<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1997
REGISTRATION STATEMENT NO. 333-37679
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
AMERISTEEL CORPORATION
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
FLORIDA 3312 59-0792436
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------------
5100 W. LEMON STREET
TAMPA, FLORIDA 33609
(813) 286-8383
(Address, including zip code, and telephone number including area code, of
Registrant's principal executive offices)
---------------------
PHILLIP E. CASEY, CHIEF EXECUTIVE OFFICER
AMERISTEEL CORPORATION
5100 W. LEMON STREET
TAMPA, FLORIDA 33609
(813) 286-8383
(Name, address, including zip code, and telephone number including area code, of
agent for service)
Copies of communications to:
<TABLE>
<C> <C>
ALBERT C. O'NEILL, JR., ESQUIRE JOHN EVANGELAKOS, ESQUIRE
TRENAM, KEMKER, SCHARF, BARKIN, SULLIVAN & CROMWELL
FRYE, O'NEILL & MULLIS 125 BROAD STREET
P.O. BOX 1102 NEW YORK, NEW YORK 10004-2400
TAMPA, FLORIDA 33601-1102 (212) 558-4000
(813) 223-7474
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, $.01
par value (2)............ 4,542,500 shares $23.00 $104,477,500 $2,038
==============================================================================================================================
</TABLE>
(1) A fee of $29,622 was previously paid upon the initial filing of this
Registration Statement. The amount of the registration fee hereunder,
$31,660, has been reduced by the amount of such previously paid fee.
(2) The shares of Class A Common Stock are not being registered for the purpose
of sales outside the United States.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1997
<TABLE>
<S> <C> <C>
[AmeriSteel LOGO] 3,950,000 SHARES
AMERISTEEL CORPORATION
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
</TABLE>
----------------------
Of the 3,950,000 shares of Class A Common Stock offered, 3,160,000 shares
are being offered hereby in the United States and 790,000 shares are being
offered in a concurrent international offering outside the United States. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting".
All of the 3,950,000 shares of Class A Common Stock offered hereby are
being sold by the Company. Prior to the Offerings, there has been no public
market for the Class A Common Stock of the Company. It is currently estimated
that the initial public offering price per share will be between $20.00 and
$23.00. For factors considered in determining the initial public offering price,
see "Underwriting".
The Company has two classes of Common Stock. Shares of Class A Common Stock
and Class B Common Stock generally carry the same rights, powers, preferences,
privileges and limitations, except that Class A Common Stock has one vote per
share while Class B Common Stock has two votes per share. See "Description of
Capital Stock". After giving effect to the Offerings (assuming the Underwriters'
over-allotment options are not exercised), the issued and outstanding shares of
Class B Common Stock will have approximately 84% of the combined voting power of
all outstanding shares of capital stock of the Company. After the Offerings,
approximately 89% of the Class B Common Stock will be held by Kyoei Steel, Ltd.
See "Principal Stockholders".
SEE "RISK FACTORS" ON PAGE 8 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE CLASS A COMMON STOCK.
The Class A Common Stock has been approved for listing, subject to notice
of issuance, on the New York Stock Exchange under the symbol "AST".
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT (1) COMPANY (2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
</TABLE>
- ---------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $800,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 474,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted the International
Underwriters a similar option with respect to an additional 118,500 shares
as part of the concurrent international offering. If such options are
exercised in full, the total initial public offering price, underwriting
discount and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting".
----------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about , 1997, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO. MORGAN STANLEY DEAN WITTER
----------------------
The date of this Prospectus is , 1997.
<PAGE> 3
[PICTURE OF ANGLE, FLAT, REBAR AND CHANNEL STEEL PRODUCTS
AND REPRESENTATIVE APPLICATIONS OF SUCH PRODUCTS]
---------------------
In this Prospectus, references to "dollars", "U.S.$" and "$" are to United
States dollars.
---------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information presented in this
Prospectus (i) assumes that the Underwriters' over-allotment options will not be
exercised and (ii) gives effect to an amendment of the Company's Articles of
Incorporation to create two classes of Common Stock, Class A and Class B, and to
convert automatically all outstanding shares of Common Stock into shares of
Class B Common Stock, which amendment is to be effected immediately prior to the
consummation of the Offerings. All references in this Prospectus to the
"Company" shall be deemed to refer to AmeriSteel Corporation and all references
to fiscal years are to the Company's fiscal years ended on March 31.
THE COMPANY
The Company operates four non-union minimills located in the southeastern
U.S. that produce steel concrete reinforcing bars ("rebar"), light structural
shapes such as rounds, squares, flats, angles and channels ("merchant bars")
and, to a lesser extent, wire rod ("rods") and billets (which are semi-finished
steel products). The Company also operates 13 rebar fabricating plants
strategically located in close proximity to its mills. The Company estimates
that it currently has annual steel melting capacity of 2.0 million tons per year
and finished product rolling capacity of 1.7 million tons per year. The Company
believes that it is the second largest producer and the largest fabricator of
rebar in the U.S.
The Company's minimills use electric arc furnaces to melt recycled scrap
steel. The molten steel is then cast into long strands called billets in a
continuous casting process. Billets are then reheated and rolled into rebar,
merchant bars and rods. The Company's fabricating plants further process
approximately 40% of the Company's mill rebar production to meet specific
contractor specifications. Rebar is used primarily for strengthening concrete in
highway and building construction and other construction applications. Merchant
bars 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.
In late 1992, the Company was purchased by Kyoei Steel Ltd. ("Kyoei"), a
private Japanese minimill company engaged in the manufacture of commodity grade
steel products, primarily rebar and merchant bar products. Kyoei, founded in
1947, operates four minimills in Japan and a rolling mill in Vietnam with a
total annual rebar and merchant bar rolling capacity of 2.5 million tons. The
Company has benefitted from access to Kyoei's operating, engineering and
technical expertise.
THE INDUSTRY
According to industry sources, United States market demand for rebar was
approximately 6.3 million tons in calendar 1996. The Company believes that it is
the second largest producer of rebar in the U.S. and estimates it has
approximately a 13% share of the U.S. rebar market and approximately a 20% share
in the eastern two-thirds of the U.S. According to industry sources, the U.S.
market for merchant and other light structural shape bars was estimated to be
approximately 8.6 million tons in calendar 1996. The Company estimates that it
has approximately a 6% share of this market. For the six months ended September
30, 1997, approximately 24% of the Company's net sales were derived from
fabricated rebar, 28% from stock rebar (rebar produced by the mills and sold to
third parties), 31% from merchant bars, 5% from rods and 12% from semi-finished
billets.
The minimill industry is composed of two types of competitors: multi-mill
operators and stand-alone minimills. The Company believes that recent growth in
the industry (through acquisitions as well as capital expenditures) has been
driven by multi-mill operations because stand-alone minimills have not generally
been able to achieve the economies of scale or had access to the financial
resources to make the investments that larger operators have. The Company
believes that further industry consolidation will continue given the significant
advantages available to multi-mill operators. Accordingly, the Company is
actively investigating potential acquisition opportunities.
3
<PAGE> 5
COMPETITIVE STRENGTHS
The primary focus of the Company's business strategy is to continue to be a
low cost producer of rebar and merchant bar products in the U.S. and to further
grow its business including through acquisitions of steel producing and related
assets. The Company believes that the following competitive strengths are key
elements of this strategy:
DEMONSTRATED COST CONTROL. Since 1994, the Company has reduced its
costs of converting scrap steel to finished steel products ("conversion
costs") from $146 per ton to $128 per ton for the six months ended
September 30, 1997. The Company has achieved these cost reductions through
its mill modernization program, high mill utilization, access to
competitively priced electric power at its Tennessee and North Carolina
mills, and labor incentive programs designed to maximize productivity. In
addition, since 1994, the Company has closed unprofitable operations and
divested non-core activities. The Company currently has initiatives in
place that it believes will further reduce its conversion costs.
MODERNIZED PRODUCTION EQUIPMENT IN ATTRACTIVE LOCATIONS. Since 1992,
the Company has invested approximately $115 million in mill modernization,
including major projects at its Jackson, Tennessee, Jacksonville, Florida
and Charlotte, North Carolina mills. The Company believes its recent mill
modernization program will lower conversion costs and increase capacity
utilization, enhance merchant bar quality and broaden its merchant bar
product range. The southeastern U.S. (where all the Company's mills are
located) accounts generally for more than one-fourth of U.S. rebar
consumption and, due to mild wintertime weather conditions, demonstrates
less seasonal demand fluctuations than more northern regions of the U.S.
Because of the high cost of freight relative to the value of the Company's
products, competition from non-regional producers is limited.
MOTIVATED, NON-UNION LABOR FORCE. The Company employs a non-union
workforce of approximately 1,860 employees. The Company's compensation
programs are designed to allow employees to earn significant incentive
bonuses (approximately one-fifth of their total compensation) based on
production volumes, sales volumes, cost targets or return on capital
employed. These programs have been successfully implemented by the current
management team and have resulted in lower costs, higher productivity and
increased profitability. Further incentive is provided through equity
ownership plans. Approximately 57% of current employees have purchased
stock in the Company, including Phillip E. Casey, Chairman and Chief
Executive Officer, who beneficially owns approximately 10% of the
outstanding shares of the Company's capital stock (approximately 6% after
the Offerings).
STRONG MARKET POSITIONS. The Company believes that it is the second
largest producer of rebar in the U.S. and estimates it has approximately a
13% share in the U.S. rebar market and approximately a 20% share in the
eastern two-thirds of the U.S. In addition, the Company believes that it is
the largest fabricator of rebar products in the U.S., with fiscal 1997
revenues of $161.2 million, or approximately 26% of the Company's sales.
The Company believes its strong market position in both stock rebar
shipments and fabricated rebar shipments provides it with competitive
market intelligence and other advantages from vertical integration relative
to its smaller competitors. The Company estimates it has approximately a 6%
share of the U.S. market for merchant and other light structural shape
bars. The Company believes it has opportunities to increase its market
share in this market, which is generally less cyclical and more profitable
than the rebar market. A recent independent survey has ranked the Company
first in customer service and on-time delivery in the Company's principal
product markets. As evidence of a high degree of customer satisfaction, the
Company has had, on average, a relationship of at least 10 years with its
top 25 customers.
The Company's headquarters are located at 5100 W. Lemon Street, Suite 312,
Tampa, Florida 33609, and its telephone number is (813) 286-8383.
4
<PAGE> 6
THE OFFERINGS(1)
<TABLE>
<S> <C> <C>
Class A Common Stock offered by the
Company:
United States Offering................ 3,160,000 shares
International Offering................ 790,000 shares
Total......................... 3,950,000 shares
Common Stock outstanding after the
Offerings:
Class A Common Stock.................. 3,950,000 shares
Class B Common Stock.................. 10,114,385 shares(2)
Total......................... 14,064,385 shares
Use of Proceeds......................... To repay approximately $66.3 million in long term
debt, to fund working capital and for general
corporate purposes. See "Use of Proceeds".
Proposed New York Stock Exchange
symbol................................ AST
</TABLE>
- ------------------------
(1) The offerings of Class A Common Stock by the U.S. Underwriters and the
International Underwriters are referred to herein as the "Offerings".
(2) Excludes 329,762 shares of Class B Common Stock issuable at an average
exercise price of $12.71 on the exercise of stock options granted under the
Company's option plans and outstanding as of September 30, 1997. See
"Management -- Incentive and Benefit Plans" and "Description of Capital
Stock".
CONCURRENT NOTES OFFERING
Concurrent with the Offerings, the Company is planning to offer $100
million aggregate principal amount of its senior unsecured Notes due 2007 (the
"Notes", and the offering of such Notes, the "Notes Offering") by a separate
offering memorandum. Because the Notes Offering is subject to a variety of
market, economic and other factors, there can be no assurance that the Notes
Offering will be consummated. The closing of the Notes Offering is conditioned
upon the closing of the Offerings, but not vice versa. It is expected that the
Notes Offering would be closed shortly after the closing of the Offerings. See
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
5
<PAGE> 7
SUMMARY FINANCIAL AND OPERATING DATA
The summary statement of operations and balance sheet data for the years
ended March 31, 1994, 1995, 1996 and 1997 are derived from the audited financial
statements of the Company. The same data for the year ended March 31, 1993 have
been compiled from the Company's financial statements, combining the periods for
the nine months ended December 31, 1992 which was unaudited, and the three
months ended March 31, 1993 which was audited. The data for the six month
periods ended September 30, 1996 and 1997 have been derived from the unaudited
financial statements for those periods. The results of the six months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the fiscal year ending March 31, 1998. The unaudited financial data include,
in the opinion of management, all adjustments consisting only of normal
recurring accruals necessary to present fairly the data for such periods.
Certain reclassifications have been made to the March 31, 1994 financial data to
conform with the financial data of the other periods presented. The following
financial data for the years ended March 31, 1995, 1996 and 1997, and for the
six month period ended September 30, 1996 and 1997 are qualified in their
entirety by reference to the more detailed Financial Statements and Notes
thereto, included elsewhere in this Prospectus, and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------------
1993 1994 1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ---------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales........................ $ 479,971 $ 547,118 $ 639,908 $ 628,404 $ 617,289 $327,908 $343,805
Operating expenses:
Cost of sales.................. 431,288 498,692 545,725 533,965 531,190 285,173 277,251
Selling and administrative..... 25,285 27,293 29,959 29,605 29,068 14,261 12,834
Depreciation................... 15,496 15,369 14,046 14,619 16,654 8,091 9,643
Amortization of goodwill....... 3,017 4,061 4,130 4,130 4,130 2,065 2,065
Other operating expenses(1).... 9,000 10,920 -- 16,013 -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
$ 484,086 $ 556,335 $ 593,860 $ 598,332 $ 581,042 $309,590 $301,793
Income (loss) from operations.... (4,115) (9,217) 46,048 30,072 36,247 18,318 42,012
Other expense:
Interest....................... 37,534 21,027 23,330 22,000 19,473 9,898 10,115
Amortization of deferred
financing costs.............. 1,548 2,552 2,863 1,956 934 467 353
---------- ---------- ---------- ---------- ---------- -------- --------
$ 39,082 $ 23,579 $ 26,193 $ 23,956 $ 20,407 $ 10,365 $ 10,468
Income (loss) before income taxes
(benefit) & extraordinary
item........................... (43,197) (32,796) 19,855 6,116 15,840 7,953 31,544
Income taxes (benefit)........... (13,711) (10,833) 9,354 3,996 7,788 3,907 13,108
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before
extraordinary item............. $ (29,486) $ (21,963) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
Extraordinary item, net of income
tax benefit(2)................. (4,185) (748) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Net income (loss)................ $ (33,671) $ (22,711) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
========== ========== ========== ========== ========== ======== ========
Earnings (loss) per share(3)..... $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 0.40 $ 1.83
========== ========== ========== ========== ======== ========
BALANCE SHEET DATA
(end of period):
Working capital.................. $ 88,805 $ 111,666 $ 121,364 $ 114,521 $ 108,727 $ 99,816 $111,852
Total assets..................... 495,884 523,706 561,748 554,896 535,685 534,961 543,400
Current liabilities.............. 59,530 76,006 102,080 85,588 73,792 75,208 80,841
Long-term debt (less current
portion)....................... 212,002 247,128 243,030 252,525 237,474 239,245 216,835
Stockholders' equity............. 147,711 124,999 137,750 141,747 150,564 146,192 169,410
SELECTED OPERATING DATA:
Shipped Tons
Stock rebar.................... 434 466 536 508 472 242 291
Merchant bar................... 427 468 549 544 512 253 283
Rod............................ 144 121 129 133 105 62 48
---------- ---------- ---------- ---------- ---------- -------- --------
Subtotal mill finished goods... 1,005 1,055 1,214 1,185 1,089 557 622
Fabricated rebar............... 317 330 347 315 326 170 174
Billets........................ 232 263 141 175 281 188 106
---------- ---------- ---------- ---------- ---------- -------- --------
Total shipped tons............. 1,554 1,648 1,702 1,675 1,696 915 902
========== ========== ========== ========== ========== ======== ========
Average mill finished goods
prices (per ton)............... $ 284 $ 310 $ 342 $ 337 $ 333 $ 332 $ 349
Average scrap cost (per ton)..... 94 119 130 131 130 133 131
Average metal spread (per
ton)(4)........................ 190 191 212 206 203 199 218
Average mill conversion costs
(per ton)...................... 140 146 135 135 138 140 128
</TABLE>
6
<PAGE> 8
- ---------------
(1) In September 1992, the Company recorded a $9.0 million charge for a
settlement related to a Florida Department of Transportation epoxy coated
rebar claim. In the fiscal year ended March 31, 1994, the Company recorded a
$10.3 million charge related to the closing of the Tampa melt shop and a
$0.6 million charge related to closing the Fort Myers, Florida and
Woodbridge, Virginia fabrication shop facilities. In the fiscal year ended
March 31, 1996, the Company recorded a $15.0 million charge related to the
closing of the Tampa rolling mill and a $1.0 million charge for the closure
of other facilities.
(2) In December 1992, the Company repaid $239.6 million of existing debt which
had a carrying value of $233.0 million resulting in a loss of $4.2 million
net of income tax benefit. In the fiscal year ended March 31, 1994, the
Company incurred a charge of $748,000, net of income tax benefits, as a
result of redeeming $20 million of the 14.5% subordinated debentures at a
premium of 6% or $1.2 million.
(3) Earnings (loss) per share for the year ended March 31, 1993 is not presented
because ownership of the Company changed in late calendar 1992. For
comparative purposes, loss per share for the entire period would have been
$(3.37) assuming 10,000,000 shares of stock outstanding throughout the
entire year.
(4) Average metal spread equals Average mill finished goods prices minus Average
scrap costs.
7
<PAGE> 9
RISK FACTORS
An investment in the shares of Class A Common Stock offered hereby involves
a high degree of risk. Prospective investors should carefully consider the
following risk factors, as well as the other information in this Prospectus,
before investing in shares of the Class A Common Stock offered hereby. This
Prospectus contains certain forward-looking statements that involve risks and
uncertainties. Future events and the Company's actual results could differ
materially from the results reflected in these forward-looking statements.
HIGHLY CYCLICAL INDUSTRY
The domestic steel industry and the Company's business are highly cyclical
in nature. The Company is particularly sensitive to the presence or absence of
sustained economic growth and accompanying construction activity since rebar is
used to reinforce concrete in the construction of high rise commercial
buildings, highways, bridges and dams, and other public and private construction
projects. Demand for the Company's merchant bar products is tied less to
construction activity and more to general economic activity. Future economic
downturns or a slowdown in construction activity could adversely affect the
Company's results of operations and financial condition.
