMENT ARRANGEMENTS
Effective June 1, 1994, the Company entered into an employment agreement
with Mr. Phillip Casey to serve as the Company's Chairman of the Board of
Directors and Chief Executive Officer. The Agreement includes a one time
signing bonus of $500,000, base annual salary of $300,000, equity interest of
7.5% of the outstanding common stock of the Company ($4.5 million to vest
ratably over the next five years), a tax bonus in the amount of $1,946,000 paid
to Mr. Casey with respect to his receipt of the 7.5% equity interest, and other
benefits commensurate with his position. In addition, Mr. Casey was granted
and exercised an option to purchase an additional 2.5% of the outstanding
common stock of the Company for $1.5 million. The agreement provides for
certain termination benefits and places restrictions on the disposition of the
Company's stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of the end fiscal 1966, the members of the Company's Executive Compensation
Committee were Messrs. Koichi Takashima, Hideichiro Takashima, Ryutaro Yoshioka
and Takeshi Fujimura. Mr. H. Takashima replaced Mr. Akihiko Takashima on the
Committee in November 1995. Mr. Fujimura is Chairman of the Executive
Committee and an employee of the Company. None of the other members has at any
time been an officer or employee of the Company.
Mr. Fujimura is Advisor to the President of Kyoei Steel, Ltd., and the other
members of the Committee are also executive officers and/or directors of Kyoei.
Two other members of the Company's Board of Directors are also executive
officers and/or directors of Kyoei.
PENSION BENEFIT
The Pension Table sets forth the estimated annual benefits, payable as a single
life annuity, at various remuneration levels and for representative years of
service at normal retirement date under the Company's tax qualified
noncontributory defined benefit pension plan. The years of credited service
for the named executives are two years for Phillip E. Casey, one year for Tom
J. Landa, 23 years for Thomas G. Creed, 38 years for J. Donald Haney and 30
years for James C. Hogue. The final average compensation for the named
executives, for purposes of this plan for 1996 is $150,000.
<TABLE>
<CAPTION>
PENSION TABLE
YEARS OF SERVICE
20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 27,242 $ 34,053 $ 40,864 $ 47,674 $ 52,674
$ 150,000 42,242 52,803 63,364 73,924 81,424
$ 200,000 57,242 71,553 85,864 100,174 110,174
$ 235,000 67,742 84,678 101,614 118,549 130,299
$ 250,000 72,242 90,303 108,364 126,424 138,924
$ 300,000 87,242 109,053 130,864 152,674 167,674
$ 350,000 102,242 127,803 153,364 178,924 196,424
</TABLE>
See notes to financial statements
23
<PAGE> 25
SUPPLEMENTAL RETIREMENT PLAN
The Company maintains a nonqualified, unfunded supplemental retirement plan,
which provides certain officers defined pension benefits in addition to those
provided under the Company's other plans. The supplemental plan provides an
annual retirement benefit equal to the greater of (i) 50% of final average
compensation (as defined above), and (ii) 2.4% of final average compensation
multiplied by years of service (up to 25), plus 1% of final average
compensation multiplied by years of service in excess of 25 (up to 10), less
(in either case) amounts to which the participant is entitled under other
retirement plans of the Company and prior employers and under Social Security.
In 1988, as a result of the Change in Control of the Company, the accrued
benefits under this Plan became immediately due and payable in a lump sum,
although all of the active officers in the Company elected to waive receipt of
their accrued benefits in exchange for common stock of Holdings. Additional
benefits over and above those resulting from the acceleration continue to be
earned. Upon retirement at January 26, 1995, R. R. Boswell received a one-time
payment of $332,223 for supplemental retirement benefit. As of March 31, 1996
the Company has accrued approximately $470,000 in supplemental retirement
benefits for the remaining active employees covered by the Plan.
In connection with the Acquisition, the officers covered by this Plan have all
waived their rights to an immediate lump sum payment, provided, that if such
officers are terminated without Cause (as defined in the severance agreements
entered into with such officers), resign for Good Reason (as defined in the
severance agreements) or die, retire or become disabled, then such officers
will be entitled to receive the amounts they would have received had such
officers not waived the above described rights.
SEVERANCE AGREEMENTS
The Company and certain senior executives have entered into an agreement
providing that, if the Company terminates any executive other than for cause,
or reassigns such executive to a new position, the Company shall continue to
pay the executive his current base pay through August 30, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information about each person who is
known to management to be the beneficial owner, as of June 1, 1996, of more
than five percent of the Company's common stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENT
OF BENEFICIAL OWNER (NUMBER OF SHARES) OF CLASS
- ------------------------ ----------------------- --------
<S> <C> <C>
FLS Holdings, Inc. 9,000,000 89%
5100 West Lemon Street
Tampa, Florida 33609
Phillip E. Casey 1,006,892 10%
5100 West Lemon Street
Tampa, Florida 33609
</TABLE>
Each person named has sole voting power and sole investment power over the
shares noted above next to his or its name.
24
<PAGE> 26
The following table sets forth certain information about the shares of the
Company's common stock beneficially owned as of June 1, 1996, by the Company's
directors and the five executive officers listed in response to Item 11
individually, and by the directors and all executive officers as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL AMOUNT AND NATURE
OWNER OR NUMBER OF OF BENEFICIAL OWNERSHIP PERCENT
PERSONS IN THE GROUP (NUMBER OF SHARES) OF CLASS
--------------------- ----------------------- --------
<S> <C> <C>
Phillip E. Casey 1,006,892 10.0%
Tom J. Landa 12,160 *
Thomas G. Creed 6,508 *
J. Donald Haney 4,176 *
Takeshi Fujimura 150 *
Shoji Nakamura 212 *
James C. Hogue 3,144 *
All 14 directors and
executive officers as
a group (including the
named individuals) 1,033,857 10.2%
</TABLE>
* Less than 1%
Those directors not listed do not beneficially own any shares of the Company's
common stock. Each person or group named has sole voting power and sole
investment power over the shares noted above next to his name.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 17, 1995, the Company made a loan to Mr. Philip Casey in the amount of
$731,511 at 7.15% interest rate to be paid over the next five years. The loan
and interest was paid in full in February 1996.
25
<PAGE> 27
PART IV
ITEM 14,(a),(1),(2),(B)1
FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND REPORTS ON FORM 8-K
(A) (1) The following financial statements of AMERISTEEL CORPORATION as of
the dates and for the periods indicated are included herein:
<TABLE>
<S> <C>
Reports of Independent Certified Public Accountants
Statements of Financial Position March 31, 1996 and March 31, 1995
Statements of Operations Years Ended March 31, 1996, March 31, 1995
and March 31, 1994
Statements of Shareholder's Equity Years Ended March 31, 1996, March 31, 1995
and March 31, 1994
Statements of Cash Flows Years Ended March 31, 1996, March 31, 1995
and March 31, 1994
</TABLE>
(2) The following financial statement schedules of AMERISTEEL CORPORATION
are filed as part of this report:
Schedule II Valuation and qualifying accounts
(3) The following exhibits are filed as part of this report:
Exhibit 3(I) -- Articles of Incorporation, as amended to date
Exhibit 10 -- AmeriSteel Equity Ownership Plan
AmeriSteel Strategic Value Added Executive Short-Term
Incentive Plan
Exhibit 23 -- Consent of Arthur Andersen LLP
Exhibit 23.1 -- Consent of Deloitte & Touche LLP
Exhibit 27 -- Financial Data Schedule (For SEC Use Only)
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and,
therefore, have been omitted.
(B) Reports on Form 8-K.
None for the quarter ended March 31, 1996.
Supplemental Information To Be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not registered Securities Pursuant
to Section 12 of the Act
The annual report on Form 10K but no proxy statement, form of proxy or other
proxy solicitation material, is intended to be furnished to stockholders of the
Company with respect to fiscal 1996.
26
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERISTEEL CORPORATION
By: /s/ Phillip E, Casey June 25, 1996
---------------------------------------------------------
Phillip E. Casey, Chairman of the Board Date
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------- -------------------------------------------
<S> <C>
/s/ Phillip E. Casey June 25, 1996 Chief Executive Officer
- --------------------------------------- Chairman of the Board; Director
Phillip E. Casey Date
/s/ Director
- ---------------------------------------
Koichi Takashima Date
/s/ Director
- ---------------------------------------
Akihiko Takashima Date
/s/ Director
- ---------------------------------------
Takeshi Fujimura Date
/s/ Director
- ---------------------------------------
Hiderchiro Takashima Date
/s/ Ryutaro Yoshioka June 25, 1996 Director
- ---------------------------------------
Ryutaro Yoshioka Date
/s/ Thomas G. Creed June 25, 1996 President; Director
- ---------------------------------------
Thomas G. Creed Date
/s/ Shoji Nakamura June 25, 1996 Vice President, Engineering; Director
- ---------------------------------------
Shoji Nakamura Date
/s/ J. Donald Haney June 25, 1996 Vice President; Director
- ---------------------------------------
J. Donald Haney Date
/s/ Tom J. Landa June 25, 1996 Vice President; Chief Financial Officer and
- --------------------------------------- Secretary (Principal Financial Officer and
Tom J. Landa Date Principal Accounting Officer)
</TABLE>
27
<PAGE> 29
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
AmeriSteel Corporation:
We have audited the accompanying statements of financial position of AmeriSteel
Corporation (a Florida corporation) as of March 31, 1996 and 1995, and the
related statements of operations, shareholders' equity and cash flows for the
years then ended. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AmeriSteel Corporation as of
March 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states, in all material respects, the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Tampa, Florida
April 26, 1996
28
<PAGE> 30
[LOGO]
DELOITTE & TOUCHE LLP
Certified Public Accountants Suite 1200
201 East Kennedy Boulevard
Tampa, Florida 33602-5821
Telephone: (813) 273-8300
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
AmeriSteel Corporation
Tampa, Florida
We have audited the accompanying statements of operations, shareholders'
equity, and cash flows of AmeriSteel Corporation [formerly Florida Steel
Corporation (the "Company")] for the year ended March 31, 1994. Our audit also
included the financial statement schedule listed in the Index at Item 14(a) for
the year ended March 31, 1994. These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Company's financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
the Company for the year ended March 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, for the year ended March 31, 1994, when considered in relation to the
basic statements taken as a whole, presents fairly in all material respects the
information set forth therein for the year ended March 31, 1994.
DELOITTE & TOUCHE LLP
June 6, 1994
- ---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
- ---------------
29
<PAGE> 31
AMERISTEEL CORPORATION
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
($ IN THOUSANDS)
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,193 $ 2,854
Accounts receivable, less allowance of
$1,000 at March 31, 1996 and 1995
for doubtful accounts 72,910 80,360
Inventories 112,753 127,680
Deferred tax assets 7,200 11,800
Other current assets 1,053 750
-------- ---------
TOTAL CURRENT ASSETS 200,109 223,444
ASSETS HELD FOR SALE 14,411 8,631
PROPERTY, PLANT AND EQUIPMENT
Land 11,435 10,953
Building and improvements 33,864 31,902
Machinery and equipment 199,350 197,720
Construction in progress 45,039 21,566
-------- ---------
289,688 262,141
Less accumulated depreciation 42,679 31,033
-------- ---------
247,009 231,108
GOODWILL 89,903 94,033
DEFERRED FINANCING COSTS 3,457 4,504
OTHER ASSETS 7 28
-------- ---------
TOTAL ASSETS $554,896 $ 561,748
======== =========
</TABLE>
See notes to financial statements
30
<PAGE> 32
AMERISTEEL CORPORATION
STATEMENTS OF FINANCIAL POSITION -- Continued
($ in thousands except share data)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
----------- ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 40,234 $ 49,364
Salaries, wages and employee benefits 14,336 16,520
Environmental remediation 6,079 10,919
Other current liabilities 5,057 3,774
Interest payable 4,940 5,258
Current maturities of long-term borrowings
(including note payable to parent of $444 and
$944 at March 31, 1996 and 1995, respectively) 14,942 16,245
-------- --------
TOTAL CURRENT LIABILITIES 85,588 102,080
LONG-TERM BORROWINGS, LESS CURRENT
PORTION (INCLUDING NOTE PAYABLE TO
PARENT OF $50,000 AT MARCH 31, 1996 AND 1995,
RESPECTIVELY) 252,525 243,030
OTHER LIABILITIES 20,336 18,388
DEFERRED TAX LIABILITIES 54,700 60,500
COMMITMENTS
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 30,000,000 authorized,
10,095,741 and 10,000,000 shares outstanding,
at March 31, 1996 and 1995, respectively 101 100
Capital in excess of par 157,026 155,900
Accumulated deficit (12,380) (14,500)
Deferred compensation (3,000) (3,750)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 141,747 137,750
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $554,896 $561,748
======== ========
</TABLE>
31
<PAGE> 33
AMERISTEEL CORPORATION
STATEMENTS OF OPERATIONS
($ in thousands except earnings per share)
<TABLE>
YEAR YEAR YEAR
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
NET SALES $ 628,404 $639,908 $ 547,118
Operating expenses:
Cost of sales, excluding depreciation 533,965 545,725 498,692
Selling and administrative 29,605 29,959 22,993
Depreciation 14,619 14,046 15,369
Amortization of goodwill 4,130 4,130 4,061
Other operating expenses 16,013 - 15,220
--------- -------- ---------
598,332 593,860 556,335
--------- -------- ---------
INCOME (LOSS) FROM OPERATIONS 30,072 46,048 (9,217)
Other expenses: 22,000 23,330 21,027
Interest 1,956 2,863 2,552
--------- -------- ---------
Amortization of deferred financing costs 23,956 26,193 23,579
--------- -------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
(BENEFIT) AND EXTRAORDINARY ITEM 6,116 19,855 (32,796)
Income taxes (benefit) 3,996 9,354 (10,833)
--------- -------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM 2,120 10,501 (21,963)
Extraordinary item, net of income tax
benefit - - (748)
NET INCOME (LOSS) $ 2,120 $ 10,501 $(22,711)
========= ======== ========
Weighted average shares outstanding
(in thousands) 10,062 10,000 10,000
========= ======== ========
Earnings (loss) per common share:
Income (loss) before extraordinary item $ 0.21 $ 1.05 $ (2.20)
Extraordinary item - - (0.07)
--------- -------- -------
Net income (loss) $ 0.21 $ 1.05 $ (2.27)
========= ======== ========
</TABLE>
See notes to financial statements
32
<PAGE> 34
AMERISTEEL CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
($ in thousands except share data)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
-------------------------- IN EXCESS ACCUMULATED DEFERRED
SHARES AMOUNT OF PAR DEFICIT COMPENSATION TOTAL
----------- ----------- ------------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31, 1993 200 $ - $ 150,000 $ (2,290) - $ 147,710
Net loss - - - (22,711) - (22,711)
----------- ----------- ------------- -------------- -------------- ----------
BALANCES AT MARCH 31, 1994 200 - 150,000 (25,001) - 124,999
Repurchase of common stock (20) - - - - -
Common stock issuance 15 - 4,500 - (4,500) -
Exercise of stock options 5 - 1,500 - - 1,500
Net income - - - 10,501 - 10,501
Reduction in deferred compensation - - - - 750 750
49,999 for 1 stock dividend 9,999,800 100 (100) - - -
----------- ----------- ------------- -------------- -------------- ----------
BALANCES AT MARCH 31, 1995 10,000,000 100 155,900 (14,500) (3,750) 137,750
Common stock issuance 95,741 1 1,126 - (150) 977
Net income - - - 2,120 - 2,120
Reduction in deferred compensation - - - - 900 900
----------- ----------- ------------- -------------- -------------- ----------
BALANCES AT MARCH 31, 1996 10,095,741 $ 101 $ 157,026 $ (12,380) $ (3,000) $ 141,747
=========== =========== ============= ============== ============== ==========
</TABLE>
See notes to financial statements
33
<PAGE> 35
AMERISTEEL CORPORATION
STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 2,120 $ 10,501 $ (22,711)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 14,619 14,046 15,369
Amortization 6,086 6,993 6,614
Provision for uncollectible accounts - - 714
Extraordinary item - - 748
Deferred income taxes (1,200) 1,849 (5,129)
Loss on disposition of property, plant and equipment 14,312 600 9,408
Other, net - - 282
Deferred compensation 900 750 -
Changes in operating assets and liabilities:
Accounts receivable 7,450 (11,142) (12,607)
Recoverable income taxes - 300 4,200
Inventories 14,927 (12,470) (31,329)
Other current assets (303) 420 (263)
Other assets 21 15 (14)
Trade accounts payable (9,130) 3,315 13,626
Salaries, wages and employee benefits (2,184) (868) 1,661
Other current liabilities 1,283 6,856 2,356
Environmental remediation (4,840) (5,005) -
Interest payable (318) 526 (1,169)
Other liabilities 348 (5,329) 4,231
--------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 44,091 11,357 (14,013)
INVESTING ACTIVITIES
Additions to property, plant and equipment (36,894) (25,781) (18,193)
Proceeds from sale of property, plant and equipment 788 1,857 221
Proceeds from sale of assets held for sale 794 - -
Restricted IRB Funds (13,700) - -
--------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES $ (49,012) $ (23,924) $ (17,972)
</TABLE>
See notes to financial statements
34
<PAGE> 36
AMERISTEEL CORPORATION
STATEMENTS OF CASH FLOWS - - Continued
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from short-term and long-term borrowings, net $ 21,227 $ 12,147 $ 55,125
Additions to deferred financing costs (909) - (194)
Repurchase of subordinated debentures (13,035) - (21,200)
Proceeds from exercise of stock options - 1,500 -
Proceeds from sale of common stock 977 - -
Purchase preferred stock - - (1,695)
---------- ---------- ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 8,260 13,647 32,036
---------- ---------- ------------
INCREASE IN CASH
AND CASH EQUIVALENTS 3,339 1,080 51
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,854 1,774 1,723
---------- ---------- ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 6,193 $ 2,854 $ 1,774
========= ========== ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized) $ 22,318 $ 22,150 $ 22,195
========= ========== ============
Cash paid for income taxes $ 4,682 $ 5,645 $ 300
========= ========== ============
</TABLE>
See notes to financial statements
35
<PAGE> 37
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE A-- BASIS OF PRESENTATION
The financial statements include the accounts of AmeriSteel (the "Company").
As of April 1, 1996, the Company changed its name from Florida Steel
Corporation (which it had used since 1956) to AmeriSteel Corporation. The
predecessor of the Company was formed in 1937.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Credit Risk: The Company extends credit, primarily on a basis of 30-day terms,
to various customers in the steel distribution, fabrication and construction
industries, primarily located in the southeastern United States. The Company
performs periodic credit evaluations of its customers and generally does not
require collateral. Credit losses, in the past, have not been significant.
Business Segment: The Company is engaged in steel production and the
manufacture, fabrication and marketing of steel products, primarily for use in
construction and industrial markets. In the years ended March 31, 1996 and
March 31, 1995, export sales were less than 1% of total sales.
Cash Equivalents: The Company considers all highly liquid investments, with a
maturity of three months or less when purchased, to be cash equivalents.
Inventories: Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Assets Held for Sale: Real estate and machinery and equipment held for sale
are carried at the lower of cost or estimated fair value. For the years ended
March 31, 1996 and March 31, 1995, the Company transferred $4,972,000 and
$1,031,000 from property, plant and equipment to assets held for sale.
Property, Plant and Equipment: Major renewals and betterments are capitalized
and depreciated over their estimated useful lives. Maintenance and repairs are
charged against operations as incurred. Upon retirement or other disposition
of property, plant and equipment, the cost and related allowances for
depreciation are removed from the accounts and any resulting gain or loss is
reflected in operations.
Plant start-up and other preoperating costs of new facilities are charged
against operations as incurred. Interest costs for property, plant and
equipment construction expenditures of $2,129,000 were capitalized for the year
ended March 31, 1996 and $654,000 for the year ended March 31, 1995. For
financial reporting purposes, the Company provides for depreciation of
property, plant and equipment using the straight-line method over the estimated
useful lives of 20 to 30 years for buildings and improvements and 4 to 15 years
for all other property, plant and equipment.
Goodwill: Goodwill consists of the excess of purchase price over the fair
value of acquired assets and liabilities. Goodwill is stated at cost less
accumulated amortization of $13,337,595 and $9,207,375 at March 31, 1996 and
1995, respectively. Goodwill is being amortized over a 25-year period.
Deferred Financing Costs: The deferred financing costs as of March 31, 1996
and 1995, are net of accumulated amortization of $8,023,464 and $6,067,332.
These amounts will be amortized over the term of the respective debt
instruments, which range from 3 to 8 years.
36
<PAGE> 38
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Earnings per Common Share Earnings per common share are computed using the
weighted average number of outstanding common shares. On May 22, 1995, the
Company's Board of Directors authorized a 49,999 for 1 stock dividend.
Earnings per common share and weighted average shares outstanding have been
retroactively adjusted for the stock dividend for all periods subsequent to
March 31, 1993.
Use of Estimates 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.
Delivery Expenses: The Company's policy is to include all delivery expenses in
cost of sales.
Self Insurance: As part of its risk management strategies, the Company is
self-insured, up to certain amounts, for risks such as workers' compensation,
employee health benefits, and long-term disability. Risk retention is
determined based on savings from insurance premium reductions, and, in the
opinion of management, does not result in unusual loss exposure relative to
other companies in the industry.
Recent Accounting Pronouncement: In March 1995, the Financial Accounting
Standards Board issued Statement No. 121 that requires impairment losses to be
recorded on long-lived assets used in operations and also addresses the
accounting for Long-Lived assets that are expected to be disposed of in future
periods. The Company will adopt Statement No. 121 in the first quarter of
fiscal 1997 and does not believe the effect of adoption will be material.
Reclassifications: Certain amounts in the fiscal 1995 financial statements
have been reclassified to conform to the fiscal 1996 financial statement
presentation.
NOTE C-- EXTRAORDINARY ITEM
In March 1994, the Company redeemed $20,000,000 of 14.5% subordinated
debentures. The 6% premium, equal to $1,200,000 was charged to expense net of
a $452,000 income tax benefit, and was classified as an extraordinary item for
financial reporting purposes.
NOTE D--INVENTORIES
Inventories consist of the following:
($ in thousands)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
---------- ----------
<S> <C> <C>
Finished goods $ 73,196 $ 81,375
Work in-process 16,291 21,620
Raw materials and operating supplies 23,266 24,685
---------- ----------
$ 112,753 $ 127,680
========== ==========
</TABLE>
37
<PAGE> 39
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE E--BORROWINGS
Long-term borrowings consist of the following:
($ in thousands)
<TABLE>
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
New Revolving Credit Agreement $ 71,650 $ -
Revolving Credit Agreement - 65,161
First Mortgage Notes 100,000 100,000
Subordinated Intercompany Note 50,000 50,000
Subordinated Debentures ("Debentures") 13,035
Industrial Revenue Bonds 30,875 10,875
Note to Parent 444 944
Trade Loan Agreements 4,498 9,260
Bank of Tokyo Loan 10,000 10,000
--------- ---------
267,467 259,275
Less current maturities 14,942 16,245
--------- ---------
$ 252,525 $ 243,030
========= =========
</TABLE>
Effective June 9, 1995, the Company entered into a two-year revolving bank
agreement (the "New Revolving Credit Agreement"), which replaced the Revolving
Credit Agreement and provides up to $140 million borrowings subject to a
"borrowing base" amount. The borrowing base amount will not exceed the sum of
85% of eligible accounts receivable plus 65% of eligible inventory. Letters of
credit are subject to an aggregate sublimit of $50 million.
The New Revolving Credit Agreement contains certain covenants including
financial ratios and limitations on indebtedness, liens, investments and
disposition of assets and dividends. It is collateralized by first priority
security interests in substantially all accounts receivable and inventory of
the Company. The Company is in compliance with these covenants at March 31,
1996.
Revolving Loans under the New Revolving Credit Agreement bear interest at a per
annum rate equal to one of several rate options (LIBOR, Fed Funds, or Cost of
Funds) at the discretion of the Company plus an applicable margin determined by
tests of performance from time to time. Prime interest rate loans, not
previously mentioned have no additional margin. In addition to Revolving
Loans, the Company has the option of incurring Swingline Loans, subject to an
aggregate sub-limit of $10 million, for short-term cash needs at rates near
prime. The initial borrowing under the New Revolving Credit Agreement, used to
pay off the Revolving Credit Agreement, was LIBOR plus 1.5%. The interest rate
at March 31, 1996 was 6.9%.
The First Mortgage Notes are collateralized senior obligations of the Company
limited in aggregate principal amount to $100 million and will mature on
December 15, 2000. Interest on the First Mortgage Notes accrues at the rate of
11.5% per annum and is payable semiannually on each June 15 and December 15.
The Company has assigned and pledged a security interest in substantially all
the real and personal property of the four mills.