AVAILABILITY AND COST OF RAW MATERIALS
The Company's principal raw material is ferrous scrap metal derived from,
among other sources, junked automobiles, railroad cars, appliances and
demolition scrap. Scrap comprised approximately 42% of the Company's cost of
sales in fiscal 1997. The purchase price for scrap is subject to market forces
beyond the control of the Company, including demand by domestic and foreign
steel producers, freight costs, speculation by scrap brokers and other
conditions. As minimills have steadily increased their share of supplying U.S.
steel demand, demand for scrap has also increased.
The ability to pass on increases in raw material prices to the Company's
customers is, to a large extent, dependent on market conditions. There may be
periods of time in which increases in raw material prices are not recoverable by
the Company due to an inability to increase the selling prices of its products
because of weakness in the demand for, or an oversupply of, such products.
Increases in raw material prices, during such periods, may have a material
adverse effect on the Company's results of operations and financial condition.
See "Business -- Raw Materials".
The Company buys substantially all of the scrap it requires through one
broker, The David J. Joseph Company, which also operates shredders for the
Company at the Jacksonville and Jackson mills. The Company believes that it
could readily obtain adequate supplies of scrap, if warranted, from a number of
other sources at competitive prices.
HIGHLY COMPETITIVE INDUSTRY; EXCESS PRODUCTION CAPACITY
The domestic and foreign steel industries are characterized by intense
competition. The Company competes primarily with domestic minimill producers of
commodity grade steel bar products, although foreign competition can also be a
factor depending on the level of domestic prices, foreign government subsidies
and exchange rates. The Company competes primarily on the basis of price,
product quality, and reliability of service and delivery. The Company believes
that its competitive production costs, the proximity of its mills to major
markets and customers, and its long-standing reputation for quality products and
service will ensure its competitive position in the industry, although there can
be no assurance that competition will not have an adverse effect in the future.
Overall consumption of steel products in the U.S. has not grown with the
economy as a whole during the past decade. Although the operations of domestic
steel producers have been scaled back as a result of corporate reorganizations
and bankruptcies, there still exists, taking into account current levels of
imports and announced capacity additions, significant excess production capacity
in the domestic steel
8
<PAGE> 10
industry as a whole. There can be no assurance that such excess production
capacity will not have a material adverse effect on the Company's results of
operation and financial condition.
SEASONALITY; VARIABILITY OF QUARTERLY RESULTS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its revenues and net income. Revenues can
fluctuate significantly between quarters due to factors such as the seasonal
slowdown in the construction industry, which is an important market for the
Company's finished steel products. In the past, the Company has generally
experienced its lowest sales during the third and fourth quarters of its fiscal
year.
DEPENDENCE ON SOUTHEASTERN MARKET
Sales to customers in the southeastern U.S. in recent years have accounted
for approximately one-third of the Company's total sales. Due to the relatively
high transport costs associated with the delivery of the Company's products
beyond this region, the Company does not believe that it can expand sales
significantly outside of the region without the acquisition of additional
facilities. Accordingly, the Company believes the economic condition of this
regional market will continue to have a material effect on sales and
profitability of the Company.
POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE
The Company is subject to federal, state and local laws and regulations
governing the remediation of environmental contamination associated with past
releases of hazardous substances 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 and employee health and
safety (collectively, "Environmental 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 for damages to enforce compliance.
The electric arc furnaces at each of the Company's four mills are
classified as generators of hazardous waste because the melting operation
produces dust containing heavy metals (principally zinc, lead, chromium and
cadmium). The Company also owns or has owned properties, and conducts or has
conducted operations at properties, which have been assessed as contaminated
with hazardous or other regulated substances, or as otherwise requiring remedial
action under Environmental Laws. Moreover, environmental legislation has been
enacted, and may in the future be enacted, to create liability for past actions
that were lawful at the time taken but that have been found to affect the
environment and to create public rights of action for environmental conditions
and activities. Under some of these Environmental Laws a company that has sent
waste to a third party waste disposal site could be held liable for the entire
cost of remediating such site regardless of fault or the lawfulness of the
original disposal activity.
Over the past three years, the Company has spent in excess of $30 million
for remediation under Environmental Laws for certain on-site and off-site
locations. The Company has estimated its potential costs for further remediation
under Environmental Laws at on-site and off-site locations to be approximately
$14.9 million and has included this amount in the Company's recorded liabilities
as of September 30, 1997. Although the Company has established reserves for
environmental remediation, there is no assurance regarding the cost of remedial
action authorities might eventually require, or that additional environmental
hazards, requiring further remedial expenditures, might not be assessed by these
authorities or private parties. Accordingly the costs of remedial measures may
exceed the amounts reserved. In addition, the Company may be subject to legal
proceedings brought by private parties or governmental agencies with respect to
environmental matters.
Although it is the Company's policy to comply with all Environmental Laws
and the Company believes that it is currently in material compliance with all
Environmental Laws, there can be no assurance that material environmental
liabilities will not be incurred by the Company in the future or that future
9
<PAGE> 11
compliance with Environmental Laws (whether those currently in effect or enacted
in the future) will not require additional expenditures by the Company or
require changes to the Company's current operations, any of which could have a
material adverse effect on the Company's results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Compliance with Environmental Laws and Regulations" and
"Note E to the September 30, 1997 unaudited condensed financial
statements -- Environmental".
VOTING CONTROL BY PRINCIPAL STOCKHOLDER
Upon completion of the Offerings, Kyoei, through its wholly owned
subsidiary, FLS Holdings Inc. ("FLS"), will be the beneficial owner of 9,000,000
shares of the Class B Common Stock, which Class B Common Stock is entitled to
two votes per share and will represent approximately 74.4% of the combined
voting power of all classes of voting stock (72.7% if the Underwriters'
over-allotment options are exercised in full). As a result, Kyoei has, and will
continue to have, sufficient voting power to elect the entire Board of Directors
of the Company and, in general, to determine (without the consent of the
Company's other stockholders) the outcome of any corporate transaction or other
matters submitted to the stockholders for approval. In addition, pursuant to
terms of the Company's Articles of Incorporation, additional shares of Class B
Common Stock may be issued to Kyoei or its wholly-owned subsidiaries. See
"Management", "Principal Stockholders" and "Description of Capital Stock".
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
Although the Company's business strategy includes growing its business
through acquisitions, there can be no assurance that the Company will be able to
identify attractive or willing acquisition candidates, or that the Company will
be able to complete acquisitions if such candidates are identified. Future
acquisitions by the Company may result in potentially dilutive issuances of
equity securities, and the incurrence of additional debt and amortization
expenses related to goodwill and other intangible assets, each of which could
materially adversely affect the Company's business and results of operations. In
addition, acquisitions involve numerous risks, including difficulties in
assimilating the operations, products and personnel of the acquired company, the
diversion of management's attention from other business concerns, risks of
entering markets in which the Company has no direct prior experience and the
potential loss of key employees of both the acquired company and the Company.
The Company has no present agreements or commitments with respect to any
material acquisitions of other businesses, products or assets or present
intention to apply any portion of the proceeds of the Offerings to any such
acquisition.
NO PRIOR MARKET FOR CLASS A COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Class A
Common Stock, and there can be no assurance that an active market will develop
or be sustained after the completion of the Offerings. Consequently, the initial
public offering price of the Class A Common Stock will be determined by
negotiations among the Company and the Underwriters. See "Underwriting" for a
description of the factors to be considered in determining the initial public
offering price.
The market price of the Class A Common Stock may be significantly affected
by, and could be subject to significant fluctuations in response to, such
factors as the Company's operating results, changes in any earnings estimates
publicly announced by the Company or by securities analysts, announcements of
significant business developments by the Company or its competitors, other
developments affecting the Company, its clients or its competitors, and various
factors affecting the Company's business, the financial markets or the economy
in general, some of which may be unrelated to the Company's performance. In
addition, the stock market has experienced a high level of price and volume
volatility, and market prices for the stock of many companies, especially
companies that have recently completed initial public offerings, have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. Because the number of shares of Class A Common
Stock
10
<PAGE> 12
being offered hereby is small relative to the average number of shares traded of
many other publicly held companies, the market price of Class A Common Stock may
be more susceptible to fluctuation.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of a substantial number of shares of the Class A Common Stock
in the public market could adversely affect the market price of the Class A
Common Stock and could impair the Company's ability to raise capital through the
sale of equity or equity-related securities. Upon completion of the Offerings,
the Company will have 3,950,000 shares of Class A Common Stock outstanding and
10,114,385 shares of Class B Common Stock outstanding. All shares of Class B
Common Stock are convertible into shares of Class A Common Stock on a one-for-
one basis. Of such shares, 72,508 shares of Class B Common Stock, representing
less than 1.0% of the issued and outstanding shares of Common Stock, will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act ("Rule 144"). The remaining
10,041,877 shares of Class B Common Stock, representing approximately 71.4% of
the issued and outstanding shares of Common Stock (approximately 68.5% if the
Underwriters' over-allotment options are exercised in full), are beneficially
owned by affiliates of the Company and are therefore "restricted securities" as
that term is defined in Rule 144 and as such are subject to certain holding
period, volume limitation and other restrictions prescribed by Rule 144. The
Company, certain of its executive officers and Kyoei have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell, pledge, hypothecate, grant any option, right or
warrant to purchase, or otherwise dispose of, directly or indirectly, (which
shall be deemed to include, without limitation, the entering into of a
cash-settled or Common Stock settled derivative instrument) any shares of Common
Stock, any securities of the Company that are substantially similar to the Class
A Common Stock or any securities that are convertible into or exchangeable for,
or that represent the right to receive, Common Stock, or any such substantially
similar securities, (other than pursuant to employee stock option plans existing
on, or upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Prospectus), without the prior written
consent of the representatives, except for the shares of Class A Common Stock
offered in connection with the Offerings. Upon expiration of such 180 day
period, an aggregate of 10,041,877 shares will be eligible for sale subject to
the timing, volume and manner of sale restrictions of Rule 144. See "Shares
Eligible for Future Sale" and "Underwriting".
IMMEDIATE AND SUBSTANTIAL DILUTION
Investors in the Offerings will experience immediate and substantial
dilution in net tangible book value per share of Common Stock of $10.00 per
share. In addition, any future issuance of shares of Common Stock or the grant
of options to purchase Common Stock could cause further dilution. See
"Dilution".
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the Offerings (based on an assumed
offering price of $21.50 per share and after deducting assumed underwriting
discounts and estimated offering expenses) are estimated to be approximately
$78.2 million ($90.0 million if the Underwriters' over-allotment options are
exercised in full). The Company intends to use $50.0 million of the net proceeds
of the Offerings to repay all of the Company's Subordinated Intercompany Note.
The balance of the estimated net proceeds of the Offerings will be used first to
repay the outstanding balance under the Company's Revolving Credit Agreement
(currently estimated to be $16.3 million) and then to fund working capital and
for general corporate purposes.
The $50.0 million principal amount of the Company's Subordinated
Intercompany Note outstanding as of September 30, 1997 bears interest calculated
using a pass-through provision based on notes held by FLS at a weighted average
rate of LIBOR plus 138 basis points, or 7.4% per annum as of such date, and
matures in December 2002. Indebtedness under the Revolving Credit Agreement
bears interest at a per annum rate equal to one of several rate options (LIBOR,
Fed Funds or Cost of Funds), depending on the debt facility selected by the
Company, plus an applicable margin determined by tests of performance from time
to time. The indebtedness outstanding as of September 30, 1997 under the
Revolving Credit Agreement bears interest at a rate of 7.3% per annum as of such
date. The Revolving Credit Agreement expires in June 1999. The unpaid balance
under the Revolving Credit Agreement was $31.0 million as of September 30, 1997.
Concurrent with the Offerings, the Company is planning to offer $100
million aggregate principal amount of the Notes by a separate offering
memorandum. Because the Notes Offering is subject to a variety of market,
economic and other factors, there can be no assurance that the Notes Offering
will be closed. The closing of the Notes Offering is conditioned upon the
closing of the Offerings, but not vice versa. It is expected that the Notes
Offering would be closed shortly after the closing of the Offerings. The net
proceeds to the Company from the Notes Offering (after deduction of assumed
underwriting discounts and the Company's estimated offering expenses), if
closed, are estimated to be $97.6 million. and will be used together with
approximately $4.3 million of additional cash drawn from the Revolving Credit
Agreement to redeem the Company's 11 1/2% First Mortgage Notes due December 15,
2000 (the "First Mortgage Notes") at a redemption price of 101.96% of their
principal amount. Although there can be no assurance of the actual interest rate
of the Notes (the establishment of which is subject to a variety of market,
economic and other factors), the Company currently anticipates that the Notes
will bear interest at a lower rate than the First Mortgage Notes. Deferred
financing costs related to the First Mortgage Notes are expected to be written
off at the time the First Mortgage Notes are redeemed. The Company also expects
that the Notes will be outstanding for up to 50 days before redemption of the
First Mortgage Notes is completed. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources".
DIVIDEND POLICY
Prior to the completion of the Offerings, the Company intends to declare
and pay a special dividend of approximately $6.1 million to its then current
stockholders. The Company has not recently paid regular cash dividends on its
Common Stock, but intends to establish a policy to declare and pay regular cash
dividends each fiscal quarter. The Company currently anticipates that the first
regular cash dividend will be declared within six months following the
completion of the Offerings in the amount of $.025 per share of Common Stock.
However, any determination to pay dividends will be at the discretion of the
Company's Board of Directors and necessarily will be dependent upon the
Company's results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors deemed relevant by the
Board of Directors, and the Company may change its dividend policy or cease
paying dividends at any time.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 and as adjusted as of such date to reflect (i) the
recapitalization of the Company to create shares of Class A Common Stock and
Class B Common Stock of which 100,000,000 and 22,000,000 will be authorized,
respectively, (ii) the payment prior to the completion of the Offerings of a
dividend of approximately $6.1 million, (iii) the application of the estimated
net proceeds from the issuance and sale by the Company of the 3,950,000 shares
of Class A Common Stock in the Offerings (at an assumed offering price of $21.50
per share) as described in "Use of Proceeds" and (iv) the issuance and sale of
the Notes pursuant to the Notes Offering and the application of the net proceeds
therefrom as described in "Use of Proceeds". The table should be read in
conjunction with the Financial Statements and Notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------------------------------
AS ADJUSTED FOR
-------------------------------------
RECAPITALIZATION,
RECAPITALIZATION, DIVIDEND,
DIVIDEND OFFERINGS AND
ACTUAL AND OFFERINGS NOTES OFFERING
-------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt (including current portion of long-term
debt)................................................... $ 5,687 $ 5,687 $ 5,687
======== ======== ========
Long-term debt (less current portion)
First Mortgage Notes.................................... $100,000 $100,000 $ --
Notes................................................... -- -- 100,000
Revolving Credit Agreement.............................. 30,960 20,729 25,045
Industrial Revenue Bonds................................ 35,875 35,875 35,875
Subordinated Intercompany Note.......................... 50,000 -- --
-------- -------- --------
Total long-term debt............................ $216,835 $156,604 $160,920
Stockholders' equity(1):
Class A Common Stock, $0.01 par value, 100,000,000
shares authorized; no shares issued and outstanding;
3,950,000 shares as adjusted......................... -- 40 40
Class B Common Stock, $0.01 par value, 22,000,000 shares
authorized; 10,114,603 shares issued and
outstanding.......................................... 101 101 101
Capital in excess of par................................ 157,297 235,437 235,437
Retained earnings....................................... 14,108 8,039 5,806
Deferred compensation................................... (2,096) (2,096) (2,096)
-------- -------- --------
Total stockholders' equity...................... $169,410 $241,521 $239,288
-------- -------- --------
Total capitalization...................................... $386,245 $398,125 $400,208
======== ======== ========
</TABLE>
- ---------------
(1) Excludes 329,762 shares of Class B Common Stock issuable at an average
exercise price of $12.71 on the exercise of stock options granted under the
Company's option plans and outstanding as of September 30, 1997. See
"Management -- Incentive and Benefit Plans" and "Description of Capital
Stock".
13
<PAGE> 15
DILUTION
The Company's net tangible book value as of September 30, 1997 was $83.5
million, or $8.25 per share, based on 10,114,603 shares of Common Stock
outstanding. Net tangible book value per share represents the amount of the
Company's total tangible assets less its total liabilities, divided by the total
number of shares of Common Stock outstanding. After giving effect to the sale of
the 3,950,000 shares of Class A Common Stock in the Offerings and the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company as of September 30, 1997 would have been $161.7
million or $11.50 per share of Common Stock. This represents an immediate
increase in net tangible book value of $3.25 per share to existing stockholders
and an immediate dilution of $10.00 per share to new investors purchasing shares
of Class A Common Stock in the Offerings. The following illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 21.50
Net tangible book value per share before the Offerings.... $ 8.25
Increase per share attributable to new investors.......... 3.25
-------
Pro forma net tangible book value per share after the
Offerings................................................. $ 11.50
-------
Dilution of net tangible book value per share to new
investors(1).............................................. $ 10.00
=======
</TABLE>
- ---------------
(1) Dilution is determined by subtracting pro forma net tangible book value per
share after the Offerings from the assumed initial public offering price per
share. The foregoing excludes 329,762 shares of Class B Common Stock
issuable at an average exercise price of $12.71 on the exercise of stock
options granted under the Company's option plans and outstanding as of
September 30, 1997. See "Management -- Incentive and Benefit Plans" and
"Description of Capital Stock". To the extent such options are exercised
upon vesting, there will be further dilution to new investors purchasing
shares of Class A Common Stock in the Offerings.
14
<PAGE> 16
SELECTED FINANCIAL DATA
The selected statement of operations and balance sheet data for the years
ended March 31, 1994, 1995, 1996 and 1997 are derived from the audited financial
statements of the Company. The same data for the year ended March 31, 1993 have
been compiled from the Company's financial statements, combining the periods for
the nine months ended December 31, 1992 which was unaudited, and the three
months ended March 31, 1993 which was audited. The data for the six month
periods ended September 30, 1996 and 1997 have been derived from the unaudited
financial statements for those periods. The results of the six months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the fiscal year ending March 31, 1998. The unaudited financial data include,
in the opinion of management, all adjustments consisting only of normal
recurring accruals necessary to present fairly the data for such periods.