38
<PAGE> 40
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE E--BORROWINGS -- Continued
The First Mortgage Notes will be redeemable, at the option of the Company, in
whole or in part from time to time, on or after December 15, 1996 at redemption
prices (expressed as percentages of the outstanding principal amount) if
redeemed during the twelve-month period commencing on December 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1996 103.833%
1997 101.916%
1998 and thereafter 100.000%
</TABLE>
The First Mortgage Notes rank pari passu with respect to the payment in full of
the principal and interest on all existing and future senior indebtedness of
the Company and rank senior to all subordinated indebtedness of the Company.
The First Mortgage Notes contain covenants that include, without limitation,
maintenance of sufficient consolidated net worth and limitations on additional
indebtedness, transactions with affiliates, dispositions of assets, liens,
dividends and distributions. The Company is in compliance with these covenants
at March 31, 1996.
The Company has issued to Holdings a $50 million note (the "Subordinated
Intercompany Note") which matures December 21, 2002. The Subordinated
Intercompany Note bear interest at variable rates. The weighted average
interest rate at March 31, 1996 was 7.2%.
The Company also has outstanding borrowings obtained through industrial revenue
bonds ("IRBs") issued to construct facilities in Jackson, Tennessee; Charlotte,
North Carolina; Jacksonville, Florida; and Plant City, Florida. The interest
rates on these bonds range from 50% to 75% of the prime rate.. The Company
increased its outstanding IRB's by $20.0 million in fiscal 1996 for a solid
waste disposal project in Jackson, Tennessee. Approximately $13.7 million of
these proceeds had not been spent as of March 31, 1996. These unspent proceeds
are legally restricted for use on the solid waste disposal project and
accordingly, have been classified as construction in progress in the
accompanying statements of financial position. The IRBs mature in fiscal 2004
except for the new IRBs which mature in fiscal 2018. The IRBs are backed by
irrevocable letters of credit issued pursuant to the New Revolving Credit
Agreement. As of March 31, 1996, the Company had approximately $37.1 million
of outstanding letters of credit, primarily for IRBs, insurance-related matters
and surety bonds
39
<PAGE> 41
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE E--BORROWINGS -- Continued
The Note to Parent is an unsecured non-interest bearing note with no stated
maturity. Accordingly, amounts due are classified as current as of March 31,
1996, in the accompanying statements of financial position.
The Company has borrowed $4.5 million as of March 31, 1996, under the Trade
Loan Agreements. The loan bears interest at 8.5% and matures on April 15,
1996. The proceeds are to be used for the purchase of steel mill equipment
which shall collateralize the loans.
As of March 28, 1994, the Company entered into a subordinated note agreement
(the "Bank of Tokyo Loan") with the Bank of Tokyo, LTD., New York Agency. The
Company pays interest semiannually at the six-month Fed Funds Rate plus 1.5%.
(7.2% effective March 31, 1996). This note, which matures January 31, 1997, is
subordinated to the Company's senior debt and the Company may not make payments
if the senior debt is in default until certain conditions are met.
The maturities of long-term borrowings for the fiscal years subsequent to March
31, 1996 are as follows:
($ in thousands)
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---------- ------
<S> <C>
1997 $ 14,942
1998 71,650
1999 4,813
2000 3,333
2001 103,333
Thereafter 69,396
--------
$267,467
========
</TABLE>
40
<PAGE> 42
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE F -- INCOME TAXES
The provision (benefit) for income taxes are comprised of the following
amounts:
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Currently payable (recoverable):
Federal $ 4,592 $ 3,572 $ (6,156)
State 604 - -
------- ------- --------
5,196 3,572 (6,156)
------- ------- --------
Deferred provision (benefit):
Federal (1,301) 4,785 (4,509)
State 101 997 (620)
------- ------- --------
(1,200) 5,782 (5,129)
------- ------- --------
$ 3,996 $ 9,354 $(11,285)
======= ======= ========
</TABLE>
For the year ended March 31, 1994, the benefit for income taxes includes
$452,000, for an extraordinary item related to the early extinguishment of
debt.
A reconciliation of the difference between the effective income tax rate for
each year and the statutory federal income tax rate follows:
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
Tax provision (benefit) at statutory rates $ 2,141 $ 6,949 $(11,151)
State income taxes, net of federal income
tax effect 244 997 (819)
Goodwill amortization 1,611 1,611 1,381
Other items, net - (203) (244)
-------- ------- --------
$ 3,996 $ 9,354 $(10,833)
======== ======= ========
</TABLE>
41
<PAGE> 43
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE F -- INCOME TAXES -- Continued
The components of the deferred tax assets and liabilities consisted of the
following at March 31:
($ in thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
ASSETS:
Allowance for doubtful accounts $ 390 $ 390
Pension accrual 1,739 1,907
Post retirement benefits accrual 3,228 3,106
Worker's compensation accrual 1,648 1,141
Employee benefits and related accruals 2,229 2,361
Environmental remediation accrual 4,611 7,449
Federal loss carryforward 2,055 2,569
State loss carryforward 596 1,189
Alternative minimum tax credit carryforward 468 3,164
Other 1,136 512
-------- --------
18,100 23,788
-------- --------
LIABILITIES:
Property, plant and equipment (58,260) (64,746)
Assets held for sale (3,240) (2,707)
Inventories (2,988) (3,572)
Deferred compensation (1,112) (1,463)
-------- --------
(65,600) (72,488)
-------- --------
NET DEFERRED TAX LIABILITY $(47,500) $(48,700)
======== ========
</TABLE>
The Company has net operating loss carryforwards of approximately $5.9 million
and $14.9 million for federal and state income taxes, respectively, expiring
through 2009. As a result of a change in tax fiscal year, recognition of
federal net operating loss carryforwards are limited to approximately $1.5
million each year. The Company also has alternative minimum tax credit
carryforwards of approximately $.5 million which have no expiration.
42
<PAGE> 44
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE G -- BENEFIT PLANS
The Company maintains a defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and compensation during
the period of employment. Annual contributions are made in conformity with
minimum funding requirements and maximum deductible limitations.
The plan's funded status and the amounts recognized in the accompanying
statements of financial position are as follows:
($ in thousands)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested
benefits of $65,617 and $55,930, at March 31,
1996 and 1995, respectively $ 69,221 $ 59,292
======== ========
Projected benefit obligation for service rendered to date $(84,950) $(73,857)
Plan assets at fair value 82,808 69,926
-------- --------
Projected benefit obligation in excess of plan assets (2,142) (3,931)
Unrecognized net (gain) loss (1,310) 161
Unrecognized prior service cost (426) (461)
-------- --------
Net accrued pension cost included in accrued salaries,
wages and employee benefits $ (3,878) $ (4,231)
======== ========
</TABLE>
The weighted average discount rate in determining the actuarial present value
of the accumulated benefit obligation were 7.5% and 8.0%, for the years ended
March 31, 1996 and March 31, 1995, respectively. The rate of increase in
future compensation levels was 4.5% for both years. The expected rate of
return on plan assets was 9.5% for the years ended March 31, 1996 and 1995.
Pension cost included in the accompanying statements of operations is comprised
of the following:
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost $ 2,695 $ 2,574 $ 2,578
Interest cost 5,756 5,357 5,228
Actual income from plan assets (14,561) (6,783) (3,295)
Net amortization and deferral 8,025 982 (1,887)
-------- ------- -------
Net pension cost $ 1,915 $ 2,130 $ 2,624
======== ======= =======
</TABLE>
43
<PAGE> 45
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE G--BENEFIT PLANS -- CONTINUED
The Company also has a voluntary savings plan available to substantially all of
its employees. Under this plan, the Company contributes amounts based upon a
percentage of the savings paid into the plan by employees. Effective January,
1993, the Company matched 50% of the employees' contributions up to 4% of
employees' salaries. Costs under this plan were $1.1 million, $1.2 million,
and $1.2 million for the years ended March 31, 1996, 1995 and 1994,
respectively.
The Company has an unfunded Supplemental Benefits Plan, which is a nonqualified
plan that provides certain officers defined pension benefits in excess of
limits imposed by federal tax laws. The charges to earnings under the
Supplemental Benefits Plan for the years ended March 31, 1996, 1995 and 1994
were $0, $159 thousand and $765 thousand, respectively.
Post Retirement Benefits:
The Company currently provides specified health care benefits to retired
employees. Employees who retire after a certain age with specified years of
service become eligible for benefits under this unfunded plan. The Company has
the right to modify or terminate these benefits. The following table
summarizes the accumulated post retirement benefit obligations included in the
Company's statements of financial position:
<TABLE>
<CAPTION>
($ in thousands) MARCH 31, MARCH 31,
1996 1995
------ ------
<S> <C> <C>
Retirees $4,176 $4,371
Fully eligible active participants 238 235
Other active plan participants 3,178 3,367
------ ------
Total 7,592 7,973
Plan assets at fair value - -
Unrecognized net gain 1,303 634
------ ------
Accrued post retirement benefit
obligation $8,895 $8,607
====== ======
</TABLE>
The following table summarizes the net post retirement benefit costs:
($ in thousands)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
------ ------
<S> <C> <C>
Service cost $ 203 $ 234
Interest Cost 543 610
Gain (60) -
----- -----
Net post retirement benefit cost $ 686 $ 844
===== =====
</TABLE>
44
<PAGE> 46
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE G--BENEFIT PLANS -- Continued
The weighted average discount rate used in determining the accrued post
retirement benefit obligation was 7.50%. The gross medical trend rate was
assumed to be 10.65% in 1995 and dropping .346% per year to 6.0% in 2008 and
beyond for pre-65 retirees that retired before January 1, 1994 and 9.5%
decreasing by .5% per year to 5.5% in 2003 and beyond for post 65-retirees that
retired before January 1, 1994. For retirees on or after January 1, 1994, the
trend rate is the same until the Company's expected costs are double the 1992
costs. At that point, future increases in the medical trend will be paid by
the retirees. The health care cost trend rate assumption has a significant
effect on the amount of the obligation reported.
The incremental effect of a 1% increase in the medical trend rate would result
in an increase of approximately $242,000 and $17,000 to the accrued post
retirement benefit obligation and net post retirement benefit cost,
respectively, as of and for the year ended March 31, 1996.
NOTE H - COMMON STOCK
In fiscal 1996, the Board of Directors approved a one time stock purchase plan
available to essentially all employees. Employees who purchased stock were
also eligible for stock options equal to six times the amount of shares
purchased. A total of 37,689 shares were sold under the plan at a purchase
price of $10.63 per share. The option price is $12.50 per share with a four
year vesting period. A total of 226,134 options were granted under the plan,
5,040 were canceled and 221,094 remained outstanding as of March 31, 1996. No
options remain available for future grant. On September 29, 1997, one-third of
the options become vested, another one-third will become vested on September
29, 1998, and the balance will become vested on September 29, 1999. The final
date to exercise the options is September 30, 2005.
During fiscal 1996, the Board of Directors also approved the AmeriSteel
Corporation Equity Ownership Plan (the Equity Ownership Plan) which provides
for grants of common stock, options to purchase common stock and stock
appreciation rights. A total of 12,000 restricted shares and options for
12,000 additional shares were granted under the Equity Ownership Plan during
1996, leaving 414,852 shares available for future grant as of March 31, 1996.
As of March 31, 1996, options for 12,000 shares remained outstanding with an
exercise price of $12.50, none of which are exercisable as of that date.
Subsequent to year-end the Board of Directors granted options for an additional
68,850 shares with an exercise price of $12.50.
NOTE I--INCENTIVE COMPENSATION PLAN
During 1989, the Board of Directors of Holdings approved a short-term incentive
plan to reward key employees who are significant to the Company's long-term
success. The awards are based on the Company's actual operating results, as
compared to targeted results. The plan provides for annual distributions to
participants based on that relationship. The plan is amended annually by the
Board of Directors to reflect changes in expected operating results, and to
adjust target results accordingly. The fiscal 1996 plan was based on actual
return on capital employed as compared to target return on capital employed.
The prior fiscal years plans were based on operating earnings as compared to
target operating earnings. The award was $1.2 million and $1.9 million for
fiscal 1996, and 1995, respectively which is included in salaries, wages and
employee benefits. No amounts were awarded under the plan for the year ended
March 31, 1994.
45
<PAGE> 47
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE J--ENVIRONMENTAL MATTERS
Environmental legislation and regulation at both the federal and state level is
subject to change, which may change the cost of compliance. Various possible
methods of remediation are presently being studied for approval; however, it is
expected that the investigation and remediation process will take a number of
years. Although the ultimate costs associated with the remediation are not
presently known, the Company has estimated the cost to be approximately $15.4
million. Approximately $13.7 million of these costs is recorded in accrued
liabilities as of March 31, 1996. The remaining amounts consist of site
restoration and environmental exit costs to ready idle facilities for sale, and
have been considered in determining whether the carrying amounts of the
properties exceed their net realizable values. The Company paid approximately
$11 million in remediation costs in fiscal 1996. Of the amount accrued at
March 31, 1996, the Company expects to pay approximately $6.0 million in fiscal
1997. The timing of future payments are uncertain due to the various
remediation alternatives being considered. The Company's estimate of the
remediation costs is based on its review of each site and the nature of such
problems. The Company then determines for each site the expected remediation
methods, and the estimated cost for each step of remediation. In all such
determinations, the Company employs outside consultants, and providers of such
remedial services where necessary, to assist in making such determinations.
During the years ended March 31, 1996, March 31, 1995 and March 31, 1994, the
Company expensed approximately $2 million, $6 million, and $10 million,
respectively, for environmental remediation costs.
Based on past use of certain technologies and remediation methods by third
parties, evaluation of those technologies and methods by the Company's
consultants and quotations and third-party estimates of costs of
remediation-related services provided to the Company or of which the Company
and its consultants are aware, the Company and its consultants believe that the
Company's cost estimates are reasonable. In light of the uncertainties
inherent in determining the costs associated with the clean-up of such
contamination, including the time periods over which such costs must be paid,
the extent of contribution by parties which are joint and severally liable, and
the nature and timing of payments to be made under cost sharing arrangements;
there can be no assurance the ultimate costs of remediation may not be greater
or less than the estimated remediation costs.
NOTE K -- COMMITMENTS
Operating Leases
The Company leases certain equipment and real property under noncancelable
operating leases. Aggregate future minimum payments under these leases are as
follows:
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31, AMOUNT
- ----------- ------
<S> <C>
1997 $1,618
1998 1,284
1999 902
2000 572
2001 488
Thereafter 1,276
------
$6,140
======
</TABLE>
46
<PAGE> 48
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE K -- COMMITMENTS -- Continued
Total rent expense was approximately $4.2 million, $5.0 million, and $4.8
million, for the years ended March 31, 1996, 1995 and 1994, respectively.
On April 1, 1995, the Company entered into two noncancelable operating lease
agreements with an initial lease term of five years to lease land and land
improvements to a third party. Aggregate future minimum gross rentals under
these leases is $100,000 per year. Cost of the land and land improvements was
$1.6 million.
Service Commitments
The Company entered into two noncancelable agreements to purchase
transportation services. The rates charged are based on a fixed dollar amount
and number of miles. These rates are subject to change each year based on
inflation. The term for each agreement is 5 years, beginning April 1, 1995,
renewable for successive one-year periods.
Employment Agreement
On June 1, 1994, the Company entered into a five-year employment agreement (the
"Employment Agreement") with a senior member of management. The Employment
Agreement provides for, among other benefits, a one-time bonus of $2,446,000,
base annual salary of $300,000, and equity interest of 7.5% of the outstanding
common stock of the Company to vest ratably over the next five years. Deferred
compensation of $4,500,000 was recorded related to the common stock granted,
and is being amortized on a straight-line basis over the term of the Employment
Agreement. The Employment Agreement also provides for certain additional
benefits in the event of termination.
Interest Rate Swap
The Company maintains an interest rate swap (the "Swap") agreement as a hedge
against fluctuations in interest rates on certain debt. The Swap has a
notional amount of $20 million and a three-year term expiring February 24,
1997. Under the terms of the Swap the Company has agreed to pay fixed interest
at 9% and receive variable interest at the LIBOR Rate (5.21% at March 31, 1996)
+ 3.0%, computed based on the notional amount. The Company is amortizing the
premium paid to acquire the Swap over its term as an adjustment to interest
expense.
Litigation
The Company is defending various claims and legal actions which are common to
its operations. While it is not feasible to predict or determine the ultimate
outcome of these matters, none of them, in the opinion of management, will have
a material effect on the Company's financial position or results of operations.
NOTE L--OTHER OPERATING EXPENSES
In March 1994, the Company announced the closing of the Tampa Mill melt shop
resulting in a $10.3 million charge of which $9.1 million was to reduce fixed
assets to realizable value and the balance was primarily benefit costs for
affected employees. The Company also announced the closing of the Ft. Myers,
Florida and Woodbridge, Virginia fabricating shops at a cost of $600,000.
In June 1995, the Company announced the closing of the Tampa rolling mill
resulting in a $15.0 million charge. $12.0 million was to reduce fixed assets
to realizable value and the balance was primarily benefit costs for affected
employees. The Company also wrote off $752 thousand in fiscal 1996, for the
remaining cost of the Woodbridge, Virginia lease.
47
<PAGE> 49
AMERISTEEL CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
BALANCE CHARGED TO BALANCE
AT BEGINNING COST AND AT END
CLASSIFICATION OF PERIOD EXPENSE DEDUCTIONS OF PERIOD
-------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Year Ended March 31, 1994:
Allowance for possible losses
on accounts and notes receivable $ 1,100 $ 714 $ 814 (1) $ 1,000
========== ========= ======== =========
Year Ended March 31, 1995:
Allowance for possible losses
on accounts and notes receivable $ 1,000 $ 559 $ (559) $ 1,000
========== ========= ======== =========
Year Ended March 31, 1996:
Allowance for possible losses
on accounts and notes receivable $ 1,000 $ 184 $ 184 $ 1,000
========== ========= ======== =========
</TABLE>
(1) Represents accounts considered to be uncollectible and charged off, less
recoveries on accounts previously charged off.
48
<PAGE> 1
EXHIBIT 3(I)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF FLORIDA STEEL CORPORATION
I. The name of the Corporation whose Articles of Incorporation are being
amended and restated in the following Amended and Restated Articles of
Incorporation is FLORIDA STEEL CORPORATION.
II. The Amended and Restated Articles of Incorporation of Florida Steel
Corporation are as follows:
ARTICLE I
The name of the Corporation is FLORIDA STEEL CORPORATION (hereinafter
called the "Corporation").
ARTICLE II
The purpose for which the Corporation is formed is to engage in any lawful
act or activity for which Corporations may be organized under the laws of the
State of Florida.
ARTICLE III
The Corporate existence of the Corporation commenced on August 24, 1956.
ARTICLE IV
The aggregate number of shares of all classes of capital stock which the
Corporation shall have the authority to issue is 1,000 shares of Common Stock,
each having a par value of one cent ($.01).
4.1 All rights to vote and all voting power shall be vested exclusively in
the holders of the Common Stock.
4.2 The holders of the Common Stock shall be entitled to receive when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends payable in cash, stock or otherwise.
4.3 Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with
their respective rights and interests.
49
<PAGE> 2
ARTICLE V
The address of the Corporation's registered office in the State of Florida
is 1715 Cleveland Street, City of Tampa, and the name of its registered agent
at such address is Marvin F. Hill.
ARTICLE IV
III. Pursuant to Section 607.1007 of the Florida General Corporation Act, the
Articles of incorporation of Florida Steel Corporation, initially filed with
the Department of State of the State of Florida on August 24, 1956 and amended
and restated on November 17, 1988, are being amended and restated Articles of
Incorporation set forth in Section II hereof by (i) deleting from old Article
IV thereof the requirement that the Board of Directors consist of at least
three members, (ii) deleting in its entirety old Article VII thereof, changing
the registered agent and (iv) reducing the authorized capital and removing all
references to preferred stock. There is no material discrepancy between the
Florida Stele Corporation Restated Articles of Incorporation as heretofore
filed with the Department of State of the State of Florida and the provisions
of the Amended and Restated Articles of Incorporation other than the inclusion
of the foregoing amendments.
IV. Pursuant to Sections 607.1003, 607.0704 and 607.1007 of the Florida General
Corporation Act, the amendments made hereby simultaneously with restating the
Articles of Incorporation of Florida Steel Corporation have been duly adopted
by the Board of Directors and by the sole shareholder of Florida Steel
Corporation by resolution at a meeting duly held for such purpose on December
21, 1992 and by a unanimous written consent dated December 21, 1992,
respectively.
IN WITNESS WHEREOF, the undersigned Chairman of the Board and Secretary of
Florida Steel Corporation have executed the foregoing Amended and Restated
Articles of Incorporation on behalf of Florida Steel Corporation on this 21st
day of December, 1992.
FLORIDA STEEL CORPORATION
/s/ Koichi Takashima
---------------------------------
Koichi Takashima
Chairman of the Board
/s/ Marvin F. Hill
---------------------------------
Marvin F. Hill
Secretary
50
<PAGE> 3
STATE OF NEW YORK
COUNTY OF NEW YORK
On this day personally appeared before me Koichi Takashima, Chairman of
the Board of Florida Steel Corporation, a Florida corporation, and he
acknowledged that he executed the foregoing Amended and Restated Articles of
Incorporation as such officer for and on behalf of said corporation after
having been duly authorized to do so.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
21st day of December, 1992.
/s/ Stephen D. Trent
---------------------------------
Stephen D. Trent
Notary Public, State of New York
No. 24-4936778
Qualified in Kings County
Commission Expires Sept. 23, 1998
51
<PAGE> 4
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
FLORIDA STEEL CORPORATION
Florida Steel Corporation, corporation organized and existing under the
laws of State of Florida (the "Corporation"), in order to amend its Articles of
Incorporation in accordance with the requirements of Chapter 607, Florida
Statutes, does hereby certify as follows:
1. The Articles of Incorporation of the Corporation were filed by the
Secretary of State of the State of Florida on August 24, 1956.
2. The amendment to the existing Articles of Incorporation being effected
hereby is to delete in its entirety Article I of the Articles of Incorporation
as of the date hereof, and to substitute in its place the Article set forth
below.
3. As amended below, Article I of the Articles of Incorporation has the
sole effect of changing the Corporation's name from "Florida Steel Corporation"
to "AmeriSteel Corporation." The Amendment to the existing Articles of
Incorporation being effected hereby will make no changes in the current capital
structure of the Corporation.
4. This amendment to the Articles of Incorporation was recommended to the
shareholders of the corporation by unanimous written action of the board of
directors of the corporation on March 27, 1996 and was approved on March 27,
1996 by the stockholders by way of a written action of shareholders of the
Corporation having the requisite number of votes to adopt such amendment as
required by Section 607.1003, Florida Statures and in compliance with the
requirements, including notice to all other shareholders, of Section 607.0704,
Florida Statutes.
5. These Articles of Amendment of the Articles of Incorporation shall be
effective immediately upon filing by the Secretary of State of the State of
Florida, all required taxes and fees having been paid, and thereafter the name
of the Corporation shall be "AmeriSteel Corporation" and Article I of the
Articles of Incorporation of the Corporation shall read as follows:
**************************************
ARTICLE I
Name
The name of this corporation shall be:
AMERISTEEL CORPORATION
**************************************
IN WITNESS WHEREOF, Florida Steel Corporation has caused these Articles of
Amendment of the Articles of Incorporation to be executed by its Chairman of
the Board this 27th day of March, 1996.
/s/ Phillip E. Casey
---------------------------------------
Phillip E. Casey, Chairman of the Board
52
<PAGE> 5
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
FLORIDA STEEL CORPORATION
Florida Steel Corporation, a corporation organized and existing under the
laws of the State of Florida (the "Corporation"), in order to amend its
Articles of Incorporation in accordance with the requirements of Chapter 607,
Florida Statutes, does hereby certify as follows:
1. The amendment to the existing Articles of Incorporation being effected
hereby is to delete Article IV of the Articles of Incorporation and to
substitute in its place the following:
************************************
ARTICLE IV
The capital stock of the corporation shall consist of 30,000,000
shares of common stock, with a par value of $.01 per share. There shall
be no preemptive rights with respect to such stock. All rights to vote
and all voting power shall be vested exclusively in the holders of common
stock.
************************************
1. The effect of the amendment is to increase the number of authorized
shares of common stock of the Corporation from 1,000 shares to 30,000,000
shares.
2. This amendment to the Articles of Incorporation was unanimously
approved by the Board of Directors of the Corporation at a meeting held
on May 22, 1995 and by the shareholders of the Corporation by a written
action signed by all shareholders and dated May 22, 1995.
3. These Articles of Amendment of the Articles of Incorporation shall be
effective immediately upon filing by the Secretary of State of the State
of Florida, all required taxes and fees having been paid.