Certain reclassifications have been made to the March 31, 1994 financial data to
conform with the financial data of the other periods presented. The following
financial data for the years ended March 31, 1995, 1996 and 1997 and for the six
month period ended September 30, 1996 and 1997 are qualified in their entirety
by reference to the more detailed Financial Statements and Notes thereto,
included elsewhere in this Prospectus, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales.................................. $ 479,971 $ 547,118 $ 639,908 $ 628,404 $ 617,289 $327,908 $343,805
Operating expenses:
Cost of sales............................ 431,288 498,692 545,725 533,965 531,190 285,173 277,251
Selling and administrative............... 25,285 27,293 29,959 29,605 29,068 14,261 12,834
Depreciation............................. 15,496 15,369 14,046 14,619 16,654 8,091 9,643
Amortization of goodwill................. 3,017 4,061 4,130 4,130 4,130 2,065 2,065
Other operating expenses(1).............. 9,000 10,920 -- 16,013 -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
$ 484,086 $ 556,335 $ 593,860 $ 598,332 $ 581,042 $309,590 $301,793
Income (loss) from operations.............. (4,115) (9,217) 46,048 30,072 36,247 18,318 42,012
Other expense:
Interest................................. 37,534 21,027 23,330 22,000 19,473 9,898 10,115
Amortization of deferred financing
costs.................................. 1,548 2,552 2,863 1,956 934 467 353
---------- ---------- ---------- ---------- ---------- -------- --------
$ 39,082 $ 23,579 $ 26,193 $ 23,956 $ 20,407 $ 10,365 $ 10,468
Income (loss) before income taxes (benefit)
& extraordinary item..................... (43,197) (32,796) 19,855 6,116 15,840 7,953 31,544
Income taxes (benefit)..................... (13,711) (10,833) 9,354 3,996 7,788 3,907 13,108
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before extraordinary item.... $ (29,486) $ (21,963) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
Extraordinary item, net of income tax
benefit(2)............................... (4,185) (748) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Net income (loss).......................... $ (33,671) $ (22,711) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
========== ========== ========== ========== ========== ======== ========
Earnings (loss) per share(3)............... $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 0.40 $ 1.83
========== ========== ========== ========== ======== ========
BALANCE SHEET DATA
(end of period):
Working capital............................ $ 88,805 $ 111,666 $ 121,364 $ 114,521 $ 108,727 $ 99,816 $111,852
Total assets............................... 495,884 523,706 561,748 554,896 535,685 534,961 543,400
Current liabilities........................ 59,530 76,006 102,080 85,588 73,792 75,208 80,841
Long-term debt (less current portion)...... 212,002 247,128 243,030 252,525 237,474 239,245 216,835
Stockholders' equity....................... 147,711 124,999 137,750 141,747 150,564 146,192 169,410
SELECTED OPERATING DATA:
Shipped Tons
Stock rebar.............................. 434 466 536 508 472 242 291
Merchant bar............................. 427 468 549 544 512 253 283
Rod...................................... 144 121 129 133 105 62 48
---------- ---------- ---------- ---------- ---------- -------- --------
Subtotal mill finished goods............. 1,005 1,055 1,214 1,185 1,089 557 622
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Fabricated rebar......................... 317 330 347 315 326 170 174
Billets.................................. 232 263 141 175 281 188 106
---------- ---------- ---------- ---------- ---------- -------- --------
Total shipped tons....................... 1,554 1,648 1,702 1,675 1,696 915 902
========== ========== ========== ========== ========== ======== ========
Average mill finished goods prices (per
ton)..................................... $ 284 $ 310 $ 342 $ 337 $ 333 $ 332 $ 349
Average scrap cost (per ton)............... 94 119 130 131 130 133 131
Average metal spread (per ton)(4).......... 190 191 212 206 203 199 218
Average mill conversion costs (per ton).... 140 146 135 135 138 140 128
</TABLE>
- ---------------
(1) In September 1992, the Company recorded a $9.0 million charge for a
settlement related to a Florida Department of Transportation epoxy coated
rebar claim. In the fiscal year ended March 31, 1994, the Company recorded a
$10.3 million charge related to the closing of the Tampa melt shop and a
$0.6 million charge related to closing the Fort Myers, Florida and
Woodbridge, Virginia fabrication shop facilities. In the fiscal year ended
March 31, 1996, the Company recorded a $15.0 million charge related to the
closing of the Tampa rolling mill and a $1.0 million charge for the closure
of other facilities.
(2) In December 1992, the Company repaid $239.6 million of existing debt which
had a carrying value of $233.0 million resulting in a loss of $4.2 million
net of income tax benefit. In the fiscal year ended March 31, 1994, the
Company incurred a charge of $748,000, net of income tax benefits, as a
result of redeeming $20 million of the 14.5% subordinated debentures at a
premium of 6% or $1.2 million.
(3) Earnings (loss) per share for the year ended March 31, 1993 is not presented
because ownership of the Company changed in late calendar 1992. For
comparative purposes, loss per share for the entire period would have been
$(3.37) assuming 10,000,000 shares of stock outstanding throughout the
entire year.
(4) Average metal spread equals Average mill finished goods prices minus Average
scrap cost.
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains certain forward-looking statements that are based
on the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. Such statements
include, among others, (i) the highly cyclical nature and seasonality of the
steel industry, (ii) the fluctuations in the cost and availability of raw
materials, (iii) the possibility of excess production capacity, (iv) the
potential costs of environmental compliance, (v) the risks associated with
potential acquisitions, (vi) further opportunities for industry consolidation,
(vii) the impact of inflation and (viii) the fluctuations in the cost of
electricity. Because such statements involve risks and uncertainties, actual
actions and strategies and the timing and expected results thereof may differ
materially from those expressed or implied by such forward-looking statements,
and the Company's future results, performance or achievements could differ
materially from those expressed in, or implied by, any such forward-looking
statements. Factors that could cause or contribute to such material differences
include, but are not limited to, those discussed under "Risk Factors". The
following presentation of management's discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the Company's Financial Statements and the Notes thereto, and other financial
information, included elsewhere in this Prospectus.
GENERAL
The results of operations of the Company are largely dependent on the level
of construction and general economic activity in the U.S. The Company's sales
are seasonal with sales in the Company's fiscal first and second quarters
generally stronger than the rest of the year. The Company's cost of sales
includes the cost of its primary raw material, steel scrap, the cost of
converting the scrap to finished steel products, the cost of warehousing and
handling finished steel products and freight costs. The following table sets
forth information regarding the historical results of operations:
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------ -------------------
1995 1996 1997 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
Net sales........................................ $639,908 $628,404 $617,289 $327,908 $343,805
Cost of sales.................................... 545,725 533,965 531,190 285,173 277,251
Cost of sales as a percent of net sales.......... 85.3% 85.0% 86.1% 87.0% 80.6%
Selling and administrative....................... 29,959 29,605 29,068 14,261 12,834
Depreciation..................................... 14,046 14,619 16,654 8,091 9,643
Amortization of goodwill......................... 4,130 4,130 4,130 2,065 2,065
Other operating expenses......................... -- 16,013 -- -- --
-------- -------- -------- -------- --------
Income from operations................. $ 46,048 $ 30,072 $ 36,247 $ 18,318 $ 42,012
Interest expense................................. 23,330 22,000 19,473 9,898 10,115
Amortization of deferred financing costs......... 2,863 1,956 934 467 353
Income taxes..................................... 9,354 3,996 7,788 3,907 13,108
-------- -------- -------- -------- --------
Net income............................. $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
======== ======== ======== ======== ========
</TABLE>
17
<PAGE> 19
SIX MONTHS ENDED SEPTEMBER 30, 1997 VERSUS SIX MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
------------------------- ---------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ---------------------------------
1996 1997 1996 1997
----- ----- -------- --------
<S> <C> <C> <C> <C>
Mill Finished Goods:
Stock Rebar............................ 242 291 $313 $334
Merchant Bar........................... 253 283 354 367
Rods................................... 62 48 322 344
--- --- ---- ----
557 622 332 349
Fabricated Rebar......................... 170 174 453 457
Billets.................................. 188 106 225 232
--- ---
Total.......................... 915 902
=== ===
</TABLE>
NET SALES. Net sales in the six months ended September 30, 1997 increased
approximately 5% from the same period last year as both prices and volumes of
mill finished goods increased. Average mill finished goods prices increased over
5%. Overall shipped tonnage was down over 1% due to a decline in semi-finished
billet tons shipped, however shipments of higher margin mill finished goods
increased over 11%. The volume shift towards higher margin finished goods and
away from semi-finished billets is a direct result of higher rolling mill
production levels from completion of mill modernization projects at the
Charlotte and Jackson mills.
COST OF SALES. Increased production levels, lower average unit costs and
the shift towards higher margin finished steel products resulted in higher
margins. Cost of sales declined from 87% to 81% of net sales in the six months
ended September 30, 1997.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses for the
six months ended September 30, 1997 include a $3.3 million charge for the
disposition of environmental waste, offset by $6.8 million received in
connection with an insurance settlement related to cleanup of the 1995 melting
of radioactive scrap at the Jackson mill. The Company also incurred $1.4 million
in startup expenses associated with its facility at the Jackson mill that is
designed to utilize a technology developed by a third party to recycle the
Company's electric arc furnace/emission control dust ("EC dust") that is
currently regulated as a hazardous waste. See "Business -- Environmental
Regulation".
DEPRECIATION. Depreciation expense of $9.6 million for the six months
ended September 30, 1997 increased 19% over the same period last year due to
capital improvement spending of $19.3 million since September 30, 1996.
FISCAL 1997 VERSUS FISCAL 1996
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
------------------------- ---------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
------------------------- ---------------------------------
1996 1997 1996 1997
----- ----- -------- --------
<S> <C> <C> <C> <C>
Mill Finished Goods:
Stock Rebar......................... 508 472 $310 $316
Merchant Bar........................ 544 512 362 352
Rods................................ 133 105 336 322
----- ----- ---- ----
1,185 1,089 337 333
Fabricated Rebar...................... 315 326 460 451
Billets............................... 175 281 233 227
----- -----
Total....................... 1,675 1,696
===== =====
</TABLE>
NET SALES. Net sales in fiscal 1997 declined 1.8% from fiscal 1996 as both
prices and sales volumes of finished goods declined. Mill finished product
prices declined $4 per ton, while fabricated rebar prices declined $9 per ton.
Mill finished steel production and shipment volumes were limited by the
18
<PAGE> 20
start-up of major capital improvement projects at the Charlotte and Jackson
rolling mills. As a result, shipments were more heavily weighted in favor of
lower-priced semi-finished billet products during the equipment installation and
start-up period. Fabricating revenues improved modestly as volume increases
offset the decline in price.
COST OF SALES. Cost of sales were 86.1% of net sales in fiscal 1997 versus
85.0% of net sales in fiscal 1996 due to the higher costs associated with the
decline in production tonnage at the Charlotte and Jackson mills during the
startup of capital projects for the rolling mills. Average scrap costs were down
$1 per ton for the year due to a fourth quarter decline in scrap prices.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses remained
constant at 4.7% of sales in fiscal 1997 as compared to fiscal 1996.
DEPRECIATION. Depreciation increased to $16.7 million in fiscal 1997 from
$14.6 million in fiscal 1996 due to increased capital expenditures at all four
mills during the last two years.
OTHER OPERATING EXPENSES. The Company decided in June 1995 to close the
Tampa rolling mill effective September 1995. The Tampa mill was the Company's
oldest facility and represented the Company's highest operating cost minimill.
In fiscal 1996, the Company incurred non-cash charges of $12 million
representing the write-down of property, plant and equipment to its estimated
fair market value, and incurred cash charges of $3 million for severance
payments and benefits costs for the termination of substantially all 116 Tampa
rolling mill employees. All severance payroll and benefit costs were paid and
charged against the liability during fiscal 1996, resulting in no liability for
severance payroll and benefit costs at March 31, 1996. Approximately $1.8
million in net book value of property, plant and equipment related to the Tampa
site, primarily land and buildings, was retained and is currently being used by
the Company. The Company currently incurs minimal ongoing costs related to the
Tampa mill land and building, primarily for ongoing warehousing and shipping
operations, and the caretaking of environmental cleanup (see "Note E to
September 30, 1997 unaudited condensed financial statements -- Environmental
Matters"), totaling approximately $300,000 annually. These costs are offset by
short-term rental income attributable to this property of approximately $225,000
annually. Approximately $3.5 million remains in Assets Held for Sale, which
represents appraised values of machinery and equipment and land being marketed
for sale. Since the closure, the Tampa market has been served by the Company's
Jacksonville mill, minimizing lost sales. The Company intends to sell the Tampa
minimill property.
The Company incurred an additional $.8 million charge in fiscal 1996 for
the write-off of all future lease obligations (through November 1998) related to
the closure of its fabricating plant in Woodbridge, Virginia.
INTEREST EXPENSE. Interest expense declined from $22.0 million in fiscal
1996 to $19.5 million in fiscal 1997 as cash generated from operations was used
to lower debt by $29.6 million and average annual interest rates declined from
9.3% to 8.7%. Capitalized interest for fiscal 1997 was $2.0 million compared to
$2.1 million in fiscal 1996.
AMORTIZATION OF DEFERRED FINANCING COSTS. Amortization of deferred
financing costs declined from $2.0 million in fiscal 1996 to $.9 million in
fiscal 1997 due to the refinancing of the Company's Revolving Credit Agreement
in June 1995. See "-- Liquidity and Capital Resources".
INCOME TAXES. The Company's effective federal and state income tax rate
for fiscal 1997 and 1996 was 39% excluding the effect of goodwill amortization,
which is not deductible for income tax purposes.
19
<PAGE> 21
FISCAL 1996 VERSUS FISCAL 1995
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
-------------------------- ---------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
-------------------------- ---------------------------------
1995 1996 1995 1996
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Mill Finished Goods:
Stock Rebar.............................. 536 508 $326 $310
Merchant Bar............................. 549 544 359 362
Rods..................................... 129 133 338 336
----- ----- ---- ----
1,214 1,185 342 337
Fabricated Rebar........................... 347 315 421 460
Billets.................................... 141 175 228 233
----- -----
Total............................ 1,702 1,675
===== =====
</TABLE>
NET SALES. Net sales for fiscal 1996 were 1.8% lower than fiscal 1995 due
to lower volume and lower mill average selling prices. Although semi-finished
billet shipments were 24.1% higher than in fiscal 1995, finished product
shipments were down 4.1%. Average mill selling prices declined $5 per ton.
Although fabricated rebar prices increased $39 per ton, fabricated rebar
shipments were down 9.2%.
COST OF SALES. Cost of sales were 85.0% of net sales in fiscal 1996 versus
85.3% of net sales in the previous year. Mill conversion costs were the same
while scrap steel costs were $1 per ton higher than in fiscal 1995.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses remained
constant at 4.7% of sales in fiscal 1996 compared to fiscal 1995.
DEPRECIATION. Depreciation increased to $14.6 million in fiscal 1996 from
$14.0 million in fiscal 1995 due to increased capital expenditures that were
placed in service at all four mills.
OTHER OPERATING EXPENSES. The Company decided in June 1995 to close the
Tampa rolling mill effective September 1995. The Tampa mill was the Company's
oldest facility and represented the Company's highest operating cost minimill.
In 1996, the Company incurred non-cash charges of $12 million representing the
write-down of property, plant and equipment to its estimated fair market value,
and incurred cash charges of $3 million for severance payments and benefits
costs for the termination of substantially all 116 Tampa rolling mill employees.
All severance payroll and benefit costs were paid and charged against the
liability during fiscal 1996, resulting in no liability for severance payroll
and benefit costs at March 31, 1996. The Company believed that the closing of
the Tampa minimill would improve future operating results, liquidity and cash
flows. Approximately $1.8 million in net book value of property, plant and
equipment related to the Tampa site, primarily land and buildings, was retained
and is currently being used by the Company. The Company currently incurs minimal
ongoing costs related to the Tampa mill land and buildings, primarily for
ongoing warehousing and shipping operations, and the caretaking of environmental
cleanup (see "Note E to September 30, 1997 unaudited condensed financial
statements -- Environmental Matters"), totaling approximately $300,000 annually.
These costs are offset by short-term rental income attributable to this property
of approximately $225,000 annually. Approximately $3.5 million remains in Assets
Held for Sale, which represents appraised values of machinery and equipment and
land being marketed for sale. Since the closure, the Tampa market has been
served by the Company's Jacksonville mill, minimizing lost sales. The Company
intends to sell the Tampa minimill property.
The Company incurred an additional $.8 million charge in fiscal 1996 for
the write-off of all future lease obligations (through November 1998) related to
the closure of its fabricating plant in Woodbridge, Virginia.
INTEREST EXPENSE. Interest expense declined from $23.3 million in fiscal
1995 to $22.0 million in fiscal 1996 primarily because of lower average interest
rates and higher capitalized interest. Average annual interest rates declined
from 9.8% in fiscal 1995 to 9.3% in fiscal 1996. Average borrowings were
20
<PAGE> 22
higher in fiscal 1996 than in fiscal 1995. Capitalized interest for fiscal 1996
was $2.1 million versus $654 thousand in fiscal 1995.
AMORTIZATION OF DEFERRED FINANCING COSTS. Amortization of deferred
financing costs declined in fiscal 1996 as compared to fiscal 1995 due to
refinancing of the Company's Revolving Credit Agreement. See "-- Liquidity and
Capital Resources".
INCOME TAXES. The effective federal and state income tax rate for fiscal
1996 was 39% compared to 38.8% for fiscal 1995 excluding the effect of goodwill
amortization, which is not deductible for income tax purposes.
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1996 1997 1997 1997
------------- ------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT AVERAGE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales............................ $158,086 $139,948 $149,433 $168,359 $175,446
Operating expenses:
Cost of sales...................... 136,261 119,602 126,415 135,037 142,214
Selling and administrative......... 7,328 7,184 7,623 7,572 5,262
Depreciation....................... 4,096 4,193 4,370 4,827 4,816
Amortization of goodwill........... 1,032 1,032 1,033 1,033 1,032
-------- -------- -------- -------- --------
$148,717 $132,011 $139,441 $148,469 $153,324
Income from operations............. 9,369 7,937 9,992 19,890 22,122
Other expense:
Interest........................... 5,043 4,786 4,789 5,188 4,927
Amortization of deferred financing
costs............................ 233 233 234 234 119
-------- -------- -------- -------- --------
$ 5,276 $ 5,019 $ 5,023 $ 5,422 $ 5,046
Income before income taxes........... 4,093 2,918 4,969 14,468 17,076
Income taxes......................... 1,999 1,541 2,340 6,045 7,063
-------- -------- -------- -------- --------
Net income.................. $ 2,094 $ 1,377 $ 2,629 $ 8,423 $ 10,013
======== ======== ======== ======== ========
SELECTED OPERATING DATA:
Shipped Tons
Stock rebar........................ 108 104 125 140 151
Merchant bar....................... 133 123 135 136 147
Rod................................ 26 19 25 29 19
-------- -------- -------- -------- --------
Subtotal mill finished goods....... 267 246 285 305 317
Fabricated rebar................... 86 82 74 85 89
Billets............................ 79 47 47 56 50
-------- -------- -------- -------- --------
Total shipped tons................. 432 375 406 446 456
======== ======== ======== ======== ========
Average mill finished goods prices
(per ton).......................... $ 334 $ 334 $ 334 $ 346 $ 352
Average scrap cost (per ton)......... 134 129 125 129 134
Average metal spread (per ton)....... 200 205 209 217 218
Average mill conversion costs (per
ton)............................... 134 137 134 125 130
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's three largest financial obligations currently outstanding are
the $100 million aggregate principal amount of First Mortgage Notes, a $140
million aggregate revolving credit facility (the "Revolving Credit Agreement"),
and a $50 million aggregate principal amount Subordinated Intercompany Note due
December 21, 2002 and owed to FLS.
21
<PAGE> 23
The First Mortgage Notes are secured by the real property, equipment and
certain other assets at the Company's minimills. The First Mortgage Notes are
redeemable, at the option of the Company, in whole or in part from time to time,
at the redemption prices set forth below (expressed as percentages of the
outstanding principal amount) if redeemed during the twelve-month period
commencing on December 15 of each year referenced below, plus, in each case,
accrued interest thereon to the date of the redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
1996........................................................ 103.833%
1997........................................................ 101.916
1998 and thereafter......................................... 100.000
</TABLE>
The Revolving Credit Agreement is secured by the Company's inventory and
receivables and matures on June 9, 1999. The Revolving Credit Agreement provides
for a substantial portion of the Company's liquidity by making available up to
$140 million in borrowings, subject to a "borrowing base". As of September 30,
1997, the Revolving Credit Agreement had a borrowing base of approximately
$121.9 million, of which approximately $51.0 million was available to the
Company for further borrowings, $31.0 million was outstanding and $39.9 million
was allocated to letters of credit (most of which are being provided as credit
backing for the Company's outstanding Industrial Revenue Bonds). These
Industrial Revenue Bonds were 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 Industrial Revenue Bonds by $20.0
million in fiscal 1996 and $5.0 million in fiscal 1998 for a solid waste
recycling facility in Jackson, Tennessee. The Industrial Revenue Bonds mature in
fiscal 2004 except for the 1996 and 1998 Industrial Revenue Bonds which mature
in fiscal 2018 and 2014, respectively.
The First Mortgage Notes and the Revolving Credit Agreement contain certain
restrictions regarding the incurrence of additional indebtedness by the Company,
restrictions on the Company's ability to pay dividends and other restrictive
covenants relating to the Company's business. The Company continues to comply
with all of the covenants of its loan agreements. See "Note D to Financial
Statements -- Borrowings". In addition, the Notes being offered in the Notes
Offering will also contain restrictions on the Company's ability to pay
dividends and certain restrictive covenants relating to the Company's business.
Net cash provided by operating activities for the six months ended
September 30, 1997 was $27.0 million compared with $29.4 million for the same
period last year. Cash flow from net income increased by $14.4 million but was
offset principally because finished product inventories were restored from the
period ended September 30, 1996 when inventories were drawn down during
production disruptions caused by mill modernization projects at the Charlotte
and Jackson mills. The Company used $20.4 million in cash to repay debt and
$11.3 million to invest in capital projects, mostly for mill modernization. In
September 1997, the Company incurred additional indebtedness of $5.0 million
through an Industrial Revenue Bond issue for construction of a facility at the
Jackson mill to recycle EC dust. Net cash provided by operating activities in
fiscal 1997 was $43.9 million compared to $44.1 million in fiscal 1996.
Over the years, the Company has expanded capacity by means of modernizing
and upgrading facilities. Capital expenditures were $34.4 million for the year
ended March 31, 1997, $36.9 million for the year ended March 31, 1996 and $25.8
million for the year ended March 31, 1995. The Company anticipates spending
approximately $28.0 million for capital expenditures in fiscal 1998, of which
approximately $9.1 million were made in the six months ended September 30, 1997.
Prior to the completion of the Offerings, the Company intends to declare
and pay a special dividend of approximately $6.1 million to its then current
stockholders. The dividend will be paid from current fiscal year earnings. The
Company plans to use available cash provided from operating activities, and if
necessary, additional borrowings under its Revolving Credit Agreement (under
which there was $51.0 million available for further borrowings as of September
30, 1997) to fund the payment of this $6.1 million cash dividend.
22
<PAGE> 24
The Company believes that the amounts available from operating cash flows
and funds available through its Revolving Credit Agreement will be sufficient to
meet its expected operational cash needs and planned capital expenditures for
the foreseeable future.
The Company is aware of the Year 2000 issue and the effects it may have on
its business systems. In response, the Company has developed a detailed plan to
address the issue. This plan includes a two year campaign, which began in April
1997 and includes approved spending of approximately $2.6 million for upgrading
hardware and software, including training, prior to 2000. The Company believes
that it will be Year 2000 compliant without a material impact on its operations
or financial results.
The estimated net proceeds from the Offerings (after deduction of
underwriting discounts and the Company's estimated offering expenses) are
intended to be used first to repay all of the Company's Subordinated
Intercompany Note and then to repay the outstanding balance under the Company's
Revolving Credit Agreement (currently estimated to be $16.3 million) and then to
fund working capital and general corporate purposes.
Concurrent with the Offerings, the Company is planning to offer $100
million aggregate principal amount of the Notes by a separate offering
memorandum. The closing of the Notes Offering is conditioned upon the closing of
the Offerings. It is expected that the Notes Offering would be closed shortly
after the closing of the Offerings. The net proceeds to the Company from the
Notes Offering (after deduction of assumed underwriting discounts and the
Company's estimated offering expenses), if consummated, are estimated to be
$97.6 million. The Company will use such proceeds to redeem the Company's First
Mortgage Notes.
Because the Notes Offering is subject to a variety of market, economic and
other factors, there can be no assurance that the Notes Offering will be closed.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
The Company is subject to federal, state and local laws and regulations
governing the remediation of environmental contamination associated with
releases of hazardous substances which can impose joint and several liability
for contamination regardless of fault or the lawfulness of past activities
(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 and employee health
and (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 and for damages.
The Company has estimated its potential costs for further remediation under
Environmental Cleanup Laws at on-site and off-site locations to be approximately
$14.9 million and has included this amount in the Company's recorded liabilities
as of September 30, 1997. 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 jointly and severally
liable, and the nature and timing of payments to be made under cost sharing
arrangements, there can be no assurance that the ultimate costs of remediation
may not be more or less than the estimated remediation costs that the Company
has recorded.
The Company also incurs significant ongoing costs to comply with current
standards promulgated by Environmental Regulatory Laws which costs are being
expensed and paid from current operations. Although it is the Company's policy
to comply with all Environmental Regulatory Laws and the Company believes that
it is currently in material compliance with all Environmental Regulatory Laws,
Environmental
23
<PAGE> 25
Regulatory Laws may become more significant in the future and, there can be no
assurance that material environmental liabilities will not be incurred by the
Company or that compliance with Environmental Regulatory Laws (whether those
currently in effect or those that may be enacted in the future) will not require
additional expenditures by the Company or require changes to the Company's
current operations, any of which could have a material adverse effect on the
Company's results of operations and financial condition.
See "Note E to September 30, 1997 unaudited condensed financial
statements -- Environmental Matters" for further information regarding
environmental matters.
IMPACT OF INFLATION
The Company's primary costs include ferrous scrap, energy and labor, which
can be affected by inflationary conditions. The Company has generally been able
to pass on cost increases through price adjustments. However, the ability to
pass on these increases depends on market conditions driven primarily by the
level of construction activity. Another factor that may limit the Company's
ability to pass on cost increases in materials is over-capacity in the steel
industry.
24
<PAGE> 26
BUSINESS
GENERAL
The Company operates four non-union minimills located in the southeastern
U.S. that produce steel concrete reinforcing bars ("rebar"), light structural
shapes such as rounds, squares, flats, angles and channels ("merchant bars")
and, to a lesser extent, wire rod ("rods") and billets (which are semi-finished
steel products). The Company also operates 13 rebar fabricating plants
strategically located in close proximity to its mills; rail spike manufacturing
facilities in Paragould, Arkansas and Lancaster, South Carolina; and a wire mesh
and collated nail manufacturing facility in New Orleans, Louisiana. Rebar is
used primarily for strengthening concrete in highway and building construction
and other construction applications. Merchant bars 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 60% of the Company's mill rebar production is sold directly
to distributors and independent fabricating companies in stock lengths and
sizes. The remaining 40% of the rebar produced by the mills is transferred to
the Company's 13 fabricating plants where value is added by cutting and bending
the rebar to meet strict engineering, architectural and other end-product
specifications. Merchant bars and rods generally are sold by the mills to steel
service centers, original equipment manufacturers and fabricators in stock
lengths and sizes.
The Company's four minimills are located in Jacksonville, Florida,
Charlotte, North Carolina, and Jackson and Knoxville, Tennessee. Minimills are
steel mills that use electric arc furnaces to melt steel scrap 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 uniformly cooled 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.
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 Florida Steel
Corporation, which then commenced construction of its first minimill in Tampa,
Florida. In 1996, the Company changed its name to AmeriSteel Corporation.
The Company was a public company from 1956 until 1988 when it was taken
private in a management led leveraged buyout. In late 1992, the Company was
purchased by Kyoei Steel, Ltd. ("Kyoei"), a private Japanese minimill company
engaged in the manufacture of commodity grade steel products, primarily rebar
and merchant bar products. Kyoei, founded in 1947, operates four minimills in
Japan and a rolling mill in Vietnam with a total annual finished steel capacity
of 2.5 million tons. The Company has benefitted from access to Kyoei's
operating, engineering and technical expertise.
INDUSTRY
According to industry sources, United States market demand for rebar was
approximately 6.3 million tons in calendar 1996. The Company believes that it is
the second largest producer of rebar in the U.S. and estimates it has
approximately a 13% share of the U.S. rebar market and approximately a 20% share
in the eastern two-thirds of the U.S. According to industry sources, the U.S.
market for merchant and other light structural shape bars was estimated to be
approximately 8.6 million tons in calendar 1996. The Company estimates that it
has approximately a 6% share of this market. For the six months ended September
30, 1997, approximately 24% of the Company's net sales were derived from
fabricated rebar, 28% from stock rebar, 31% from merchant bars, 5% from rods and
12% from semi-finished billets.
The minimill industry is composed of two types of competitors: multi-mill
operators and stand-alone minimills. The Company believes that recent growth in
the industry (through acquisitions as well as capital expenditures) has been
driven by multi-mill operations because stand-alone minimills have not
25
<PAGE> 27
generally been able to achieve the economies of scale or had access to the
financial resources to make the investments that larger operators have. The
Company believes that further industry consolidation will continue given the
significant advantages available to multi-mill operators. Accordingly, the
Company is actively investigating potential acquisition opportunities.
COMPETITIVE STRENGTHS
The primary focus of the Company's business strategy is to continue to be a
low cost producer of rebar and merchant bar products in the U.S. and further
grow its business including through acquisitions of steel producing and related
assets. The Company believes that the following competitive strengths are key
elements of this strategy:
DEMONSTRATED COST CONTROL. Since 1994, the Company has reduced its costs
of converting scrap steel to finished steel products ("conversion costs") from
$146 per ton to $128 per ton for the six months ended September 30, 1997. The
Company has achieved these cost reductions through its mill modernization
program, high mill utilization, access to competitively priced electric power at
its Tennessee and North Carolina mills, and labor incentive programs designed to
maximize productivity. In addition, since 1994, the Company has closed
unprofitable operations and divested non-core activities. The Company currently
has initiatives in place that it believes will further reduce its conversion
costs.
MODERNIZED PRODUCTION EQUIPMENT IN ATTRACTIVE LOCATIONS. Since 1992, the
Company has invested approximately $115 million in mill modernization, including
major projects at its Jackson, Tennessee, Jacksonville, Florida and Charlotte,
North Carolina mills. The Company believes its recent mill modernization program
will lower conversion costs and increase capacity utilization, enhance merchant
bar quality and broaden its merchant bar product range. The southeastern U.S.
(where all the Company's mills are located) accounts generally for more than
one-fourth of U.S. rebar consumption and, due to mild wintertime weather
conditions, demonstrates less seasonal demand fluctuations than more northern
regions of the U.S. Because of the high cost of freight relative to the value of
the Company's products, competition from non-regional producers is limited.
MOTIVATED, NON-UNION LABOR FORCE. The Company employs a non-union
workforce of approximately 1,860 employees. The Company's compensation programs
are designed to allow employees to earn significant incentive bonuses
(approximately one-fifth of their total compensation) based on production
volumes, sales volumes, cost targets or return on capital employed. These
programs have been successfully implemented by the current management team and
have resulted in lower costs, higher productivity and increased profitability.
Further incentive is provided through equity ownership plans. Approximately 57%
of current employees have purchased stock in the Company, including Phillip E.
Casey, Chairman and Chief Executive Officer, who beneficially owns approximately
10% of the outstanding shares of the Company's capital stock (approximately 6%
after the Offerings).
STRONG MARKET POSITIONS. The Company believes that it is the second
largest producer of rebar in the U.S. and estimates it has approximately a 13%
share in the U.S. rebar market and approximately a 20% share in the eastern
two-thirds of the U.S. In addition, the Company believes that it is the largest
fabricator of rebar products in the U.S., with fiscal 1997 revenues of $161.2
million, or approximately 26% of the Company's sales. The Company believes its
strong market position in both stock rebar shipments and fabricated rebar
shipments provides it with competitive market intelligence and other advantages
from vertical integration relative to its smaller competitors. The Company
estimates it has approximately a 6% share of the U.S. market for merchant and
other light structural shape bars. The Company believes it has opportunities to
increase its market share in this market, which is generally less cyclical and
more profitable than the rebar market. A recent independent survey has ranked
the Company first in customer service and on-time delivery in the Company's
principal product markets. As evidence of a high degree of customer
satisfaction, the Company has had, on average, a relationship of at least 10
years with its top 25 customers.
26
<PAGE> 28
PRODUCTS
The following table shows the percentage of the Company's net sales derived
from each product category in the relevant time period:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
------------------ SIX MONTHS ENDED
1995 1996 1997 SEPTEMBER 30, 1997
---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Fabricated Rebar............................................ 23% 24% 24% 24%
Stock Rebar................................................. 27 25 24 28
Merchant Bars............................................... 31 32 30 31
Rods........................................................ 7 7 5 5
Billets and other........................................... 12 12 17 12
--- --- --- -----
100% 100% 100% 100%
=== === === =====
</TABLE>
REBAR PRODUCTS (STOCK AND FABRICATED)
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
and other end-product specifications. Rebar is used primarily for strengthening
concrete in highway and building construction and other construction
applications. The Company's rebar products are used primarily in two sectors of
the construction industry: non-residential building projects, such as
institutional buildings, retail sites, commercial offices, apartments and hotels
and manufacturing facilities, and infrastructure projects such as highways,
bridges, utilities, water and waste treatment facilities and sports stadiums.
The Company's rebar products are also used in multi-family residential
construction such as apartments, condominiums and multi-family homes. Usage of
the Company's rebar products is roughly split evenly between private and public
projects.
MERCHANT BARS
The Company produces merchant bars at its minimills in Jackson and
Charlotte and to a lesser degree in Knoxville. 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,
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 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 wire mesh,
collated nails and bulk nails.
BILLETS
The Company produces semi-finished billets for conversion to rebar,
merchant bar and rods. When the market for finished product is down, or when
rolling production is limited -- as was the case in fiscal
27
<PAGE> 29
1997 with downtime associated with capital improvements in the Charlotte and
Jackson mills -- the Company sells the excess billet production to steel mills
that have less steel melting capacity than rolling mill capacity.
MARKETING AND CUSTOMERS
The Concrete Reinforcing Steel Institute ("CRSI") annual statistical report
for apparent rebar consumption during 1995 in the U.S. for the nine regions is
depicted on the map below.
[U.S. MAP OF REBAR CONSUMPTION]
CRSI has reported that the apparent rebar consumption for 1996 is
approximately 6.3 million tons, an increase of 14.5% over reported apparent
rebar usage in 1995 of 5.5 million tons. The latest industry data of apparent
rebar consumption by region is from CRSI's 1995 data as shown below.
<TABLE>
<CAPTION>
U.S. APPARENT REBAR USAGE AMERISTEEL SHIPMENTS % OF
REGION (THOUSANDS OF TONS) (THOUSANDS OF TONS) MARKET
------ ------------------------- -------------------- ------
<S> <C> <C> <C>
5................................................. 1,074 504 47
6................................................. 314 150 48
3................................................. 833 71 9
4................................................. 428 34 8
7................................................. 837 30 4
2................................................. 530 23 4
1................................................. 158 22 14
8................................................. 300 0 0
9................................................. 1,037 1 0
------- ----- ----
Total................................... 5,511 835 15%
======= ===== ====
</TABLE>
The Company believes that it is the second largest producer of rebar in the
U.S. The Company markets its rebar primarily in the Southeast, generally within
a 350 mile radius of its mills due to freight economics. 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 is one of the larger producers of merchant bar products and
generally markets its products in the eastern two-thirds of the U.S. The Company
estimates that it has approximately 6% market share of the U.S. market for
merchant and other light structural shape merchant bars. The Company believes it
has opportunities to increase its market share in the merchant bar market, which
is generally less cyclical and more profitable than the rebar market.
28
<PAGE> 30
The Company conducts its marketing operation through both its own inside
and outside sales personnel. The outside sales personnel for mill rebar and
merchant bar are located in close proximity to the Company's major markets and
customers. The Company's salespeople handle both rebar and merchant bar sales in
a geographic area. This structure has several advantages in that it eliminates
duplicate sales calls on customers, enables salespeople to cover smaller
geographic areas, improves customer relationships and facilitates flow of
reliable market information to the Company. Metallurgical service
representatives, located at each of the Company's mills, provide technical
support to the sales force.