IN WITNESS WHEREOF, Florida Steel Corporation has caused these Articles of
Amendment of the Articles of Incorporation to be executed by its Chairman of
the Board this 22nd day of May, 1995.
FLORIDA STEEL CORPORATION
/s/ Phillp E. Casey
---------------------------------------
Phillip E. Casey, Chairman of the Board
53
<PAGE> 1
EXHIBIT 10
FLORIDA STEEL CORPORATION
EQUITY OWNERSHIP PLAN
ARTICLE 1
ESTABLISHMENT; PURPOSE
1.1 ESTABLISHMENT. Florida Steel Corporation, a Florida corporation, (the
"Company") hereby establishes an incentive compensation plan to be known as the
"Florida Steel Equity Ownership PLAN" (the "Plan").
1.2 PURPOSE. The purpose of the Plan is to (a) attract, retain and
motivate participating employees of the Company and its subsidiaries through
awards of shares of the Common Stock of the Company (the "Shares"), options to
purchase Shares (the "Options") and other equity-based awards, (b) encourage
employee ownership of Shares and (c) encourage participating employees to think
and act like owners of the Company.
1.3 MAXIMUM NUMBER OF SHARES. The maximum number of Shares that may be
offered under the Plan is 438,852 subject to adjustment as provided in Section
10.1. If an Option is surrendered or for any other reason ceases to be
exercisable in whole or in part, the Shares that are subject to such Option,
but as to which the Option has not been exercised, shall again become available
for offering under the Plan. Any awards under the Plan made other than in
Shares or Options shall not reduce the maximum number of Shares covered by the
Plan.
1.4 STATUS. It is the intention of the Company that ISOs granted under
the Plan qualify as "incentive stock options" under Section 422 of the Code,
and the regulations promulgated thereunder. The provisions of the Plan with
respect to ISOs, accordingly, shall be construed in a manner consistent with
such requirements. Except with respect to ISOs, no other Award under the Plan
is intended to qualify for special treatment or status under the Code.
ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS. The following words and terms as used herein shall have
that meaning set forth therefor in this Article 2 unless a different meaning is
clearly required by the context.
2.1.1 "AWARD" shall mean any Option, Shares, SAR or any cash payment
granted or awarded under the Plan.
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2.1.2 "AWARD AGREEMENT(S)" shall mean any document, agreement or
certificate deemed by the Board of Directors as necessary or advisable to be
entered into with or delivered to a Participant in connection with or as a
condition precedent to the valid completion of the grant of an Award under the
Plan.
2.1.3 "AWARD SHARE(S)" shall mean any Shares granted or awarded to a
Participant in accordance with the provisions of Article 8.
2.1.4 "BOARD" OR "BOARD OF DIRECTORS" shall mean the Board of Directors of
the Company.
2.1.5 "CHIEF EXECUTIVE OFFICER" shall mean the officer so designated from
time to time by the Board of Directors, or if the Board shall fail to so
designate an officer to that position, the President of the Company.
2.1.6 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include a reference to any
successor provision.
2.1.7 "COMPANY" shall mean Florida Steel Corporation, a Florida
corporation, and its successors.
2.1.8 "EFFECTIVE DATE" shall mean April 1, 1995.
2.1.9 "ELIGIBLE EMPLOYEE" shall mean any individual employed by the
Company or any Subsidiary. The Board of Directors shall have the sole power to
determine if the eligibility requirements have been satisfied.
2.1.10 "FAIR MARKET VALUE" of the Shares shall mean the closing price, on
the date in question (or, if no Shares are traded on such day, on the next
preceding day on which Shares were traded), of the Shares as reported on the
Composite Tape, or if not reported thereon, then such price as reported in the
trading reports of the principal securities exchange in the United States on
which such stock is listed, or if such stock is not listed on a securities
exchange in the United States, the mean between the dealer closing "bid" and
"ask" prices on the over-the-counter market as reported by the National
Association of Security Dealers Automated Quotation System (NASDAQ), or
NASDAQ's successor, or if not reported on NASDAQ, the fair market value of such
stock as determined by the Board of Directors in good faith and based on all
relevant factors.
2.1.11 "ISO" shall mean an incentive stock option granted in accordance
with the provisions of Article 5 of the Plan.
2.1.12 "NSO" shall mean a nonqualified stock option granted in accordance
with the provisions of Article 6 of the Plan.
2.1.13 "OPTION" shall mean an ISO or an NSO.
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<PAGE> 3
2.1.14 "OPTIONEE" shall mean an individual employed by the Company
or any Subsidiary to whom an Option is granted under the Plan.
2.1.15 "PARTICIPANT" shall mean an Eligible Employee, who in
accordance with the terms of the Plan, is first recommended by the Chief
Executive Officer and then approved by the Board of Directors for
participation in the Plan as a recipient of an Award and who receives an Award.
2.1.16 "PLAN" shall mean the Florida Steel Equity Ownership Plan,
as set forth herein and as amended from time to time.
2.1.17 "REGISTRATION DATE" shall mean the effective date of the first
registration statement that becomes effective under the Securities Act of 1933
(excluding any offering to employees, whether under the Plan or otherwise,
registered under Form S-8) with respect to any public offering of Shares.
2.1.18 "SAR" shall mean a Stock Appreciation Right granted in
accordance with the provisions of Article 7 of the Plan, which as to each SAR
entitles the Participant to receive payment equal to the excess of (1) the
Fair Market Value of a Share at the time of payment or exercise over (2) a
specified price or value set or established at the time of grant of the SAR.
2.1.19 "SHARES" shall mean shares of the common stock of the Company.
2.1.20 "SUBSIDIARY" shall mean any corporation that at the time
qualifies as a subsidiary of the Company under the definition of "subsidiary
corporation" contained in Section 424(f) of the Code.
2.1.21 "10% STOCKHOLDER" shall mean an individual who owns more
than 10% of the total combined voting power of all classes of stock of the
Company or of a parent or subsidiary corporation.
2.2 USAGE. Whenever appropriate, words used in the singular shall be
deemed to include the plural and vice versa, and the masculine gender shall be
deemed to include the feminine gender.
ARTICLE 3
ADMINISTRATION
3.1 BOARD OF DIRECTORS. The Plan shall be administered by the Board of
Directors.
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<PAGE> 4
3.2 POWER AND AUTHORITY. Subject to the provisions of the Plan, the Board
of Directors shall have full authority, in its discretion: (a) to determine
from among Eligible Employees those persons who shall become Participants; (b)
to determine the nature, amount and terms and conditions of all Awards under
the Plan, in accordance with and subject to the specific limitations and
requirements set forth in the Plan; and (c) to interpret the Plan, the terms of
all Awards and Award Agreements and any other agreement or instrument awarded,
issued or entered into under the Plan, and to prescribe, amend and rescind
rules and regulations with respect the administration of the Plan. The
interpretation and construction by the Board of Directors of any provision of
the Plan, any Award or any other agreement or instrument awarded, issued or
entered into under the Plan, and all other determinations and decisions of the
Board of Directors pursuant to the provisions of the Plan, shall be final,
conclusive and binding on all Participants and other affected persons. All
actions and policies of the Board, to the extent they deal with ISOs, shall be
consistent with the qualification of ISOs as incentive stock options under
Section 422 of the Code.
3.3 DISCRETIONARY AUTHORITY. The Board of Directors' decision to
authorize the grant of an Award to an Eligible Employee at any time shall not
require the Board of Directors to authorize the grant of an Award to that
employee at any other time or to any other employee at any time; nor shall its
determination with respect to the size, type or terms and conditions of the
Award to be granted to an Eligible Employee at any time require it to authorize
the grant of an Award of the same type or size or with the same terms and
conditions to that employee at any other time or to any other employee at any
time. The Board of Directors shall not be precluded from authorizing the grant
of an Award to any Eligible Employee solely because the employee previously may
have been granted an Award of any kind under the Plan.
3.4 NO LIABILITY. No member of the Board of Directors shall be liable for
any action or determination made in good faith with respect to the Plan.
ARTICLE 4
EMPLOYEES ELIGIBLE TO PARTICIPATE
4.1 GENERALLY. Any person, including any officer but not a person who is
solely a director, who is in the employ of the Company or any Subsidiary on the
date of a grant of an Award shall be an Eligible Employee, able to participate
in the Plan in accordance with the terms of the Plan.
4.2 PARTICIPANT STATUS. The Chief Executive Officer, in his sole
discretion, from time to time may select from among Eligible Employees persons
to recommend to the Board of Directors to become Participants in the Plan. Any
Eligible Employee so recommended to the Board and who remains an Eligible
Employee shall become a Participant upon the approval of such status by the
Board of Directors, which approval shall be conclusively evidenced by the award
or grant of an Award to a Participant.
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<PAGE> 5
4.3 ISO ELIGIBILITY REQUIREMENT. Notwithstanding any provision of the
Plan to the contrary, no person shall be eligible to receive any ISOs under the
Plan if such person would not be able qualify for the benefits of incentive
stock options under Section 422 of the Code.
ARTICLE 5
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
5.1 GRANT. Any ISO granted pursuant to the Plan shall be authorized by
the Board of Directors and shall be evidenced by certificates or agreements in
such form as the Board of Directors from time to time shall approve, which
certificates or agreements shall comply with and be subject to the terms and
conditions hereinafter specified. Upon the granting of any ISO, the Board of
Directors shall promptly cause the Optionee to be notified of the fact that
such Option has been granted. The date on which the Board of Directors
approves the grant of an ISO shall be considered to be the date on which such
Option is granted.
5.2 NUMBER OF SHARES. Each ISO shall state the number of Shares to which
it pertains.
5.3 OPTION PRICE. Each ISO shall state the option price, which option
price shall be determined by the Board of Directors in its discretion.
Notwithstanding the foregoing, the option price in no event shall be less than
100% of the Fair Market Value of the Shares on the date of grant of the Option;
or, in the case of an ISO being issued to an Eligible Employee who is a 10%
Stockholder at the time an ISO is granted, 110% of the Fair Market Value of the
Shares on the date of grant.
5.4 METHOD OF EXERCISE. An Optionee may exercise an ISO during such time
as may be permitted by the Option and the Plan by providing written notice to
the Board of Directors, tendering the purchase price in accordance with the
provisions of Section 5.4, and complying with any other exercise requirements
contained in the Option or promulgated from time to time by the Board of
Directors.
5.5 METHOD OF PAYMENT. Payment of the option price upon the exercise of
the ISO shall be in (a) United States dollars in cash or by check, bank draft
or money order payable to the order of the Company; (b) in the discretion of
and in the manner determined by the Board of Directors, by the delivery of
Shares of Common Stock already owned by the Optionee; (c) by any other legally
permissible means acceptable to the Board of Directors at the time of grant of
the Option (including cashless exercise as permitted under the Federal Reserve
Board's Regulation T, subject to applicable legal restrictions); or in the
discretion of the Board of Directors, through a combination of (a), (b) and (c)
of this Section 5.5. If the option price is paid in whole or in part through
the delivery of Shares, the decision of the Board of Directors with respect to
the fair market value of such Shares shall be final and conclusive.
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<PAGE> 6
5.6 TERM AND EXERCISE OF OPTIONS.
5.6.1 Each ISO shall be exercisable, in whole or in part, only in
accordance with the following chart:
<TABLE>
<CAPTION>
Percentage of
Number of Years from Shares
Date Option is Granted Exercisable
---------------------- -----------
<S> <C>
Less than 2 years 0%
2 years but less than 3 years 33 1/3%
3 years but less than 4 years 66 2/3%
4 years or more 100%
</TABLE>
5.6.2 Notwithstanding the foregoing, an Optionee shall be 100% vested
in the number of Shares originally covered by an ISO in the event the Optionee
dies or becomes totally and permanently disabled (as determined in the sole
discretion of the Board of Directors) while still employed by the Company.
5.6.3 To the extent not exercised, exercisable installments of ISOs
shall be exercisable, in whole or in part, in any subsequent period, but not
later than the expiration date of the Option. The Board of Directors shall
determine the expiration date of the Option at the time of the grant of the
Option; provided, however, that no ISO shall be exercisable after the
expiration of ten (10) years from the date it is granted; or, in the case of a
10% Stockholder, no ISO shall be exercisable after the expiration of five (5)
years from the date it is granted. Not less than one hundred (100) Shares may
be exercised at any one time unless the number exercised is the total number
at the time exercisable under the Option.