The Company's inside sales force is centralized at the Company's Tampa,
Florida headquarters, where all order taking, mill production scheduling,
inventory management and shipping arrangements are coordinated. This inside
sales force has an average of 18 years of experience with the Company. The
Company's inside sales force can provide customers with updated order and
shipment status, rolling schedules, inventory levels and mill test reports. The
Company also provides customers with a dial-up information service, called
AmeriSteel E-Z-Link(TM), which allows 24-hour electronic assess to information
on open orders, purchasing history, shipments, rolling schedules and current
inventories.
The Company has recently developed in-house a system ("Vendor Managed
Inventory" or "VMI") for certain (currently four) of its larger merchant bar
customers. This system provides real-time updates to the Company and customers
of order and production status. The Company assumes the responsibility for
maintaining the customers' desired inventory levels and shipment status. Because
of the nature of the programs, VMI is targeted for the Company's larger and more
well established customers. The Company believes VMI provides it with a
competitive marketing advantage with respect to these customers.
Fabricated rebar sales personnel are located at the Company's 13
fabricating facilities where engineering service representatives provide
technical and sales support.
Principal customers of the Company include steel distributors, steel
service centers, rebar 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 single customer. The
Company's customer base is fairly stable from year to year, and during fiscal
1997 no one customer accounted for more than 2.9% of net sales and the five
largest customers accounted for approximately 9.4% of net sales. The Company's
business is seasonal, with orders in the Company's first and second fiscal
quarters tending to be strongest.
Fabricated rebar is generally produced in response to specific customer
orders. The amount of sales order backlog pertaining to fabrication contracts
was approximately 205 thousand tons at September 30, 1997. The Company expects
almost all of the backlog at September 30, 1997 to be filled through the first
fiscal quarter of 1999. Due to the advanced order booking and the order backlog,
fabricated rebar business tends to be less cyclical than the Company's other
product lines.
The Company's payment terms to customers are generally determined based on
market conditions. The Company, however, 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, although construction and
infrastructure projects are generally nonrecurring in nature, the steel
fabricators, distributors and service centers which supply many of these
projects tend to be long-time customers of the Company. The Company believes
that its reputation for quality products and service is among the highest in the
industry.
29
<PAGE> 31
PRODUCTION AND FACILITIES
Steel can be produced at significantly lower costs by minimills than by
integrated steel operators. 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, operate older facilities that are
more labor intensive and employ a more highly paid labor force. In general,
minimills serve localized markets and produce a limited line of 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 minimills operate their melting facilities continuously and
have an annual aggregate melting capacity of approximately 2.0 million tons. The
Jackson, Charlotte and Jacksonville mills operate their rolling facilities
continuously. The Knoxville mill operates its rolling facility five days per
week.
[MAP OF THE UNITED STATES SHOWING THE COMPANY'S MINIMILL
LOCATIONS AND MELTING AND ROLLING CAPACITIES ]
30
<PAGE> 32
The following table sets forth certain information regarding the Company's
four minimills, including the current estimated annual production capacity and
actual production of the minimills in thousands of tons. Billets produced in the
melting process in excess of rolling needs are sold to third parties.
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
MARCH 31, MARCH 31,
ANNUAL 1997 CAPACITY 1997 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>
Charlotte, NC...................... 1961 450 415 92% 400 220 55%
Jackson, TN........................ 1981 600 523 87 480 364 76
Jacksonville, FL................... 1976 600 465 78 500 443 89
Knoxville, TN...................... 1987(1) 330 297 90 360 340 94
----- ----- -- ----- ----- --
Total..................... 1,980 1,700 86% 1,740 1,367 79%
===== ===== == ===== ===== ==
</TABLE>
- ---------------
(1) Purchase Date
The Company's four minimills, together with certain other assets, serve as
collateral for the Company's First Mortgage Notes. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".
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's melting equipment includes a 75 ton electric arc furnace
utilizing the Consteel process, a continuous scrap feeding and preheating
system, and a ladle refining station. The melting facilities also include a
3-strand continuous caster and material handling equipment. Charlotte's rolling
mill includes a reheat furnace, 15 in-line mill stands, a 200 foot cooling bed,
a cut-to-length shear and an automated material bundling unit. The rolling mill
includes recently installed upgraded finishing end equipment, including a
product straightener for merchant shapes and a French manufactured Empilam
stacker. During fiscal 1997, capacity utilization of the rolling mill was
limited due to down time associated with a major capital improvement project.
The Company believes that the upgrade will improve merchant bar quality,
increase production and lower conversion costs.
JACKSON MINIMILL
The Jackson minimill produces mostly merchant bars and some larger size
rebar. This minimill is the Company's largest single producer of merchant bars.
The merchant bars are marketed primarily in the southeastern U.S., as well as
into southern Illinois, Indiana and Ohio.
The Jackson mill is the newest of the Company's minimills. Melting
equipment includes a 135 ton electric arc furnace, a 4-strand continuous billet
caster and material handling equipment. The rolling mill consists of a 120 tons
per hour reheat furnace, 16 new in-line quick-change 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. Installation of the
new quick-change mill stands, a combination of Danieli vertical and horizontal,
began in April 1996 and is scheduled to be completed in December 1997.
Installation of those stands had a disruptive effect on the rolling mill
operations as evidenced by the reduced capacity utilization of 76% in fiscal
1997. The Company believes this investment will provide significant return on
investment in the form of decreased change time and therefore increasing
production and lowering conversion costs. The Company expects that the new mill
stands will increase rolling mill production capacity by approximately 60,000
tons per year and decrease mill conversion costs by approximately $5 per ton if
the benefits of the project are fully realized.
31
<PAGE> 33
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
rebar being shipped throughout the Company's marketing area. The rod products
are sold throughout the southeastern U.S.
Jacksonville's melting equipment consists of a 90 ton capacity electric arc
furnace and a 4-strand continuous caster. The rolling mill includes a 100 tons
per hour reheat furnace, a 16-stand horizontal Danieli in-line mill, a 10-stand
Danieli rod block, a cooling bed for straight bars and a controlled cooling line
for coiled products, a cut-to-length product shear, and automatic bundling and
tying equipment for straight bars and coils.
KNOXVILLE MINIMILL
The Knoxville minimill produces almost exclusively rebar. 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 in
portions of North and South Carolina, Georgia and Alabama.
Knoxville's melting equipment includes two 35 ton electric arc furnaces, a
3-strand continuous caster and material handling equipment. The rolling mill
consists of a reheat furnace, 16 in-line mill stands utilizing the Thermex
in-line heat treating process, a cooling bed, a cut-to-length shear line, and
associated shipping and material handling facilities.
32
<PAGE> 34
FABRICATION
The Company believes that it operates the largest rebar fabricating group
in the U.S., consisting of a network of 13 strategically located reinforcing
steel fabricating plants throughout the southeastern U.S. with an annual
capacity of approximately 334,000 tons. The facilities are interconnected via
satellite for the immediate transfer of customer engineering and production
information utilized in its computer assisted design (CAD) detailing programs.
The fabricating plants are a downstream operation of the Company, purchasing all
rebar from the Company's minimills, primarily Knoxville, Jacksonville and
Charlotte.
[MAP OF THE UNITED STATES SHOWING THE COMPANY'S FABRICATING PLANT LOCATIONS]
33
<PAGE> 35
Fabricated rebar is produced by cutting and bending stock rebar to meet
engineering, architectural and other end-product specifications. The fabrication
division employs about 540 employees. The following table shows the fabricating
plant locations and approximate annual tonnage on a two-shift per day, five days
per week operating basis.
<TABLE>
<CAPTION>
CAPACITY
FABRICATING PLANT (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>
OTHER OPERATIONS
The Company's railroad spike operations, located in Lancaster, South
Carolina and Paragould, Arkansas, forge steel square bars produced at the
Charlotte mill 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 wire
mesh for concrete pavement, converted into collated nails for use in high-speed
nail machines, or converted to bulk nails for general construction uses.
RAW MATERIALS
Steel scrap is the Company's primary raw material and comprised
approximately 42% of the Company's costs of sales in fiscal 1997. The relatively
simple metallurgical requirements of the Company's products enable the Company
to use low quality, and thus lower cost, steel scrap. Due to the geographic
extent of the Company's requirements, the Company utilizes a scrap broker, The
David J. Joseph Company ("DJJ"), in the purchase of substantially all of its
requirements. DJJ receives a fixed per ton commission fee for all tons supplied.
To reduce costs at its Jacksonville and Jackson minimills, the Company employs
DJJ under contract to operate shredding and processing operations on its mill
property for preparation and delivery of scrap from its local markets. The
operator is paid a per ton fee for these services. At Knoxville, a DJJ
representative is employed to source local prepared scrap, which the Company
buys at day-to-day market prices at the mill. The Company believes that these
processing and local buying operations at its mills consistently result in the
purchase of significant quantities of the Company's requirements at a $5-$10/ton
savings versus open market brokerage purchases. The Company anticipates that it
could readily obtain adequate supplies of scrap steel at market prices from
sources other than DJJ if warranted.
Various domestic and foreign firms supply other important raw materials or
operating supplies required for the Company's business, including refractories,
ferroalloys and carbon electrodes. The Company has historically obtained
adequate quantities of such raw materials and supplies to permit efficient mill
operations.
34
<PAGE> 36
ENERGY SUPPLY
Electricity and natural gas represent approximately 14% and 5%,
respectively, of the Company's conversion costs. Access to attractively priced
electric power and natural gas can be an important competitive cost advantage to
a minimill.
The Company purchases its electricity from the Tennessee Valley Authority
("TVA"), Knoxville Utility Board, a TVA affiliate ("KUB"), Duke Power Company
("Duke") and Florida Power & Light Company ("FP&L") and incurred the following
costs for electricity for fiscal 1997:
<TABLE>
<CAPTION>
APPROXIMATE
MILL SUPPLIER CENTS/KWH ANNUAL COST
- ---- -------- --------- -----------
(IN
MILLIONS)
<S> <C> <C> <C>
Jackson..................................................... TVA 2.3 $7.2
Knoxville................................................... TVA/KUB 2.5 4.9
Charlotte................................................... Duke 2.9 6.2
Jacksonville................................................ FP&L 4.4 11.4
</TABLE>
The Company receives electric service under competitively priced power
supply contracts with Duke and TVA. Given the importance of competitively priced
power to minimill steel production, the Company plans to continue to exhaust
every available avenue in pursuit of more cost effective rates at the
Jacksonville Mill. The Company expects that, longer term, deregulation of the
electric power industry will allow electricity to be purchased on more favorable
terms in Florida.
The Company purchases its power from its utilities under interruptible
service contracts. Under such contracts, the utilities provide service at less
than firm tariff rates in return for the right to curtail power deliveries
during peak demand periods. Such interruptions are infrequent and occur with
sufficient notice to allow the Company to curtail production in an orderly
manner.
Since deregulation of the natural gas industry, natural gas requirements
have generally been provided through purchase of well-head gas delivered via the
interstate pipeline system and local distribution companies. Open access to
competitively priced supply of natural gas enables the Company to secure
adequate supplies at competitive prices.
ENVIRONMENTAL REGULATION
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Compliance with Environmental Laws and Regulations" and
"Note E to September 30, 1997 unaudited condensed financial
statements -- Environmental Matters", for a discussion of the Company's cleanup
liabilities with state and federal regulators regarding the investigation and/or
cleanup of certain sites.
The Company, through a third-party contractor and operator, has been
constructing a facility at the Company's Jackson mill that is designed to
utilize a technology developed by a third party to recycle the Company's EC dust
which is currently regulated as a hazardous waste due to the presence of heavy
metals. The facility has a design capacity to recycle up to 30 thousand tons of
EC dust per year. The Company currently generates approximately 24 thousand tons
of EC dust per year. The facility is designed to recycle EC dust in two stages.
In the first stage the dust is fed into a rotary hearth furnace where the zinc
in the dust is vaporized and collected in a baghouse as crude zinc oxide. The
residual of the dust exits the rotary hearth in the form of a reduced iron unit
that can be fed into the Jackson minimill's electric arc furnace as a steel
scrap substitute. In the second stage of the process, the crude zinc oxide is
fed into a wet chemical process to extract the lead and cadmium and produce a
high quality, saleable zinc oxide.
The contractor and third-party operator of the facility has recently
defaulted under its agreements with the Company. This third-party default will
result in the Company incurring additional costs and may delay the completion of
the facility. The facility is currently in the early startup phase. Startup is
expected to progress slowly given that new technology is involved, and the
challenge will be to demonstrate that it can be applied at a commercially
acceptable scale of production. If the technology and the facility can be
35
<PAGE> 37
successfully developed, the Company foresees that all of the Company's EC dust
will eventually be recycled at the facility and that the revenues from sale of
the zinc oxide and other by-products may cover the operating cost of the
facility. Additionally, the Company will save the alternative cost of disposing
of its EC dust with third parties. There can be no assurance, however, that the
technology or the facility will be successfully developed, or that, if
successfully developed, can be operated in a cost-efficient basis.
COMPETITION
The Company experiences substantial competition in the sale of each of its
products from a large number of 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. 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 Company has experienced some competition from foreign sources, with the
level and degree of foreign competition varying from time to time depending upon
factors including foreign government subsidies and currency exchange rates.
The Company's competitive environment varies by product.
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 U.S. The Company did not enter the merchant bar
market in a significant way until 1982 and does not have the same market
position it has in the rebar market. The Company's 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 as market conditions allow and at Jackson
to increase production and improve merchant product mix.
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. Although the market for rods can be
heavily influenced by foreign imports, rod sales by foreign competitors have not
had a material effect on the Company's rod sales in the last three years.
FABRICATED REBAR
With 13 fabricating plants located throughout the southeastern U.S., all
within good support distance from one of the Company's four minimills, the
Company is a major factor in all the markets it serves. In the
36
<PAGE> 38
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.
EMPLOYEES
As of September 30, 1997, the Company had 1,858 employees, none of whom is
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good. The following table sets forth the
approximate number of employees of the Company as of September 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF
GROUP EMPLOYEES
- ----- ----------
<S> <C>
Mills
Jackson................................................... 294
Knoxville................................................. 212
Jacksonville.............................................. 272
Charlotte................................................. 271
-----
Total Mills....................................... 1,049
Mill Sales.................................................. 21
Fabricating................................................. 534
Rail/Atlas.................................................. 184
Corporate................................................... 70
-----
Total Company..................................... 1,858
=====
</TABLE>
The Company has been, and continues to be, proactive in establishing and
maintaining a climate of good employee relations with its employees. Ongoing
initiatives include organizational development skills training, team building
programs, opportunities for participation in employee involvement teams, and
adoption of an "open book" system of management. The Company believes high
employee involvement is a key factor in the success of the Company's operations.
A compensation program designed to make the Company's employees' financial
interests congruous with those of the Company's shareholders has been
implemented. For the Company's mill operating employees, the incentive is
directly connected to melting and rolling mill volumes. The sales team has their
own incentive calculated on the Company's sales volumes. The fabrication group's
operating employee incentives are tied to operating costs and other incentive
targets. Some 40 employees, comprising senior management, participate in a
Strategic Value Added incentive plan based upon return on capital employed.
LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the Company's business, to which the Company is a party
or in which any of its property is the subject, and no such proceedings are
known to be contemplated by governmental authorities. However, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Compliance with Environmental Laws and Regulations" and "Note E to
September 30, 1997 unaudited condensed financial statements -- Environmental
Matters" for a discussion of the Company's liabilities with respect to the
investigation and/or remediation at certain sites.
37
<PAGE> 39
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors consists of eight members. The Company
intends within approximately six months after the completion of the Offerings to
elect two independent outside directors. Directors generally serve for one-year
terms and until their successors are duly elected and qualified.
The following table sets forth certain information regarding the Company's
existing directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Phillip E. Casey..................... 54 Chairman of the Board, Chief Executive Officer and Director
J. Donald Haney...................... 61 Group Vice President, Fabricated Reinforcing Steel, and
Director
Shuzo Hikita......................... 54 Vice President, Engineering and Technology, and Director
Tom J. Landa......................... 46 Vice President, Chief Financial Officer, Secretary and
Director
Koichi Takashima..................... 74 Director
Akihiko Takashima.................... 60 Director
Hideichiro Takashima................. 39 Director
Ryutaro Yoshioka..................... 58 Director
Dennie Andrew........................ 57 Vice President, Steel Mill Operations
J. Neal McCullohs.................... 41 Vice President, Mill Product Sales
Robert P. Muhlhan.................... 47 Vice President, Material Procurement
James S. Rogers, II.................. 49 Vice President, Human Resources
Hiroyoshi Tsuchiya................... 59 Vice President, Strategic Planning
</TABLE>
Phillip E. Casey has been Chairman of the Board, Chief Executive Officer
and a director since June 1994. Prior to joining the Company, Mr. Casey held
various positions with Birmingham Steel Corporation, including Chief Financial
Officer, Executive Vice President and Vice Chairman of the Board from 1985 until
1994.
J. Donald Haney has been Group Vice President, Fabricated Reinforcing Steel
since 1979 and a director of the Company since 1988. Mr. Haney joined the
Company in 1958 and has held various management and sales positions with the
Company. Mr. Haney was promoted to the position of Vice President in 1974. Mr.
Haney is principally responsible for the Company's reinforcing steel fabricating
group.
Shuzo Hikita has been Vice President, Engineering and Technology and a
director of the Company since September 1996. Prior to September 1996, Mr.
Hikita held several management positions with Kyoei including Division Manager
of Kyoei's Hirakata and Osaka mills from 1994 to 1996. From 1992 to 1993, Mr.
Hikita was a Vice President with Auburn Steel.
Tom J. Landa has been Chief Financial Officer, Vice President and Secretary
of the Company since April 1995. Mr. Landa was elected a director of the Company
in March 1997. Before joining the Company, Mr. Landa spent over 19 years in
various financial management positions with Exxon Corporation and its affiliates
worldwide.
Koichi Takashima has been a director of the Company since 1992 and Chairman
of Kyoei for many years.
Akihiko Takashima has been a director of the Company since 1992 and a
Director of Kyoei for 26 years.
38
<PAGE> 40
Hideichiro Takashima has been a director of the Company since 1995. Since
June 1995 Mr. Takashima has been President and Chief Operating Officer of Kyoei.
From June 1992 until June 1995, Mr. Takashima held other senior management
positions with Kyoei.
Ryutaro Yoshioka has been a director of the Company since 1995. Mr.
Yoshioka has been Managing Director of Kyoei since July 1, 1994. Prior to such
time, Mr. Yoshioka was an executive of Bank of Tokyo for over 7 years.
Dennie Andrew has been Vice President, Steel Mill Operations, since October
1997. From September 1996 until September 1997, Mr. Andrew was Vice President,
Jacksonville Steel Mill Division. From 1986 until 1996, Mr. Andrew was President
of North American operations for Simac International.
J. Neal McCullohs has been Vice President, Mill Product Sales, since August
1995. Mr. McCullohs joined the Company in 1978 and has held various sales
management positions with the Company, including division manager of the St.
Albans Reinforcing Division and Atlanta Reinforcing Division.
Robert P. Muhlhan has been Vice President, Material Procurement, since
February 1995. From 1993 until 1995, Mr. Muhlhan was Regional Vice President of
National Material Trading. Prior to 1993, Mr. Muhlhan spent 24 years with LTV
Steel Company, most recently as Manager -- Production Materials.
James S. Rogers, II, has been Vice President, Human Resources, since June
1997. From 1992 until 1996, Mr. Rogers was Vice President, Human Resources, at
Birmingham Steel Corporation. From 1975 until 1992, Mr. Rogers was employed by
the Company in various positions, including Manager of Corporate Personnel
Practices and Director of Human Resources.
Hiroyoshi Tsuchiya has been Vice President, Strategic Planning, since May
1994. Prior to his employment with the Company, Mr. Tsuchiya held various
management positions with Mitsubishi Corporation in Japan and Canada from 1975
to 1994.
Koichi Takashima and Akihiko Takashima are brothers. Hideichiro Takashima
is the son of Koichi Takashima. None of the other directors or executive
officers is related to one another.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Executive Compensation Committee and
Audit Committee.
The principal responsibility of the Executive Compensation Committee is to
provide recommendations to the Board of Directors regarding compensation for
executive officers of the Company.
The Audit Committee's principal responsibilities are to review the annual
audit of the Company's financial statements and to meet with the independent
auditors of the Company from time to time in order to review the Company's
general policies and procedures with respect to audits and accounting and
financial controls.
DIRECTORS COMPENSATION
No director receives separate compensation for services rendered as a
director. Expenses incurred by directors who are employees of the Company to
attend meetings of the Board of Directors or committees thereof are reimbursed
by the Company. The Company does not reimburse expenses incurred by non-employee
directors to attend Board of Directors or committee meetings. These policies are
expected to change following the election of two outside, independent directors
within six months following completion of the Offerings.
39
<PAGE> 41
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during the Company's
three most recently completed fiscal years for each of the named executive
officers of the Company as defined under applicable Securities and Exchange
Commission Rules (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- -------------------------
SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(S)(1) (#)(1) COMPENSATION(2)
- --------------------------- ---- -------- ---------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Phillip E. Casey..................... 1997 $255,000 $ 65,637 $ 0 0 $ 3,278
Chairman of the Board 1996 255,000 80,453 0 0 4,617
and Chief Executive 1995 249,167 2,692,170 4,500,000 250,000 0
Officer(3)
J. Donald Haney...................... 1997 210,954 53,893 0 3,500 3,032
Group Vice President, 1996 196,974 64,445 0 1,368 2,620
Fabricated Reinforcing 1995 216,594 140,995 0 0 4,137
Steel
Tom J. Landa......................... 1997 170,217 43,886 0 0 3,647
Vice President and 1996 160,389 153,019 150,000 12,960 0
Chief Financial Officer(4)
James C. Hogue....................... 1997 166,662 42,570 0 3,000 2,921
Vice President, Human 1996 155,712 50,944 0 1,080 2,735
Resources(5) 1995 180,936 105,872 0 0 3,422
James F. Oliver...................... 1997 121,978 83,009 0 3,000 2,332
Vice President, 1996 104,734 62,942 0 738 2,096
Knoxville Steel Mill Division 1995 119,856 55,317 0 0 1,936
Thomas G. Creed...................... 1997 156,408 39,935 0 0 593,569
President and 1996 256,308 82,671 0 2,500 2,481
Chief Operating Officer(5) 1995 282,204 221,779 0 0 4,748
</TABLE>
- ------------------------
(1) All references are to Class B Common Stock. The shares of restricted stock
shown are subject to a substantial risk of forfeiture which for Mr. Casey
lapses at the rate of 20% per year beginning as of June 1, 1995 and for Mr.
Landa lapses at a rate of 33 1/3% per year beginning as of April 1, 1997. At
the end of fiscal 1997, the aggregate restricted stock holdings and value of
such holdings were for Mr. Casey 450,000 shares and $6,075,000,
respectively, and for Mr. Landa 12,000 shares and $162,000, respectively.
Dividends, if declared and paid on the Common Stock generally, are payable
on such restricted shares at the same rate as paid to all stockholders. In
fiscal 1998, Messrs. Haney, Landa and Oliver were granted 2,500 shares of
restricted stock each subject to a substantial risk of forfeiture which
lapses at the rate of 33 1/3% per year beginning as of October 1, 1999.
(2) These amounts consist of Company matching contributions made pursuant to the
Company's Savings Plan, except for Mr. Creed, which amount includes a
one-time payment of $591,600 from the Supplemental Benefits Plan in
connection with his retirement in November 1996.
(3) For fiscal 1995, Mr. Casey's salary covers ten months of employment
beginning June 1, 1994, and his bonus includes a one-time signing bonus of
$500,000 and a $1,946,000 tax bonus. See "-- Executive Employment Agreement"
for more information.
(4) Includes a $100,000 signing bonus pursuant to Mr. Landa's employment offer
in March 1995.
(5) Messrs. Creed and Hogue retired from the Company in November 1996 and May
1997, respectively.
40
<PAGE> 42
OPTION GRANTS TABLE
The following table shows information concerning options to purchase shares
of Class B Common Stock granted during fiscal 1997 for the Named Executive
Officers:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Phillip E. Casey............................ 0 -- -- -- -- --
J. Donald Haney............................. 3,500 4.41% 12.50 5/14/06 27,514 69,726
Tom J. Landa................................ 0 -- -- -- -- --
James C. Hogue(1)........................... 3,000 3.78% 12.50 5/14/06 23,584 59,765
James F. Oliver............................. 3,000 3.78% 12.50 5/14/06 23,584 59,765
Thomas G. Creed(1).......................... 2,500 3.15% 12.50 5/14/06 19,653 49,804
</TABLE>
- ---------------
(1) Messrs. Creed and Hogue forfeited their options upon retirement in November
1996 and May 1997, respectively.
OPTION EXERCISES AND YEAR-END VALUE TABLE
No stock options were exercised by any of the Company's executive officers
during fiscal 1997. The following table shows information concerning values as
of the end of fiscal 1997 of options to purchase shares of Class B Common Stock
held by each Named Executive Officer:
<TABLE>
<CAPTION>
VALUE OF OPTIONS
NUMBER OF OPTIONS EXERCISABLE/UNEXERCISABLE
NAME EXERCISABLE/UNEXERCISABLE $(1)
- ---- ------------------------- -------------------------
<S> <C> <C>
Phillip E. Casey........................................ 0/0 0/0
Tom J. Landa............................................ 0/12,960 0/12,960
J. Donald Haney......................................... 0/4,868 0/4,868
James C. Hogue(2)....................................... 0/4,080 0/4,080
James F. Oliver......................................... 0/3,738 0/3,738
Thomas G. Creed(2)...................................... 0/0 0/0
</TABLE>
- ---------------
(1) This represents the amount by which the latest appraisal exceeds the
exercise price of the options held by the Named Executive Officer.
(2) Messrs. Creed and Hogue forfeited their options upon retirement in November
1996 and May 1997, respectively.
PENSION BENEFITS
The table below sets forth the estimated annual benefits, payable as a
single life annuity beginning at retirement at age 65, 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
"Retirement Plan").
ESTIMATED ANNUAL RETIREMENT BENEFIT
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
FINAL AVERAGE COMPENSATION 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- -------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000............................................ $27,070 $33,837 $40,604 $47,372 $ 52,372
150,000............................................ 42,070 52,587 63,104 73,622 81,122
200,000............................................ 57,070 71,337 85,604 99,872 109,872
</TABLE>
41
<PAGE> 43
Under the Retirement Plan, the compensation taken into account generally
includes all salary, bonuses and other taxable compensation, subject to a
$150,000 per year limitation. The final average compensation for the Named
Executive Officers for purposes of the Retirement Plan for fiscal 1997 is
$150,000. The years of credited service for the named Executive Officers for the
Retirement Plan are three years for Phillip E. Casey, 39 years for J. Donald
Haney, two years for Tom J. Landa, seven years for James F. Oliver, and 23 years
for Thomas G. Creed. The benefits under the Retirement Plan are not subject to
any deduction for Social Security or other offset amounts.
SUPPLEMENTAL BENEFITS PLAN
The Company maintains a nonqualified, unfunded Supplemental Benefits Plan
(the "SERP"), which provides certain officers defined pension benefits in
addition to those provided under the Company's other plans. The SERP provides an
annual retirement benefit equal to the greater of (i) 50% of final average
compensation without regard to the $150,000 limit, 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.
Upon retirement at November 1, 1996, Thomas G. Creed received a one-time payment
of $591,600 as his SERP benefit. As of March 31, 1997, the Company had accrued
approximately $138,500 in supplemental retirement benefits for the then two
remaining active employees (James C. Hogue and J. Donald Haney) covered by the
SERP. No other Named Executive Officer is, or is anticipated to be, covered by
the SERP.
In connection with the acquisition of FLS by Kyoei the officers covered by
the SERP waived certain rights under the SERP, provided that if such officers
are terminated without cause, resign for good reason, die, retire or become
disabled, then such officers will be entitled to receive the amounts they would
have received had such officers not waived such rights.
EXECUTIVE EMPLOYMENT AGREEMENT
Effective June 1, 1994, the Company entered into an employment agreement
with Phillip E. Casey to serve as the Company's Chairman of the Board of
Directors and Chief Executive Officer. The agreement provides for a one time
signing bonus of $500,000, annual base salary of $300,000, a grant of 750,000
shares of Class B Common Stock (then valued at $4.5 million) to vest ratably
over five years, a tax bonus in the amount of $1,946,000 with respect to such
shares, and other benefits commensurate with his position. Mr. Casey has placed
15% of his annual salary at risk as part of the Company's annual incentive
program. Pursuant to the agreement, the Company also granted to Mr. Casey an
option to purchase an additional 250,000 shares of Class B Common Stock for $1.5
million, which Mr. Casey exercised. The agreement provides for certain
termination benefits and places restrictions on the disposition of the Company's
Class B Common Stock. Effective upon the completion of the Offerings, the
restrictions on the disposition of such shares will lapse.
INCENTIVE AND BENEFIT PLANS
EQUITY OWNERSHIP PLAN
The Board of Directors administers the Equity Ownership Plan and makes the
determination as to the grant of awards, options and/or rights under the plan.
An aggregate of 243,002 shares of Class A Common Stock are reserved for issuance
under the plan. An aggregate of 143,750 shares of Class B Common Stock are
reserved for issuance in connection with stock options previously granted under
the plan and currently unexercised. Under the plan, restricted stock, incentive
stock options, nonqualified stock options and stock appreciation rights or any
combination thereof may be granted to Company employees. In general, the
exercise price of the options granted under the plan will be determined at the
discretion of the Board of Directors, which price generally may not be less than
the market price of the Common Stock on the date the option is granted. Options
normally vest 33 1/3% each year beginning approximately two years after the date
of grant and expire after 10 years. The Board of Directors may
42
<PAGE> 44
condition awards of restricted stock and stock appreciation rights upon
satisfaction of performance criteria or other conditions.
SHARES IN SUCCESS
In 1995, the Company adopted a stock purchase/stock option plan that
provided employees with a one-time right in July 1995 to purchase Class B Common
Stock at a price equal to 85% of then appraised fair market value. For each
share of Class B Common Stock purchased under the plan, each employee received
options to purchase six additional shares at the then appraised fair market
value. Options vest 33 1/3% each year beginning approximately two years after
the date of grant and expire in 2005. No additional options may be granted under
the plan, and no additional shares may be purchased under the plan except upon
the exercise of outstanding options. As of September 30, 1997, an aggregate of
30,987 shares of Class B Common Stock purchased by employees under the plan
remain outstanding, and an aggregate of 186,012 shares of Class B Common Stock
are reserved for issuance under the plan in connection with stock options that
were granted under the plan and are currently unexercised.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Executive Compensation Committee are Koichi
Takashima, Hideichiro Takashima and Ryutaro Yoshioka. Akihiko Takashima, a
current director of the Company, and Takeshi Fujimura, a former director, were
members of the committee during fiscal 1997. Mr. Fujimura remains a special
advisor to the Chairman of the Board of the Company. No other member of the
Executive Compensation Committee has at any time been an officer or employee of
the Company.
Mr. Fujimura was an advisor to the President of Kyoei until his retirement
in June 1997; the current members of the Executive Compensation Committee and
Akihiko Takashima continue to be executive officers and/or directors of Kyoei.
CERTAIN TRANSACTIONS
The Company has entered into technical assistance arrangements with Kyoei,
which owns FLS. See "Risk Factors -- Voting Control by Principal Stockholder"
and "Principal Stockholders". Under these arrangements the Company reimburses
Kyoei for the personnel costs of its consulting engineers and certain travel and
other expenses. Payments made by the Company under these arrangements have been
approximately $230,000, $408,000 and $2,000 in fiscal 1995, 1996 and 1997,
respectively.
43
<PAGE> 45
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Class B Common Stock as of the date of the
Prospectus and as adjusted to reflect the sale of the shares of Class A Common
Stock offered hereby, assuming no exercise of the Underwriters' over-allotment
option, by (i) each person known by the Company to own beneficially more than
5.0% of the outstanding Class B Common Stock, (ii) each director of the Company
who owns shares of Class B Common Stock, (iii) each of the Named Executive
Officers and (iv) all executive officers and directors as a group.
BENEFICIAL OWNERSHIP(1)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
COMMON STOCK VOTING POWER
------------------------ -------------
BEFORE THE AFTER THE AFTER THE
NUMBER OFFERINGS OFFERINGS OFFERINGS
--------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Kyoei Steel, Ltd.................................... 9,000,000(2) 89.0 64.0 74.4
Phillip E. Casey(3)................................. 1,005,792 9.9 6.2 7.2
J. Donald Haney..................................... 6,676 * * *
Tom J. Landa........................................ 14,660 * * *
James F. Oliver..................................... 4,172 * * *
Koichi Takashima.................................... 500 * * *
Akihiko Takashima................................... 0 -- -- --
Shuzo Hikita........................................ 0 -- -- --
Hideichiro Takashima................................ 300 * * *
Ryutaro Yoshioka.................................... 0 -- -- --
Thomas G. Creed(4).................................. 0 -- -- --
James C. Hogue(4)................................... 0 -- -- --
All Directors and Executive Officers as a Group (13
persons).......................................... 1,041,877 10.3 6.5 7.5
</TABLE>
- ---------------
* Less than one percent.
(1) Beneficial ownership of shares, as determined in accordance with applicable
Securities Exchange Commission rules, includes shares as to which a person
has or shares voting power and/or investment power. Except as otherwise
indicated, all shares are held of record with sole voting and investment
power. For purposes of the table, a person or group of persons is deemed to
have "beneficial ownership" of any shares as of a given date which such
person has the right to acquire within 60 days after such date.
(2) All shares shown are owned directly by FLS, a wholly owned subsidiary of
Kyoei. Kyoei's address is 18F Aqua Dojima, West Building, 1-4-16 Dojimahama,
Kita-Ku, Osaka 530, Japan.
(3) Includes 129,408 shares of Class B Common Stock that have been gifted by Mr.
Casey pursuant to Transfer and Proxy Agreements between Mr. Casey and
certain donees. The gifted shares are subject to certain restrictions set
forth in the agreements. Under the agreements, Mr. Casey is appointed as
attorney-in-fact with full power to vote the shares in accordance with the
decision of the holders of a majority of the shares held by the donee
stockholders and Mr. Casey. As a result, Mr. Casey had the right to vote all
129,408 shares. The restrictions (including those relating to voting) expire
upon the effectiveness of the registration statement of which this
Prospectus is a part. Mr. Casey's address is 5100 W. Lemon Street, Suite
312, Tampa, Florida 33609.
(4) Messrs. Creed and Hogue retired from the Company in November 1996 and May
1997, respectively.
44
<PAGE> 46
DESCRIPTION OF CAPITAL STOCK
References in this Prospectus to the Company's Articles of Incorporation or
Bylaws are references to such documents as they will be amended and restated in
connection with the Offerings. The following description is a summary and is
subject to and qualified in its entirety by reference to the provisions of the
Company's Articles of Incorporation, the form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
COMMON STOCK
The Company has authority under its Articles of Incorporation to issue up
to 100,000,000 shares of Class A Common Stock, par value $.01 per share, and up
to 22,000,000 shares of Class B Common Stock, par value $.01 per share (together
referred to as "Common Stock"). Shares of Class A Common Stock and shares of
Class B Common Stock generally carry the same rights, powers, preferences,
privileges and limitations, except that Class A Common Stock has one vote per
share while Class B Common Stock has two votes per share. As of the date of this
Prospectus, there are no shares of Class A Common Stock outstanding and there
are 10,114,385 shares of Class B Common Stock outstanding held of record by
approximately 1,065 stockholders. Of such shares, 9,000,000 shares are held of
record by FLS, which shares will represent approximately 74.4% of the combined
voting power of all Common Stock upon completion of the Offerings. See
"Principal Stockholders".
Holders of Common Stock do not have any preemptive rights or rights to
subscribe for additional securities of the Company.
VOTING RIGHTS
The holders of Class A Common Stock are entitled to one vote per share.
Holders of Class B Common Stock are entitled to two votes per share. Except as
otherwise required by law or the Company's Articles of Incorporation, the
holders of all classes of Common Stock entitled to vote will vote together as a
single class on all matters presented to the stockholders for their vote or
approval. Because of the disproportionate voting rights of the Class B Common
Stock, holders of Class B Common Stock may be able to control the outcome of
matters submitted to a vote of the Company's stockholders, including the
election of directors, when the number of outstanding shares of Class B Common
Stock is less than a majority of the number of shares of all classes of Common
Stock then outstanding. See "Risk Factors -- Voting Control by Principal
Stockholder".