5.6.4 Within the limits described above, the Board of Directors may
impose additional requirements on the exercise of ISOs. When it deems special
circumstances to exist, the Board of Directors in its discretion may accelerate
the time at which an ISO may be exercised if, under previously established
exercise terms, such Option was not immediately exercisable in full, even if
the acceleration would permit the Option to be exercised more rapidly than the
vesting set forth above in the chart would permit.
5.7 ADDITIONAL LIMITATIONS. The aggregate Fair Market Value (determined
as of the time an ISO is granted) of the Shares with respect to which ISOs are
exercisable for the first time by any Optionee in any calendar year under the
Plan and under all other incentive stock option plans of the Company and any
parent and subsidiary corporations of the Company (as those terms are defined
in Section 424 of the Code) shall not exceed $100,000.
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<PAGE> 7
5.8 DEATH OR OTHER TERMINATION OF EMPLOYMENT.
5.8.1 In the event that an Optionee shall cease to be employed by the
Company or a Subsidiary for any reason other than his or her death, subject to
the conditions that no ISO shall be exercisable after its expiration date, such
Optionee shall have the right to exercise the ISO at any time within thirty
(30) days after such termination of employment to the extent his or her right
to exercise such Option had accrued pursuant to this Article 5 at the date of
such termination and had not previously been exercised; such thirty (30) day
period shall be increased to ninety (90) days if the termination of employment
was the retirement or early retirement of the Optionee (as defined under the
Company's qualified Retirement Plan) and to one (1) year for any Optionee who
dies during the thirty (30) day or ninety (90) day period, whichever may be
applicable, and the Option may be exercised within such extended time limit by
the Optionee or, in the case of death, the personal representative of the
Optionee or by any person or persons who shall have acquired the Option
directly from the Optionee by bequest or inheritance. Whether an authorized
leave of absence or absence for military or governmental service shall
constitute termination of employment for purposes of the Plan shall be
determined by the Board of Directors, whose determination shall be final and
conclusive.
5.8.2 In the event that an Optionee shall die while in the employ of
the Company or a Subsidiary and shall not have fully exercised any ISO, the
ISO may be exercised, subject to the conditions that no ISO shall be
exercisable after its expiration date, to the extent that the Optionee's right
to exercise such Option had accrued pursuant to this Article 5 at the time of
his or her death and had not previously been exercised, at any time within one
(1) year after the Optionee's death, by the personal representative of the
Optionee or by any person or persons who shall have acquired the Option
directly from the Optionee by bequest or inheritance.
5.8.3 No ISO shall be transferable by the Optionee otherwise than by
will or the laws of descent and distribution.
5.8.4 During the lifetime of the Optionee, an ISO shall be exercisable
only by him or her and shall not be assignable or transferable, and no other
person shall acquire any rights therein.
5.9 DELIVERY OF CERTIFICATES REPRESENTING SHARES.
5.9.1 As soon as practicable after the exercise of an ISO, the Company
shall deliver or cause to be delivered to the Optionee exercising the ISO a
certificate or certificates representing the Shares purchased upon the
exercise. Certificates representing Shares to be delivered to a Optionee will
be registered in the name of the Optionee.
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<PAGE> 8
5.9.2 If determined by the Company in its discretion appropriate to
administer the right of first refusal provisions of Article 9, but only for so
long as such provisions remain in effect, certificates representing Shares
shall not be delivered to Participants but shall be delivered to the Company to
be held by the Company as safekeeping agent for the benefit of each
Participant. A written safekeeping receipt evidencing the Shares so held in
safekeeping, bearing the name of the Participant, indicating the number of the
certificate or certificates and the number of Shares so represented shall be
delivered promptly to each Participant. In its capacity as safekeeping agent
for Participants, the Company shall act in accordance with instructions
received from such Participants, which instructions are to be confirmed in
writing if deemed appropriate by the Company. The safekeeping agency shall not
affect the rights of Participants as owners of Shares.
5.9.3 Upon the expiration of the right of first refusal provisions of
Article 9, any safekeeping agency arrangement adopted pursuant to Section 5.9.2
shall terminate and the certificates representing the Shares owned by
Participants, registered in the name(s) of the Participants, shall be delivered
promptly to such Participants.
5.10 RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his or her ISO until the date
on which he or she becomes a record owner of the Shares purchased upon the
exercise of the Option (the "record ownership date"). No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions, or other rights for which the record date is
prior to the record ownership date, except as provided in Article 10.
5.11 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Board of Directors
may modify outstanding ISOs granted under the Plan, or accept the surrender of
outstanding ISOs (to the extent not theretofore exercised) and authorize the
granting of new Options in substitution therefor (to the extent not theretofore
exercised). The Board of Directors shall not, however, modify any outstanding
ISO so as to specify a lower option price or accept the surrender of
outstanding ISOs and authorize the granting of new Options in substitution
therefor specifying a lower option price. Notwithstanding the foregoing,
however, no modification of an ISO shall, without the consent of the Optionee,
alter or impair any of the rights or obligations under any ISO theretofore
granted under the Plan.
5.12 LISTING AND REGISTRATION OF SHARES. Each ISO shall be subject to the
requirement that if at any time the Board of Directors shall determine, in its
discretion, that the listing, registration or qualification of the Shares
covered thereby upon any securities exchange or under any state or federal
laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such ISO or the issuance or purchase of Shares thereunder, such ISO may not
be exercised unless and until such listing, registration, qualification,
consent or
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<PAGE> 9
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. Notwithstanding anything in the Plan to
the contrary, if the provisions of this Section 5.12 become operative, and if,
as a result thereof, the exercise of an ISO is delayed, then and in that event,
the term of the ISO shall not be affected.
5.13 OTHER PROVISIONS. The ISO certificates or agreements authorized
under the Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the Option, as the Board of
Directors shall deem advisable. Any such certificate or agreement shall
contain such limitations and restrictions upon the exercise of the ISO as shall
be necessary in order that such Option will be an incentive stock option as
defined in Section 422 of the Code, or to conform to any change in the law.
ARTICLE 6
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
6.1 GRANT. Any NSO granted pursuant to the Plan shall be authorized by
the Board of Directors and shall be evidenced by certificates or agreements in
such form as the Board of Directors from time to time shall approve, which
certificates or agreements shall comply with and be subject to the terms and
conditions hereinafter specified. Upon the granting of any NSO, the Board of
Directors shall promptly cause the Optionee to be notified of the fact that
such Option has been granted. The date on which the Board of Directors
approves the grant of a NSO shall be considered to be the date on which such
Option is granted.
6.2 NUMBER OF SHARES. Each NSO shall state the number of Shares to which
it pertains.
6.3 OPTION PRICE. Each NSO shall state the option price, which option
price shall be determined by the Board of Directors in its discretion.
Notwithstanding the foregoing, the option price shall in no event be less than
100% of the Fair Market Value of the Shares on the date of grant of the Option.
6.4 METHOD OF EXERCISE. An Optionee may exercise a NSO during such time
as may be permitted by the Option and the Plan by providing written notice to
the Board of Directors, tendering the purchase price in accordance with the
provisions of Section 6.4, and complying with any other exercise requirements
contained in the Option or promulgated from time to time by the Board of
Directors.
6.5 METHOD OF PAYMENT. PAYMENT OF THE OPTION PRICE UPON THE exercise of
the NSO shall be (a) in United States dollars in cash or by check, bank draft
or money order payable to the order of the Company; (b) in the discretion of
and in the manner determined by the Board of Directors, by the delivery of
Shares already owned by the Optionee; (c) by any other legally permissible
means acceptable to the Board of Directors
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<PAGE> 10
at the time of grant of the Option (including cashless exercise as permitted
under the Federal Reserve Board's Regulation T, subject to applicable legal
restrictions); or in the discretion of the Board of Directors, through a
combination of (a), (b) and (c) of this Section 6.5. If the option price is
paid in whole or in part through the delivery of Shares, the decision of the
Board of Directors with respect to the fair market value of such Shares shall
be final and conclusive.
6.6 TERM AND EXERCISE OF OPTIONS.
6.6.1 Each NSO shall be exercisable, in whole or in part, only in
accordance with the following chart:
<TABLE>
<CAPTION>
Number of Years from Percentage of
Date Option is Granted Shares Exercisable
---------------------- ------------------
<S> <C>
Less than 2 years 0%
2 years but less than 3 years 33 1/3%
3 years but less than 4 years 66 2/3%
4 years or more 100%
</TABLE>
6.2.2 Notwithstanding the foregoing, an Optionee shall be 100% vested
in the number of Shares originally covered by a NSO in the event the Optionee
dies or becomes totally and permanently disabled (as determined in the sole
discretion of the Board of Directors) while still employed by the Company.
6.6.3 To the extent not exercised, exercisable installments of NSOs
shall be exercisable, in whole or in part, in any subsequent period, but not
later than the expiration date of the Option. The Board of Directors shall
determine the expiration date of the Option at the time of the grant of the
Option; provided, however, that no NSO shall be exercisable after the
expiration of ten (10) years from the date it is granted. Not less than one
hundred (100) Shares may be exercised at any one time unless the number
exercised is the total number at the time exercisable under the Option.
6.6.4 Within the limits described above, the Board of Directors may
impose additional requirements on the exercise of NSOs. When it deems special
circumstances to exist, the Board of Directors in its discretion may accelerate
the time at which a NSO may be exercised if, under previously established
exercise terms, such Option was not immediately exercisable in full, even if
the acceleration would permit the Option to be exercised more rapidly than the
vesting set forth above in the chart would permit.
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<PAGE> 11
6.7 DEATH OR OTHER TERMINATION OF EMPLOYMENT.
6.7.1 In the event that an Optionee shall cease to be employed by the
Company or a Subsidiary for any reason other than his or her death, subject to
the conditions that no NSO shall be exercisable after its expiration date, such
Optionee shall have the right to exercise the NSO at any time within thirty
(30) days after such termination of employment to the extent his or her right
to exercise the NSO had accrued pursuant to this Article 6 at the date of such
termination and had not previously been exercised; such thirty (30) day period
shall be increased to such thirty (30) day limit shall be increased to ninety
(90) days if the termination of employment was the retirement or early
retirement of the Optionee (as defined under the Company's qualified Retirement
Plan) and to one (1) year for any Optionee who dies during the thirty (30) day
or ninety (90) day period, whichever may be applicable, and the Option may be
exercised within such extended time limit by the Optionee or, in the case of
death, the personal representative of the Optionee or by any person or persons
who shall have acquired the Option directly from the Optionee by bequest or
inheritance. Whether an authorized leave of absence or absence for military or
governmental service shall constitute termination of employment for purposes of
the Plan shall be determined by the Board of Directors, whose determination
shall be final and conclusive.
6.7.2 No NSO shall be transferable by the Optionee otherwise than by
will or the laws of descent and distribution.
6.7.3 During the lifetime of the Optionee, an NSO shall be exercisable
only by him or her and shall not be assignable or transferable, and no other
person shall acquire any rights therein.
6.8 DELIVERY OF CERTIFICATES REPRESENTING SHARES.
6.8.1 As soon as practicable after the exercise of a NSO, the Company
shall deliver or cause to be delivered to the Optionee exercising the NSO a
certificate or certificates representing the Shares purchased upon the
exercise. Certificates representing Shares to be delivered to a Optionee will
be registered in the name of the Optionee.
6.8.2 If determined by the Company in its discretion appropriate to
administer the right of first refusal provisions of Article 9, but only for so
long as such provisions remain in effect, certificates representing Shares
shall not be delivered to Participants but shall be delivered to the Company to
be held by the Company as safekeeping agent for the benefit of each
Participant. A written safekeeping receipt evidencing the Shares so held in
safekeeping, bearing the name of the Participant, indicating the number of the
certificate or certificates and the number of Shares so represented shall be
delivered promptly to each Participant. In its capacity as safekeeping agent
for Participants, the Company shall act in accordance with instructions
received from such Participants, which instructions are to be confirmed in
writing if deemed appropriate by the Company. The safekeeping agency shall not
affect the rights of Participants as owners of Shares.
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<PAGE> 12
6.8.3 Upon the expiration of the right of first refusal provisions of
Article 9, any safekeeping agency arrangement adopted pursuant to Section 6.8.2
shall terminate and the certificates representing the Shares owned by
Participants, registered in the name(s) of the Participants, shall be delivered
promptly to such Participants.
6.9 RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his or her NSO until the date
on which he or she becomes a record owner of the Shares purchased upon the
exercise of the Option (the "record ownership date"). No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions, or other rights for which the record date is
prior to the record ownership date, except as provided in Article 10.
6.10 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Board of Directors
may modify outstanding NSOs granted under the Plan, or accept the surrender of
outstanding NSOs (to the extent not theretofore exercised) and authorize the
granting of new Options in substitution therefor (to the extent not theretofore
exercised). The Board of Directors shall not, however, modify any outstanding
NSO so as to specify a lower option price or accept the surrender of
outstanding NSOs and authorize the granting of new Options in substitution
therefor specifying a lower option price. Notwithstanding the foregoing,
however, no modification of an NSO shall, without the consent of the Optionee,
alter or impair any of the rights or obligations under any NSO theretofore
granted under the Plan.
6.11 LISTING AND REGISTRATION OF SHARES. Each NSO shall be subject to the
requirement that if at any time the Board of Directors shall determine, in its
discretion, that the listing, registration or qualification of the Shares
covered thereby upon any securities exchange or under any state or federal
laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such NSO or the issuance or purchase of shares thereunder, such NSO may not
be exercised unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Board of Directors. Notwithstanding anything in the Plan
to the contrary, if the provisions of this Section 6.11 become operative, and
if, as a result thereof, the exercise of a NSO is delayed, then and in that
event, the term of the NSO shall not be affected.
6.12 OTHER PROVISIONS. The NSO certificates or agreements authorized
under the Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the Option, as the Board of
Directors shall deem advisable.
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ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 GRANT. The Board of Directors, in its sole discretion, from time to
time may authorize the grant of SARs to a Participant. An SAR may be granted
in connection with all or any portion of a previously or contemporaneously
granted Award (other than an SAR), or by itself and not in connection with any
other Award. An SAR may be granted at the time of grant of the related Option
and shall be subject to the same terms and conditions as the related Option,
except as this Article 7 may otherwise provide. The grant of SAR shall be
evidenced either by provisions in the Option to which it relates or by a
separate written agreement between the Company and the Participant, which shall
comply with and be subject to the terms and conditions of the Plan and shall be
in such form as the Board of Directors from time to time shall approve (an "SAR
Agreement"). The SAR Agreement may contain such additional terms, conditions
or limitations, not inconsistent with the specific provisions of the Plan, as
may be approved by the Board of Directors in it sole discretion.
7.2 TERMS AND CONDITIONS. Each SAR granted under the Plan shall be
exercisable or payable at such time or times, or upon the occurrence of such
event or events, and in such amounts or types of consideration (including cash
or Shares) as the Board of Directors shall specify in the SAR Agreement.
Subsequent to the grant of an SAR, the Board of Directors, at any time before
complete termination of such SAR, may accelerate the time or times at which
such SAR may be exercised or paid in whole or in part.
7.3 EXERCISE.
7.3.1 An SAR shall be exercised by surrendering the SAR Agreement or,
if the SAR was granted in connection with an Option, the surrender of the
related Option together with any SAR Agreement, or the portion(s) thereof
pertaining to the Shares with respect to which the SAR is exercised, and
providing the Company with a written notice in such form and containing such
information (including the number of Shares with respect to which the SAR is
being exercised) as the SAR Agreement or the Board of Directors may specify.
The date on which the Company receives such surrender and notice shall be the
date on which the related Option, or portion thereof, shall be deemed
surrendered and the SAR shall be deemed exercised.
7.3.2 An SAR granted in connection with an Option shall be exercisable
only at such time or times, to such extent and by such persons as the Option to
which it relates shall be exercisable, provided that an SAR granted in
connection with an ISO shall not be exercisable on any date on which the Fair
Market Value of a Share is less than or equal to the per share exercise price
of the ISO. An SAR shall be canceled when, and to the extent that, any related
Option is exercised, and an Option shall be canceled when, and to the extent
that, the Option is surrendered to the Company upon the exercise of a related
SAR.
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<PAGE> 14
7.4 PAYMENT. To effect payment or exercise of an SAR, the Company shall
make payment to the Participant in cash or Shares (valued at their Fair Market
Value on the date of payment or exercise) or in combination of cash and Shares
as provided in the SAR Agreement. If payment is to be made in Shares, upon
such exercise, the Participant shall be entitled to receive that number of
Shares which have an aggregate Fair Market Value on the exercise date equal to
the amount by which the Fair Market Value of one Share on the exercise date
exceeds the Option price per share of any related Option or the Fair Market
Value on the date of grant of the SAR, as the case may be, multiplied by the
number of Shares covered by the related Option or the SAR, as the case may be,
or portion thereof, surrendered in connection with the exercise of the SAR.
7.5 EXPIRATION. An SAR granted in connection with or related to an
Option, unless previously exercised or canceled, shall expire upon the
expiration of the Option to which it relates. Any other SAR, unless previously
exercised or canceled, shall expire upon the tenth anniversary of its grant.
The exercise of an SAR granted in connection with an Option shall result in a
pro rata surrender or cancellation of any related Option to the extent the SAR
has been exercised.
7.6 DEATH OR OTHER TERMINATION OF EMPLOYMENT.
7.6.1 In the event that a Participant shall cease to be employed by the
Company or a Subsidiary for any reason other than his or her death, subject to
the conditions that no SAR shall be exercisable after its expiration date, such
Participant shall have the right to exercise the SAR at any time within thirty
(30) days after such termination of employment to the extent his or her right
to exercise such SAR had accrued pursuant to this Article 7 at the date of such
termination and had not previously been exercised; such thirty (30) day period
shall be increased to ninety (90) days if the termination of employment was
the retirement or early retirement of a Participant (as defined under the
Company's qualified Retirement Plan) and to one (1) year for any Participant
who dies during the thirty (30) day or ninety (90) day period, whichever may be
applicable, and the SAR may be exercised within such extended time limit by a
Participant, or, in the case of death, the personal representative of a
Participant or by any person or persons who shall have acquired the SAR
directly from a Participant by bequest or inheritance. Whether an authorized
leave of absence or absence for military or governmental service shall
constitute termination of employment for purposes of the Plan shall be
determined by the Board of Directors, whose determination shall be final and
conclusive.
7.6.2 In the event that a Participant shall die while in the employ
of the Company or a Subsidiary and shall not have fully exercised any SAR, the
SAR may be exercised, subject to the conditions that no SAR shall be
exercisable after its expiration date, to the extent that a Participant's
right to exercise such SAR had accrued in accordance with the provisions of
this Article 7 at the time of his or her death and had not previously been
exercised, at any time within one (1) year after a Participant's death, by the
personal representative of a Participant or by any person or persons who shall
have acquired the SAR directly from a Participant by bequest or inheritance.
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<PAGE> 15
7.6.3 No SAR shall be transferable by a Participant otherwise than by
will or the laws of descent and distribution.
7.6.4 During the lifetime of a Participant, an SAR shall be exercisable
only by him or her and shall not be assignable or transferable, and no other
person shall acquire any rights therein.
7.7 DELIVERY OF CERTIFICATES REPRESENTING SHARES.
7.7.1 As soon as practicable after the exercise or payment of an SAR
payable in whole or in part in Shares, the Company shall deliver or cause to be
delivered to the Participant exercising the SAR for Shares a certificate or
certificates representing the Shares issuable upon such purchase or exercise.
Certificates representing Shares to be delivered to a Participant will be
registered in the name of the Participant.
7.7.2 If determined by the Company in its discretion appropriate to
administer the right of first refusal provisions of Article 9, but only for so
long as such provisions remain in effect, certificates representing Shares
issued in respect of SAR payment or exercise shall not be delivered to
Participants but shall be delivered to the Company to be held by the Company as
safekeeping agent for the benefit of each Participant. A written safekeeping
receipt evidencing the Shares so held in safekeeping, bearing the name of the
Participant, indicating the number of the certificate or certificates and the
number of Shares so represented shall be delivered promptly to each
Participant. In its capacity as safekeeping agent for Participants, the
Company shall act in accordance with instructions received from such
Participants, which instructions are to be confirmed in writing if deemed
appropriate by the Company. The safekeeping agency shall not affect the rights
of Participants as owners of Shares.
7.7.3 Upon the expiration of the right of first refusal provisions of
Article 9, any safekeeping agency arrangement adopted pursuant to Section 7.7.2
shall terminate and the certificates representing the Shares owned by
Participants, registered in the name(s) of the Participants, shall be delivered
promptly to such Participants.
7.8 LISTING AND REGISTRATION OF SHARES. Each SAR shall be subject to the
requirement that if at any time the Board of Directors shall determine, in its
discretion, that the listing, registration or qualification of any Shares
covered thereby upon any securities exchange or under any state or federal
laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such Option or the issuance or purchase of shares thereunder, such SAR may
not be paid or exercised unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. Notwithstanding
anything in the Plan to the contrary, if the provisions of this Section 7.8
become operative, and if, as a result thereof, the exercise of an SAR is
delayed, then and in that event, the term of the SAR shall not be affected.
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<PAGE> 16
7.9 RIGHTS AS A STOCKHOLDER. In general, the holder of an SAR shall have
no rights as a stockholder. The holder of an SAR under which Shares are
issuable upon payment or exercise shall have no rights as a stockholder of the
Company until the date on which he or she becomes a record owner of the Shares
issued upon the payment or exercise of the SAR (the "record ownership date").
No adjustment shall be made for dividends (ordinary or extraordinary, whether
in cash, securities or other property), distributions, or other rights for
which the record date is prior to the record ownership date, except as provided
in Article 10.
ARTICLE 8
AWARD SHARES
8.1 GENERAL. The Board of Directors, in its sole discretion, from time to
time may authorize the grant of Award Shares to a Participant. In making any
such grant of Award Shares, the Board of Directors may grant Award Shares
without the requirement of any cash payment or may require a cash payment from
a Participant in an amount no greater than the aggregate Fair Market Value of
the Award Shares as of the date of grant in exchange for, or as a condition
precedent to, the completion of the grant and the issuance of the Award Shares.
8.2 RESTRICTION PERIOD. All Award Shares issued under Article 8 shall be
subject to certain restrictions as set forth in Section 8.3, which restrictions
shall continue in effect for such period of time as is specified in the Award
Agreement entered into at the time of the grant (the "Restriction Period").
The Award Agreement may contain such additional terms, conditions or
limitations, not inconsistent with the specific provisions of the Plan, as may
be approved by the Board of Directors in it sole discretion.
8.3 CERTAIN RESTRICTIONS. Until the expiration of the Restriction Period,
Award Shares shall be subject to the following restrictions and any additional
restrictions included in the Award Agreement that the Board of Directors, in
its sole discretion, may from time to time deem desirable in furtherance of the
objectives of the Plan: (a) the Participant shall not be entitled to take
possession of the certificate or certificates representing the Shares; (b) the
Award Shares may not be sold, transferred, assigned, pledged, conveyed,
hypothecated or otherwise disposed of (other than by operation of law); and (c)
the Shares may be forfeited immediately as provided in Section 8.4.
8.4 TERMINATION OF EMPLOYMENT. If the employment of a Participant is
terminated for any reason other than the retirement or early retirement (as
defined under the Company's qualified Retirement Plan), disability or death of
a Participant in service before the expiration of the Restriction Period, the
Award Shares shall be forfeited immediately and all rights of a Participant to
such Shares shall terminate immediately without further obligation on the part
of the Company. If a Participant's employment is terminated by reason of the
retirement or early retirement of a Participant (as defined
69
<PAGE> 17
under the Company's qualified Retirement Plan), disability or death of a
Participant in service before the expiration of the Restriction Period, (a) the
number of Award Shares held by the Company for a Participant's account pursuant
to Section 8.6 shall be reduced by partial forfeiture in an amount of Award
Shares in proportion equal to the percentage of the total Restriction Period
remaining after a Participant's termination of employment, (b) the restrictions
on the unforfieted balance of such Award Shares shall lapse on the date a
Participant's employment terminated and (c) subject to the safekeeping
provisions of Section 8.6, the certificate or certificates representing the
Shares upon which the restrictions have lapsed shall be delivered to a
Participant (or, in the event of a Participant's death, to his or her legal
representative).
8.5 DISTRIBUTION OF AWARD SHARES. If a Participant to whom Award Shares
have been issued pursuant to Article 8 remains in the continuous employment of
the Corporation or a Subsidiary until the expiration or waiver by the Board of
the Restriction Period and the satisfaction of any other conditions imposed by
the Award Agreement, all restrictions applicable to the Restricted Shares at
that time still outstanding and registered in the name of a Participant shall
lapse and, subject to the safekeeping provisions of Section 8.6, the
certificate or certificates representing the Shares that were granted to the
Participant shall be delivered to the Participant.