DIVIDENDS
Holders of Class A Common Stock and Class B Common Stock are entitled to
receive dividends at the same rate on a per share basis if, as and when such
dividends are declared by the Board of Directors of the Company out of assets or
funds legally available therefor. In the case of a dividend or other
distribution payable in shares of a class of Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock, only shares
of Class A Common Stock may be distributed with respect to Class A Common Stock
and only shares of Class B Common Stock may be distributed with respect to Class
B Common Stock. The number of shares of each class of Common Stock so
distributed shall be equal in number on a per share basis.
CONVERSION
Class A Common Stock has no conversion rights. Shares of Class B Common
Stock are convertible into Class A Common Stock, in whole or in part, at any
time and from time to time at the option of the holder, on the basis of one
share of Class A Common Stock for each share of Class B Common Stock converted.
Each share of Class B Common Stock shall automatically convert into one share of
Class A Common Stock on the date on which the number of shares of Class B Common
Stock then owned of record by Kyoei, its wholly owned subsidiaries and Phillip
E. Casey would be entitled to cast fewer than 50% of the aggregate number of
votes that would be entitled to be cast by all holders of shares of
45
<PAGE> 47
Common Stock then outstanding at a meeting of such holders. The Company
covenants that (i) it will at all times reserve and keep available, out of its
authorized but unissued shares of Class A Common Stock, such number of shares of
Class A Common Stock issuable upon the conversion of all outstanding shares of
Class B Common Stock, (ii) it will cause any share of Class A Common Stock
issuable upon conversion of a share of Class B Common Stock that requires
registration with or approval of any governmental authority under federal or
state law before such shares may be issued upon conversion to be so registered
or approved and (iii) it will use its best efforts to list the shares of Class A
Common Stock required to be delivered upon conversion prior to such delivery
upon such national securities exchange upon which the outstanding Class A Common
Stock is listed at the time of such delivery.
RESTRICTIONS ON ADDITIONAL ISSUANCES AND TRANSFER
Other than pursuant to options or other rights to purchase already
outstanding, or pursuant to a stock split, stock dividend or similar transaction
effected in accordance with the Company's Articles of Incorporation, the Company
may not issue or sell any shares of Class B Common Stock or any securities
(including, without limitation, any rights, options, warrants or other
securities) convertible into, or exchangeable or exercisable for, shares of
Class B Common Stock to any person who is not then a record holder of Class B
Common Stock, Kyoei or a wholly owned subsidiary of Kyoei. Additionally, shares
of Class B Common Stock may not be transferred, whether by sale, assignment,
gift, bequest, appointment or otherwise, to a person other than another record
holder of Class B Common Stock, Kyoei or a wholly owned subsidiary of Kyoei.
Notwithstanding the foregoing (i) any holder of Class B Common Stock may pledge
his, her or its shares of Class B Common Stock to a financial institution
pursuant to a bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee provided that such shares remain subject to the
transfer restrictions and that, in the event of foreclosure or other similar
action by the pledgee, such pledged shares of Class B Common Stock may only be
transferred to as provided above or converted into shares of Class A Common
Stock, as the pledgee may elect, and (ii) the foregoing transfer restrictions
shall not apply in the case of a merger, consolidation or business combination
of the Company with or into another corporation in which all of the outstanding
shares of Common Stock of the Company regardless of class are purchased by the
acquiror.
RECLASSIFICATION AND MERGER
In the event the Company enters into any consolidation, merger, combination
or other transaction in which shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then,
and in such event, the shares of each class of Common Stock will be exchanged
for or changed into either (i) the same amount of stock, securities, cash and/or
any other property, as the case may be, into which or for which each share of
any other class of Common Stock is exchanged or changed; provided, however, that
if shares of Common Stock are exchanged for or changed into shares of capital
stock, such shares so exchanged for or changed into may differ to the extent and
only to the extent that the Class A Common Stock and Class B Common Stock differ
as provided in the Company's Articles of Incorporation or (ii) if holders of
each class of Common Stock are to receive different distributions of stock,
securities, cash and/or any other property, an amount of stock, securities, cash
and/or property per share having a value, as determined by an independent
investment banking firm of national reputation selected by the Board of
Directors, equal to the value per share into which or for which each share of
any other class of Common Stock is exchanged or changed.
OTHER PROVISIONS
In the event of any dissolution, liquidation or winding up of the affairs
of the Company, after payment of the debts and other liabilities of the Company,
the remaining assets of the Company will be distributable ratably among the
holders of the Class A Common Stock and Class B Common Stock treated as a single
class. The holders of the Class A Common Stock and Class B Common Stock are not
entitled to preemptive rights. None of the Class A Common Stock or Class B
Common Stock may be
46
<PAGE> 48
reclassified, subdivided or combined in any manner unless the other class is
simultaneously reclassified, subdivided or combined in the same proportion.
FLORIDA BUSINESS CORPORATION ACT
The Company will be subject to several anti-takeover provisions under
Florida law that apply to a public corporation organized under Florida law
unless the corporation has elected to opt out of such provisions in its Articles
of Incorporation or (depending on the provision in question) its Bylaws. The
Company has not elected to opt out of these provisions. The Florida Business
Corporation Act (the "Florida Act") contains a provision that prohibits the
voting of shares in a publicly-held Florida corporation which are acquired in a
"control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition. A
"control share acquisition" means an acquisition that immediately thereafter
entitles the acquiring party to vote in the election of directors within any of
the following ranges of voting power: (i) one-fifth or more but less than one
third of such voting power, (ii) one third or more but less than a majority of
such voting power and (iii) more than a majority of such voting power.
The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested stockholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested stockholder,
(ii) the interested stockholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years, or (iii) the interested
stockholder is the beneficial owner of at least 90% of the corporation's
outstanding voting shares, exclusive of those shares acquired by the interested
stockholder directly from the corporation in a transaction approved by a
majority of the disinterested directors, or (iv) the affirmative vote of
two-thirds of the voting shares other than the shares beneficially owned by the
interested stockholders. An interested stockholder is defined as a person who
together with affiliates and associates beneficially owns more than 10% of the
corporation's outstanding voting shares.
INDEMNIFICATION AND LIMITATION OF LIABILITY FOR DIRECTORS AND OFFICERS
The Company's Bylaws provide that the Company shall indemnify directors and
officers to the fullest extent permitted by the laws of the State of Florida.
The Company intends to enter into indemnification agreements with all of its
executive officers and directors creating certain indemnification obligations on
the Company's part in favor of the directors and executive officers. These
indemnification agreements clarify and expand the circumstances under which a
director or executive officer will be indemnified.
The indemnification rights conferred by the Bylaws and indemnification
agreements are not exclusive of any other right, under the Florida Act or
otherwise, to which a person seeking indemnification may otherwise be entitled.
The Company also intends to provide liability insurance for the directors and
officers for certain losses arising from claims or charges made against them
while acting in their capacities as directors or officers.
The effect of such indemnification arrangements may be to exempt or limit
the liability of such executive officers and directors to the Company or its
stockholders for monetary damages for breach of fiduciary duty to the Company,
except to the extent such exemption or limitation is not permitted under the
Florida Act as the same exists or may hereafter be amended.
TRANSFER AGENT
The transfer agent and registrar of the Common Stock is Chase Mellon
Shareholder Services.
47
<PAGE> 49
LISTING
The Class A Common Stock has been approved for listing, subject to notice
of issuance, on the New York Stock Exchange ("NYSE") under the trading symbol
"AST".
SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of shares of Class B Common Stock already outstanding,
or issuable on exercise of outstanding options, upon conversion into shares of
Class A Common Stock, will be eligible for future sale in the public market at
prescribed times pursuant to exemptions from registration under the Securities
Act of 1933, as amended (the "Securities Act").
Future sales of a substantial number of shares of the Class A Common Stock
in the public market could adversely affect the market price of the Class A
Common Stock and could impair the Company's ability to raise capital through the
sale of equity or equity-related securities. Upon completion of the Offerings,
the Company will have 3,950,000 shares of Class A Common Stock outstanding and
10,114,385 shares of Class B Common Stock outstanding. All shares of Class B
Common Stock are convertible into shares of Class A Common Stock on a one-for-
one basis. Of such shares, 72,508 shares of Class B Common Stock, representing
less than 1.0% of the issued and outstanding shares of Common Stock will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act ("Rule 144"). The remaining
10,041,877 shares of Class B Common Stock representing approximately 71.4% of
the issued and outstanding shares of Common Stock (approximately 68.5% if the
Underwriters' over-allotment options are exercised in full) are beneficially
owned by affiliates of the Company and are therefore "restricted securities" as
that term is defined in Rule 144 and as such are subject to certain holding
period, volume limitations and other restrictions prescribed by Rule 144. The
Company, certain of its executive officers and Kyoei have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell, pledge, hypothecate, grant any option, right or
warrant to purchase, or otherwise dispose of, directly or indirectly, (which
shall be deemed to include, without limitation, the entering into of a
cash-settled or Common Stock settled derivative instrument) any shares of Common
Stock, any securities of the Company that are substantially similar to the Class
A Common Stock or any securities that are convertible into or exchangeable for,
or that represent the right to receive, Common Stock, or any such substantially
similar securities, (other than pursuant to employee stock option plans existing
on, or upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Prospectus), without the prior written
consent of the representatives, except for the shares of Class A Common Stock
offered in connection with the Offerings. Upon expiration of such 180 day
period, an aggregate of 10,041,877 shares will be eligible for sale subject to
the timing, volume and manner of sale restrictions of Rule 144. See
"Underwriting".
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her shares of Common Stock for at least one year
(including the prior holding period of any prior owner other than an affiliate
of the Company) is entitled to sell within any three-month period that number of
shares which does not exceed the greater of 1% of the outstanding shares of
Common Stock and the average weekly trading volume during the four calendar
weeks preceding each such sale. Sales under Rule 144 also are subject to certain
manner of sale provisions, notice requirements and the availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not or has not been deemed an affiliate of the Company for at
least three months and who has beneficially owned shares for at least two years
(including the holding period of any prior owner other than an affiliate) would
be entitled to sell such shares under Rule 144 without regard to the limitations
discussed above.
Sales of such shares in the public market, or the perception that such
sales may occur, could adversely affect the market price of the Common Stock or
impair the Company's ability to raise additional capital in the future through
the sale of equity securities.
48
<PAGE> 50
VALIDITY OF CLASS A COMMON STOCK
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis, Professional Association, Tampa, Florida. The validity of the shares of
Class A Common Stock offered hereby will be passed upon for the Underwriters by
Sullivan & Cromwell, New York, New York, which will be relying upon the opinion
of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill, & Mullis, Professional
Association, as to matters of Florida law.
EXPERTS
The Financial Statements and Notes thereto included in this Prospectus, to
the extent and for the periods indicated in their report, have been audited by
Arthur Andersen LLP, independent certified public accountants, as indicated in
their report with respect thereto, and is included herein, in reliance upon the
authority of said firm, as experts in accounting and auditing in giving said
report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each such instance reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Company is subject to the informational requirements of the
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
will file reports, proxy statements and other information with the Commission.
The Registration Statement, as well as all periodic reports and other
information filed by the Company pursuant to the Exchange Act, may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street NW, Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, 7th Floor, New York, New York 10048
and Citicorp Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the World Wide Web site that the
Commission maintains at http://www.sec.gov and from the Public Reference Section
of the Commission, 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed
rates.
49
<PAGE> 51
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Statements of Financial Position as of March 31, and
September 30, 1997 (unaudited)............................ F-2
Statements of Income (unaudited) for the Six Month Periods
Ended September 30, 1996 and 1997......................... F-3
Statements of Cash Flows (unaudited) for the Six Month
Periods Ended September 30, 1996 and 1997................. F-4
Notes to Unaudited Financial Statements..................... F-5
Report of Independent Certified Public Accountants.......... F-9
Statements of Financial Position as of March 31, 1996 and
1997...................................................... F-10
Statements of Income for the Years Ended March 31, 1995,
1996 and 1997............................................. F-11
Statements of Shareholders' Equity for the Years Ended March
31, 1995, 1996 and 1997................................... F-12
Statements of Cash Flows for the Years Ended March 31, 1995,
1996 and 1997............................................. F-13
Notes to Financial Statements for the Years Ended March 31,
1995, 1996 and 1997....................................... F-14
</TABLE>
F-1
<PAGE> 52
AMERISTEEL CORPORATION
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
MARCH 31, -------------------------
1997 HISTORICAL PRO FORMA
--------- ----------- -----------
(UNAUDITED) (UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 1,645 $ 1,848 $ 1,848
Accounts receivable....................................... 68,563 77,573 77,573
Inventories............................................... 106,173 106,830 106,830
Deferred tax assets....................................... 5,000 5,000 5,000
Other current assets...................................... 1,138 1,442 1,442
-------- -------- --------
TOTAL CURRENT ASSETS............................ 182,519 192,693 192,693
ASSETS HELD FOR SALE...................................... 14,838 14,967 14,967
PROPERTY, PLANT AND EQUIPMENT............................. 308,159 317,496 317,496
Less accumulated depreciation............................. 58,138 67,679 67,679
-------- -------- --------
250,021 249,817 249,817
GOODWILL.................................................. 85,773 83,708 83,708
DEFERRED FINANCING COSTS.................................. 2,523 2,208 2,208
OTHER ASSETS.............................................. 11 7 7
-------- -------- --------
TOTAL ASSETS.................................... $535,685 $543,400 $543,400
======== ======== ========
CURRENT LIABILITIES
Trade accounts payable.................................... $ 44,666 $ 39,779 $ 39,779
Salaries, wages and employee benefits..................... 14,598 14,926 14,926
Environmental remediation................................. 5,079 5,875 5,875
Other current liabilities................................. 4,355 9,594 9,594
Interest payable.......................................... 4,659 4,980 4,980
Current maturities of long-term borrowings................ 435 5,687 5,687
-------- -------- --------
TOTAL CURRENT LIABILITIES....................... 73,792 80,841 80,841
LONG-TERM BORROWINGS, LESS CURRENT PORTION................ 237,474 216,835 222,904
OTHER LIABILITIES......................................... 21,555 24,014 24,014
DEFERRED TAX LIABILITIES.................................. 52,300 52,300 52,300
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 30,000,000 shares
authorized at March 31, and September 30, 1997,
10,079,028 and 10,114,603 shares outstanding at March
31, and September 30, 1997, respectively............. 101 101 101
Capital in excess of par................................ 156,816 157,297 157,297
(Accumulated deficit) retained earnings................. (4,328) 14,108 8,039
Deferred compensation................................... (2,025) (2,096) (2,096)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY...................... 150,564 169,410 163,341
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $535,685 $543,400 $543,400
======== ======== ========
</TABLE>
See notes to financial statements
F-2
<PAGE> 53
AMERISTEEL CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
------------- -------------
($ IN THOUSANDS EXCEPT PER
COMMON SHARE)
<S> <C> <C>
NET SALES................................................... $327,908 $343,805
Operating Expenses:
Cost of sales............................................. 285,173 277,251
Selling and administrative................................ 14,261 12,834
Depreciation.............................................. 8,091 9,643
Amortization of goodwill.................................. 2,065 2,065
-------- --------
309,590 301,793
-------- --------
INCOME FROM OPERATIONS...................................... 18,318 42,012
Other Expenses:
Interest.................................................. 9,898 10,115
Amortization of deferred financing costs.................. 467 353
-------- --------
10,365 10,468
-------- --------
INCOME BEFORE INCOME TAXES.................................. 7,953 31,544
Income taxes................................................ 3,907 13,108
-------- --------
NET INCOME.................................................. $ 4,046 $ 18,436
======== ========
Weighted average common shares outstanding (in thousands)... 10,093 10,096
EARNINGS PER COMMON SHARE................................... $ .40 $ 1.83
</TABLE>
See notes to financial statements
F-3
<PAGE> 54
AMERISTEEL CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
------------- -------------
($ IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 4,046 $ 18,436
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 10,623 12,061
Deferred income taxes.................................. 1,300 --
Other (loss on asset disposals and deferred
compensation)........................................ 492 2,313
Changes in operating assets and liabilities:
Accounts receivable.................................... 761 (9,010)
Inventories............................................ 16,758 (657)
Other assets........................................... 270 (429)
Accounts payable, income taxes and other liabilities... (4,898) 4,256
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 29,352 26,970
INVESTING ACTIVITIES
Additions to property, plant and equipment (24,211) (9,121)
Proceeds from sales of property, plant and equipment... 519 90
Restricted IRB funds................................... 8,109 (2,252)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES..................... (15,583) (11,283)
FINANCING ACTIVITIES
Payments to short-term and long-term borrowings, net... (19,782) (20,387)
Proceeds from IRB (Bonds).............................. -- 5,000
Addition to deferred financing costs................... -- (38)
Purchase of common stock............................... (107) (59)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES..................... (19,889) (15,484)
-------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............ (6,120) 203
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 6,193 1,645
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 73 $ 1,848
======== ========
</TABLE>
See notes to financial statements
F-4
<PAGE> 55
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
The condensed financial statements include the accounts of AmeriSteel
Corporation, a Florida corporation (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.
The accompanying unaudited condensed financial statements do not include
all the information or footnotes necessary for a complete presentation of
financial condition, results of operations and cash flows in conformity with
generally accepted accounting principles. However all adjustments which, in the
opinion of management, are necessary for a fair presentation have been included.
Such adjustments consist only of normally recurring items.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included
elsewhere in this Prospectus. The results of the six months ended September 30,
1997 are not necessarily indicative of the results to be expected for the fiscal
year ending March 31, 1998.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements: In February 1997, the Financial
Accounting Standards Board issued Statement No. 128, "Earnings per Share" which
establishes standards for computing and presenting earnings per share. The
statement replaces the presentation of primary earnings per share with a
presentation of basic earnings per share. It also requires dual presentation of
basic and diluted earnings per share on the income statement and provides for
certain disclosures. The Company will adopt Statement No. 128 in the third
quarter of fiscal 1998 and does not believe the effect of adoption will be
material.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information" which
establishes standards for reporting information about operating segments of a
business. The statement, which is based on the management approach to segment
reporting, includes requirements to report selected segment information and
entity-wide disclosures about products and services, major customers, and the
countries in which the Company holds assets and reports revenues. This statement
becomes effective for the Company for reporting beginning in fiscal 1999.