8.6 DELIVERY OF CERTIFICATES REPRESENTING SHARES.
8.6.1 As soon as practicable after a grant of Award Shares, the Company
shall issue certificates representing the Award Shares registered in the name
of the holder of Award Shares.
8.6.2 To administer the restrictions imposed on Award Shares under the
Plan and the Award Agreement (and if determined in the discretion of the Board
of Directors, the right of first refusal provisions of Article 9, but only for
so long as such provisions remain in effect), certificates representing Award
Shares shall not be delivered to Participants but shall be delivered to the
Company to be held by the Company as safekeeping agent for the benefit of each
Participant. A written safekeeping receipt evidencing the Shares so held in
safekeeping, bearing the name of the Participant, indicating the number of the
certificate or certificates and the number of Shares so represented shall be
delivered promptly to each Participant. In its capacity as safekeeping agent
for Participants, the Company shall act in accordance with instructions
received from such Participants, which instructions are to be confirmed in
writing if deemed appropriate by the Company. The safekeeping agency shall not
affect the rights of Participants as owners of Award Shares, nor shall such
agency affect the restrictions imposed on Award Shares under the Plan or the
Award Agreement.
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<PAGE> 18
8.6.3 Upon the last to occur of (a) the lapse, satisfaction or waiver
of the Restriction Period and any other restrictions imposed on Award Shares
under the Plan or the Award Agreement and (b) the expiration of the right of
first refusal provisions of Article 9, any safekeeping agency arrangement
adopted pursuant to Section 8.6.2 shall terminate and the certificates
representing the Shares owned by Participants, registered in the name(s) of
the Participants, shall be delivered promptly to such Participants.
8.7 WAIVER OF RESTRICTIONS. The Board of Directors, in its sole
discretion, may at any time waive or accelerate the expiration of any or all
restrictions with respect to Award Shares issued pursuant to this Article 8..
8.8 RIGHTS AS A STOCKHOLDER. A Participant receiving Award Shares shall
have no rights as a stockholder with respect to any Award Shares grant to him
or her under the Plan until the date on which he or she becomes a record owner
of the Award Shares (the "record ownership date"). No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions, or other rights for which the record date is prior to
the record ownership date, except as provided in Article 10.
ARTICLE 9
LIMITATIONS ON TRANSFER; REPURCHASE OF SHARES
9.1 RIGHT OF FIRST REFUSAL. As a condition to receiving Shares under the
Plan, each Participant shall agree that he or she will not sell, assign,
transfer, pledge, or otherwise dispose of any Shares he or she may acquire
under the Plan (including by the exercise of an Option granted under Article 5
or Article 6, upon payment or exercise of an SAR under Article 7, by the
receipt of Award Shares under Article 8, or otherwise), or attempt to so,
without first offering to sell the Shares to the Company in accordance with the
terms and conditions of this Article 9, and any disposition or attempted
disposition of Shares in violation hereof shall be null and void.
9.2.1 VOLUNTARY DISPOSITION.
9.2.1 If the record owner of Shares shall desire to sell, assign,
transfer, pledge, or otherwise dispose of any Share, such owner shall first
serve notice (the "Offer to Sell") to that effect upon the Company, offering to
sell such Shares to the Company in accordance with the terms of this Article 9.
The Company shall have the right (but not the obligation) to purchase all or
any part of the Shares so offered within thirty (30) days after receipt by the
Company of the Offer to Sell; provided, that if acceptance would result in a
default by the Company under any loan covenants applicable to it, the Company
shall have one hundred eighty (180) days rather than thirty (30) days within
which to exercise its purchase rights.
71
<PAGE> 19
9.2.2 Subject to the right of the Board of Directors of the Company
in its sole discretion to discontinue or modify its repurchase program,
including solely with respect to a record owner, for any reason or for no
reason at any time, the Company agrees to repurchase any and all Shares held
by a record owner at the request of the record owner within the time specified
in Section 9.2.1 above. Subject to change or modification at any time and
from time to time by the Board of Directors, the repurchase price shall be
equal to the appraised value of the Shares as of the end of the immediately
preceding fiscal year as determined by the Board of Directors based on an
appraisal made at the request of the Company (or based on the latest such
appraised value if an appraisal has been obtained by the Company as of a date
after the end of the immediately preceding fiscal year).
9.2.3 If for any reason the Company shall fail to exercise its right to
purchase all of such Shares offered for sale pursuant to Section 9.2.1, the
record owner may offer the Shares for sale to a third party and complete the
sale within 60 (sixty) days after he or she receives notice of the Company's
failure to repurchase. Any person acquiring the Shares from the record owner
in such event will be required, among other things, to consent to the
imposition of the restrictions on resales included in this Article 9 and to
enter into a similar arrangement with the Company.
9.3 TERMINATION OF EMPLOYMENT. If the employment of the record owner with
the Company shall terminate for any reason, whether by action of the Company,
by death of the employee, the resignation or retirement of the employee, or
otherwise, the record owner shall be deemed to have made an Offer to Sell under
the provisions of Section 9.2.1 as of the date the employee's employment
terminates. If the termination occurs by reason of the death of the employee,
or if the employee should die after otherwise making or being deemed to have
made an Offer to Sell, the offer shall be binding upon his estate, and the
employee's duly appointed and acting personal representative shall act in his
or her behalf.
9.4 EXPIRATION OF PROVISIONS. The provisions of this Article 9 shall be
applicable only during the time prior to the Registration Date; and the
provisions of this Article 9 shall expire as of the Registration Date.
ARTICLE 10
MISCELLANEOUS
10.1 STOCK ADJUSTMENTS.
10.1.1 In the event of any increase or decrease in the number of
issued Shares resulting from a stock split or other division or consolidation of
shares or the payment of a stock dividend (but only on Shares) or any other
increase or decrease in the number of Shares effected without any receipt of
consideration by the Company, then, in
72
<PAGE> 20
any such event, the number of Shares that remain available under the Plan, the
number of Shares covered by each outstanding Option, the exercise price per
Share covered by each outstanding Option, the number of Shares covered by each
outstanding SAR and the price per Share and the number and any purchase price
for any Award Shares granted but not yet issued, in each case, shall be
proportionately and appropriately adjusted for any such increase or decrease.
10.1.2 Subject to any required action by the stockholders, if any
change occurs in the Shares by reason of any recapitalization, reorganization,
merger, consolidation, split-up, combination or exchange of shares, or of any
similar change affecting Shares, then, in any such event, the number and type
of Shares then covered by each outstanding Option, the purchase price per
Share covered by each outstanding Option, the number of Shares covered by each
outstanding SAR and the exercise price per Share and the number and any
purchase price for any Award Shares granted but not yet issued, in each case,
shall be proportionately and appropriately adjusted for any such change.
10.1.3 In the event of a change in the Shares as presently constituted
that is limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par value, the
shares resulting from any change shall be deemed to be Shares within the
meaning of the Plan.
10.1.4 To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by, and in the
discretion of, the Board of Directors, whose determination in that respect
shall be final, binding and conclusive; provided, however, that any Option
granted pursuant to Article 5 shall not be adjusted in a manner that causes
such Option to fail to continue to qualify as an incentive stock option within
the meaning of Section 422 of the Code.
10.1.5 Except as hereinabove expressly provided in this Section 10.1,
an Eligible Employee or a Participant shall have no rights by reason of any
division or consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease the number of shares of stock
of any class or by reason of any dissolution, liquidation, merger or
consolidation, or spin-off of assets or stock of another corporation; and any
issuance by the Company of shares of stock of any class, securities convertible
into shares of stock of any class, or warrants or options for shares of stock
of any class shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares, any Option, any SAR or any
Award Shares granted but not yet issued.
10.1.6 The existence of the Plan, or the grant of an Option, SAR or
Award Shares under the Plan, shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to consolidate, or to
dissolve, to liquidate, to sell, or to transfer all or any part of its business
or assets.
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<PAGE> 21
10.2 TAX ABSORPTION PAYMENTS. The Company may, but is not required to,
make a cash payment, either directly to any Participant or on a Participant's
behalf, in an amount that the Board of Directors estimates to be equal (after
taking into account any federal and state taxes that the Board of Directors
estimates to be applicable to such cash payment) to any additional federal and
state income taxes that are imposed upon a Participant as a result of the
granting of any Award under the Plan (a "Tax Absorption Payment"). In
determining the amount of any Tax Absorption Payment, the Board of Directors
may adopt such methods and assumptions as it considers appropriate, and it
shall not be required to examine the individual tax liability of any
Participant. The decision to make any Tax Absorption Payment shall be made by
the Board of Directors at the same time as the grant of the Award to which it
relates.
10.3 AMENDMENT OF THE PLAN; TERMINATION. The Board shall have the right
to revise, amend or terminate the Plan at any time without notice, provided
that no Participant's existing rights are adversely affected thereby without
the consent of such person, and provided further that, without approval of the
stockholders of the Company, no such revision or amendment shall (a) increase
the total number of Shares subject to the Plan; (b) decrease the price at which
Options may be granted; (c) materially modify the requirements as to
eligibility for participation in the Plan; (d) otherwise materially increase
the benefits under the Plan; or (e) remove the administration of the Plan from
the Board of Directors. In addition, the provisions of Article 5, Article 6,
Article 7 and Article 8 may not be amended more frequently than once every six
(6) months other than to comply with applicable provisions of the Code or the
Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder. The limitation specified in the preceding sentence is
intended to satisfy the requirements of Rule 16b-3(c)(2)(ii)(B) under the
Securities Exchange Act of 1934, as currently in effect. The foregoing
prohibitions in this Section 10.4 shall not be affected by adjustments in
shares and purchase price made in accordance with the provisions of Section
9.1.
10.4 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Shares or the exercise of Options pursuant to the Plan will be used for
general corporate purposes.
10.5 NO IMPLIED RIGHTS TO EMPLOYEES. The existence of the Plan and the
granting of Awards under the Plan shall in no way give any employee the right
to continued employment, give any employee the right to receive any additional
Awards or any additional compensation under the Plan, or otherwise provide any
employee any rights not specifically set forth in the Plan or in any Option,
SAR or Award Agreement.
10.6 WITHHOLDING. Whenever the Company proposes or is required to issue
or transfer Awards under the Plan, the Company shall have the right to require
a Participant to remit to the Company an amount sufficient to satisfy any
federal, state or local withholding tax liability prior to the delivery of any
certificate or certificates for such shares. Whenever under the Plan payments
are to be made in cash, such payments shall be made net of an amount sufficient
to satisfy any federal, state or local withholding tax liability.
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<PAGE> 22
10.7 CONDITIONS PRECEDENT TO EFFECTIVENESS. The Plan shall become
effective upon the satisfaction of all the following conditions, with the
Effective Date of the Plan after the completion of such adoption procedures
being April 1, 1995, regardless of the date that the last of the following
conditions is satisfied:
10.7.1 the adoption of the Plan by the Board of Directors; and
10.7.2 the approval of the Plan by the stockholders of the Company
within twelve (12) months after its adoption by the Board.
75
<PAGE> 1
CONSENT TO USE OF REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report, and to all references to our firm incorporated by
reference in this Form 10-K, into the Company's previously-filed registration
statement (File No. 33-60329).
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Tampa, Florida
June 25, 1996
76
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
AmeriSteel Corporation (formerly Florida Steel Corporation) (the "Company") on
Form S-8 of our report dated June 6, 1994, appearing in the Annual Report on
Form 10-K of the Company for the year ended March 31, 1996.
/s/ Deloitte & Touche LLP
- --------------------------------
DELOITTE & TOUCHE LLP
Tampa, Florida
June 21, 1996
77
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERI-STEEL CORPORATION FOR THE YEAR ENDED MARCH 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 6,193
<SECURITIES> 0
<RECEIVABLES> 73,910
<ALLOWANCES> (1,000)
<INVENTORY> 112,753
<CURRENT-ASSETS> 200,109
<PP&E> 289,688
<DEPRECIATION> 42,679
<TOTAL-ASSETS> 554,896
<CURRENT-LIABILITIES> 85,588
<BONDS> 252,525
0
0
<COMMON> 101
<OTHER-SE> 141,646
<TOTAL-LIABILITY-AND-EQUITY> 554,896
<SALES> 628,404
<TOTAL-REVENUES> 628,404
<CGS> 533,965
<TOTAL-COSTS> 533,965
<OTHER-EXPENSES> 49,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,956
<INCOME-PRETAX> 21,116
<INCOME-TAX> 9,846
<INCOME-CONTINUING> 11,270
<DISCONTINUED> (9,150)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,120
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