Management has not yet evaluated the effects of this change on the Company's
financial statements.
Reclassifications: Certain amounts in the prior period financial
statements have been reclassified to conform to the current fiscal financial
statement presentation.
NOTE C -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1997
--------- -------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $ 59,299 $ 64,056
Work in-process............................................. 14,175 10,022
Raw materials and operating supplies........................ 32,699 32,752
-------- --------
$106,173 $106,830
======== ========
</TABLE>
F-5
<PAGE> 56
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- BORROWINGS
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1997
--------- -------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Revolving Credit Agreement.................................. $ 51,340 $ 30,960
First Mortgage Notes........................................ 100,000 100,000
Subordinated Intercompany Note.............................. 50,000 50,000
Industrial Revenue Bonds.................................... 30,875 35,875
Trade Loan Agreement........................................ 5,259 5,259
Note to Parent.............................................. 435 428
-------- --------
237,909 222,522
Less Current Maturities..................................... 435 5,687
-------- --------
$237,474 $216,835
======== ========
</TABLE>
NOTE E -- ENVIRONMENTAL MATTERS
The Company is involved in the manufacture of steel, in connection with
which it produces and uses certain substances that may pose environmental
hazards. The principal hazardous waste generated by current and past operations
is electric arc furnace/emission control dust ("EC dust"), a residual from the
production of steel in electric arc furnaces. Environmental legislation and
regulation at both the federal and state level over EC dust is subject to
change, which may change the cost of compliance. While EC dust is generated in
current production processes, such EC dust is being collected, handled and
disposed of in a manner which management believes meets all current federal and
state environmental regulations. The costs of such collection and disposal are
being expensed and paid currently from operations. In addition, the Company has
handled and disposed of EC dust in other manners in previous years, and is
responsible for the remediation of certain sites where such EC dust was
generated and/or disposed. In general, the Company's estimate of the remediation
costs is based on its review of each site and the nature of the anticipated
remediation activities to be undertaken. The Company's process for estimating
such remediation costs includes determining for each site the expected
remediation methods, and the estimated cost for each step of the remediation. In
all such determinations, the Company employs outside consultants, and providers
of such remedial services where necessary, to assist in making such
determinations. Although the ultimate costs associated with the remediation are
not presently known, the Company has estimated the total cost to be
approximately $14.9 million and has recorded these costs as accrued liabilities
as of September 30, 1997. The majority of this amount is associated with four
sites.
The Tampa mill site contains slag and soil that is contaminated with EC
dust generated by past operations. The volume and mass estimates of the
contamination was based on analytical data from approximately 600 soil borings,
700 soil samples and 91 groundwater-monitoring wells. The remediation approach
selected by the Company, excavation and on-site treatment and disposal, was
approved, and a permit issued, by the U.S. Environmental Protection Agency
during fiscal 1996 and by the Florida Department of Environmental Protection
during fiscal 1998. The Company is currently awaiting a signed Consent Order to
begin the remediation process. The remediation cost estimates are based on the
Company's previous experience with comparable projects as well as estimates
provided by outside environmental consultants. The Company is responsible for
the total remediation costs and currently
F-6
<PAGE> 57
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
estimates those costs to be approximately $8 million for this site. The Company
expects cleanup at this site to be substantially completed during 2001.
At the Jackson Tennessee mill site, EC dust contaminated with Cesium 137, a
man-made, radioactive material (incident-related material) has been stored in
containers awaiting remediation. The remediation volumes and masses are based on
actual measurements made by the outside contractor during the now complete
cleanup, consolidation and containerization phase of the remediation. The
approach for the remaining treatment, transport and disposal phase is based on
the final Nuclear Regulatory Commission "Technical Position," dated March 20,
1997. The remediation cost estimate is based on a signed contract for the
treatment and transportation and on a written price quotation for the disposal.
The detailed workplan has been submitted to the regulatory agencies and approval
is expected within 90 days. The Company is responsible for the total remediation
cost and currently estimates those costs to be approximately $3 million for this
site. The Company expects cleanup at this site to be substantially completed
during fiscal 1998.
The Sogreen site, a third party site, contains EC dust from the Company
that was improperly stored at this recycling location. The estimate includes the
cost of soil remediation and groundwater remediation based on an approach
approved by the Georgia Environmental Protection Division. The Company has been
named as a potentially responsible party ("PRP") for this site, and thus its
estimated share of the remediation costs is approximately 43% (based on
analytical data from soil borings and samples) of the total estimated
remediation cost of $4.3 million; therefore, the Company currently estimates its
obligation to be approximately $2 million. The Company's management believes
that the impact of additional future costs on the Company's results of
operations, financial condition and liquidity from the Sogreen site, based on
the other PRPs not fulfilling their obligations, would not be significant. The
Company expects cleanup at this site to be substantially completed during fiscal
1998.
The Stoller site, a third party site, contains EC dust from the Company
that was improperly stored at this recycling location. The Company has been
named as a PRP for this site. The estimate includes soil remediation and
groundwater remediation. Outside contractors have measured the remediation
volumes and masses during the now complete cleanup and consolidation phase of
the remediation. The remainder of the remediation approach selected by the
Company, on-site treatment and disposal, has been approved, and contract
negotiations for construction of the on-site vault are underway. The Company's
cost estimates are based on its previous experience with comparable projects as
well as estimates confirmed by the State of South Carolina. An Allocation
Agreement was issued by the State of South Carolina during fiscal 1997 that
essentially shifted some of the payment burden from the Company to other PRPs,
leaving the Company with an approximately 2% share of the remaining estimated $8
million remediation cost; therefore, the Company currently estimates its
obligation to be approximately $.2 million. The non-participating PRPs have
intervened in the proceedings for approval by the federal court in order to
contest the agreement. The Company's management believes that the agreement will
be finalized between February and May 1998. If the Allocation Agreement is not
finalized under its present terms, the Company's management believes that the
Company's overall obligation for this site would not exceed approximately 50% of
the total estimated remediation cost. The Company expects cleanup at this site
to be substantially completed during fiscal 1998.
The Company paid approximately $5.2 million in remediation costs in fiscal
1997, and $.7 million during the first six months of fiscal 1998. Of the $14.9
million accrued at September 30, 1997, the Company expects to pay approximately
$3.7 million during the remainder of fiscal 1998. The timing of the remaining
future payments for each future year is uncertain due to the various remediation
alternatives being considered. However, the Company's management has estimated
that all significant remediation
F-7
<PAGE> 58
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
should be completed by 2002. The Company expensed approximately $3.3 million
during the six months ended September 30, 1997 and approximately $2 million in
each of the past two fiscal years 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 which the Company and is
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 jointly 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 F -- SUBSEQUENT EVENTS
The Company proposes to sell shares of common stock to the public pursuant
to a Registration Statement filed with the Securities and Exchange Commission
(the "Offering"). In connection with the Offering, the Board of Directors
approved on October 16, 1997 subject to stockholder approval, amendments to the
Company's Articles of Incorporation. The Company expects the amendments to the
Articles of Incorporation to become effective on or about December 7, 1997. The
amendment authorizes 100,000,000 shares of $.01 par value Class A common stock
and 22,000,000 shares of $.01 par value Class B common stock. The rights of the
holders of both Class A and Class B common stock will be substantially the same
except that the holders of Class A common stock and Class B common stock will be
entitled to one vote per share and two votes per share, respectively. Only
shares of Class A common stock will be sold in the Offerings.
NOTE G -- PRO FORMA INFORMATION
Prior to the completion of the Offering, the Company intends to declare and
pay a special dividend of $.60 per share to its then current stockholders.
The accompanying unaudited pro forma statement of financial position as of
September 30, 1997, is based on the Company's historical statement of financial
position as of September 30, 1997, as adjusted to reflect the payment of the
special dividend which is assumed to be funded from available borrowings under
the Revolving Credit Agreement. This transaction is presented in the unaudited
pro forma statement of financial position as if it was consummated on September
30, 1997.
F-8
<PAGE> 59
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To AmeriSteel Corporation:
We have audited the accompanying statements of financial position of
AmeriSteel Corporation (a Florida corporation) as of March 31, 1996 and 1997,
and the related statements of income, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 1997, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
April 25, 1997 (except with
respect to the matter discussed
in Note L, as to which the
date is October 16, 1997)
F-9
<PAGE> 60
AMERISTEEL CORPORATION
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $ 6,193 $ 1,645
Accounts receivable, less allowance of $1,000 at March 31,
1996 and 1997 for doubtful accounts....................... 72,910 68,563
Inventories................................................. 112,753 106,173
Deferred tax assets......................................... 7,200 5,000
Other current assets........................................ 1,053 1,138
-------- --------
TOTAL CURRENT ASSETS.............................. 200,109 182,519
ASSETS HELD FOR SALE........................................ 14,411 14,838
PROPERTY, PLANT AND EQUIPMENT
Land and improvements....................................... 13,393 14,942
Building and improvements................................... 31,906 35,116
Machinery and equipment..................................... 199,350 250,299
Construction in progress.................................... 45,039 7,802
-------- --------
289,688 308,159
Less accumulated depreciation............................... 42,679 58,138
-------- --------
247,009 250,021
GOODWILL.................................................... 89,903 85,773
DEFERRED FINANCING COSTS.................................... 3,457 2,523
OTHER ASSETS................................................ 7 11
-------- --------
TOTAL ASSETS...................................... $554,896 $535,685
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable...................................... $ 40,234 $ 44,666
Salaries, wages and employee benefits....................... 14,336 14,598
Environmental remediation................................... 6,079 5,079
Other current liabilities................................... 5,057 4,355
Interest payable............................................ 4,940 4,659
Current maturities of long-term borrowings (including note
payable to parent of $444 and $435 at March 31, 1996 and
1997, respectively)....................................... 14,942 435
-------- --------
TOTAL CURRENT LIABILITIES......................... 85,588 73,792
LONG-TERM BORROWINGS, LESS CURRENT PORTION.................. 252,525 237,474
OTHER LIABILITIES........................................... 20,336 21,555
DEFERRED TAX LIABILITIES.................................... 54,700 52,300
SHAREHOLDERS' EQUITY........................................
Common stock, $.01 par value; 30,000,000 authorized,
10,095,741 and 10,079,028 shares outstanding, at March 31,
1996 and 1997, respectively............................... 101 101
Capital in excess of par.................................... 157,026 156,816
Accumulated deficit......................................... (12,380) (4,328)
Deferred compensation....................................... (3,000) (2,025)
-------- --------
TOTAL SHAREHOLDERS' EQUITY........................ 141,747 150,564
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $554,896 $535,685
======== ========
</TABLE>
See notes to financial statements
F-10
<PAGE> 61
AMERISTEEL CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS EXCEPT EARNINGS PER
COMMON SHARE)
<S> <C> <C> <C>
NET SALES................................................... $639,908 $628,404 $617,289
Operating expenses:
Cost of sales............................................. 545,725 533,965 531,190
Selling and administrative................................ 29,959 29,605 29,068
Depreciation.............................................. 14,046 14,619 16,654
Amortization of goodwill.................................. 4,130 4,130 4,130
Other operating expenses.................................. -- 16,013 --
-------- -------- --------
593,860 598,332 581,042
-------- -------- --------
INCOME FROM OPERATIONS...................................... 46,048 30,072 36,247
Other expenses:
Interest.................................................. 23,330 22,000 19,473
Amortization of deferred financing costs.................. 2,863 1,956 934
-------- -------- --------
26,193 23,956 20,407
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 19,855 6,116 15,840
Income taxes................................................ 9,354 3,996 7,788
-------- -------- --------
NET INCOME.................................................. $ 10,501 $ 2,120 $ 8,052
======== ======== ========
Weighted average common shares outstanding (in thousands)... 10,000 10,062 10,087
EARNINGS PER COMMON SHARE................................... $ 1.05 $ 0.21 $ 0.80
</TABLE>
See notes to financial statements
F-11
<PAGE> 62
AMERISTEEL CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
------------------- IN EXCESS ACCUMULATED DEFERRED
SHARES AMOUNT OF PAR DEFICIT COMPENSATION TOTAL
---------- ------ --------- ----------- ------------ --------
($ IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
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
Common stock issuance............ 100 -- 1 -- -- 1
Repurchase of common stock....... (16,813) -- (211) -- -- (211)
Net income....................... -- -- -- 8,052 -- 8,052
Reduction in deferred
compensation................... -- -- -- -- 975 975
---------- ---- -------- -------- ------- --------
BALANCES AT MARCH 31, 1997....... 10,079,028 $101 $156,816 $ (4,328) $(2,025) $150,564
========== ==== ======== ======== ======= ========
</TABLE>
See notes to financial statements
F-12
<PAGE> 63
AMERISTEEL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 10,501 $ 2,120 $ 8,052
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.............................................. 14,046 14,619 16,654
Amortization.............................................. 6,993 6,086 5,064
Deferred income taxes..................................... 1,849 (1,200) (200)
Loss on disposition of property, plant and equipment...... 600 14,312 317
Deferred compensation..................................... 750 900 975
Changes in operating assets and liabilities:
Accounts receivable....................................... (11,142) 7,450 4,347
Recoverable income taxes.................................. 300 -- --
Inventories............................................... (12,470) 14,927 6,580
Other current assets...................................... 420 (303) (85)
Other assets.............................................. 15 21 (4)
Trade accounts payable.................................... 3,315 (9,130) 4,432
Salaries, wages and employee benefits..................... (868) (2,184) 262
Other current liabilities................................. 290 769 (828)
Environmental remediation................................. (7,995) (5,421) (1,400)
Interest payable.......................................... 526 (318) (281)
Income taxes payable...................................... 1,561 514 126
Other liabilities......................................... 2,666 929 (81)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......... 11,357 44,091 43,930
INVESTING ACTIVITIES
Additions to property, plant and equipment.................. (25,781) (36,894) (34,382)
Proceeds from sale of property, plant and equipment......... 1,857 788 876
Proceeds from sale of assets held for sale.................. -- 794 1,550
Purchase of assets held for sale............................ -- -- (454)
Restricted IRB Funds........................................ -- (13,700) 13,700
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES.............. $(23,924) $(49,012) $(18,710)
FINANCING ACTIVITIES
Proceeds from (payments to) short and long-term borrowings,
net....................................................... $ 12,147 $ 21,227 $(29,558)
Additions to deferred financing costs....................... -- (909) --
Repurchase of subordinated debentures....................... -- (13,035) --
Proceeds from exercise of stock options..................... 1,500 -- --
Proceeds from sale of common stock.......................... -- 977 --
Redemption of common stock.................................. -- -- (210)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......... 13,647 8,260 (29,768)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 1,080 3,339 (4,548)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 1,774 2,854 6,193
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 2,854 $ 6,193 $ 1,645
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized).......... $ 22,150 $ 22,318 $ 19,754
======== ======== ========
Cash paid for income taxes.................................. $ 5,645 $ 4,682 $ 7,862
======== ======== ========
</TABLE>
See notes to financial statements
F-13
<PAGE> 64
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995, 1996 AND 1997
NOTE A -- BASIS OF PRESENTATION
The financial statements include the accounts of AmeriSteel, a Florida
corporation (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. All significant
intercompany accounts and transactions have been eliminated.
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 (recoveries)losses for the fiscal years
1995, 1996, and 1997 have been $(559,000), $184,000 and $106,000, respectively.
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 1997,
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: The majority of the account consists of real estate
and machinery and equipment held for sale which are carried at the lower of cost
or estimated fair value. For the year ended March 31, 1996, the Company
transferred $5.0 million from property, plant and equipment to assets held for
sale.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. 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 income.
Restricted IRB Funds: The Company accounts for restricted funds received
from the proceeds of Industrial Revenue Bonds (IRBs) as Construction in Progress
within Property, Plant and Equipment until such funds have been spent. As of
March 31, 1996 and 1997, the Company had $13.7 million and $0 million,
respectively, of such restricted IRB funds on its balance sheet.
Interest costs for property, plant and equipment construction expenditures
of approximately $2.1 million and $2.0 million were capitalized for the years
ended March 31, 1996 and 1997, respectively. 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 $13.3 million and $17.5 million at March 31, 1996
and 1997, respectively. Goodwill is being amortized over a 25-year period.
Deferred Financing Costs: The deferred financing costs as of March 31,
1996 and 1997, are net of accumulated amortization of $8.0 million and $9.0
million, respectively. These amounts will be amortized over the term of the
respective debt instruments, which range from 3 to 8 years.
F-14
<PAGE> 65
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (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.
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.
Fair Value of Financial Instruments: The carrying amount of long-term
borrowings approximates fair value due to market rates of interest and related
maturities.
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 Pronouncements: In October 1996, the American Institute
of Certified Public Accountants issued Statement of Position No. 96-1,
"Environmental Remediation Liabilities" (SOP 96-1). SOP 96-1 provides
authoritative guidance on the specific accounting issues for the recognition,
measurement, display, and disclosure of environmental remediation liabilities.
Specifically, SOP 96-1 requires (1) the recognition of an environmental
remediation liability when the criteria of Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies" are met, (2) the measurement of
the liability to include incremental direct costs of the remediation effort and
costs of compensation and benefits for those employees who are expected to
devote a significant amount of time directly to the remediation effort, (3) the
measurement of the liability to include the entity's allocable share of the
liability for a specific site and the entity's share of amounts related to the
site that will not be paid by other potentially responsible parties, (4) the
measurement of the liability be based on enacted laws, regulations and
technology, and (5) appropriate display of the liabilities in the financial
statements and disclosures in the footnotes to the financial statements. SOP
96-1 is effective for fiscal years beginning after December 15, 1996. Management
has determined that the adoption of SOP 96-1 will not have a material effect on
the accompanying financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" which establishes standards for computing and
presenting earnings per share. The statement replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. It
also requires dual presentation of basic and diluted earnings per share on the
income statement and provides for certain disclosures. The Company will adopt
Statement No. 128 in the third quarter of fiscal 1998 and does not believe the
effect of adoption will be material.
Reclassifications: Certain amounts in the fiscal 1995 and 1996 financial
statements have been reclassified to conform to the fiscal 1997 financial
statement presentation.
F-15
<PAGE> 66
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE C -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $ 73,196 $ 59,299
Work in-process............................................. 16,291 14,175
Raw materials and operating supplies........................ 23,266 32,699
-------- --------
$112,753 $106,173
======== ========
</TABLE>
NOTE D -- BORROWINGS
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Revolving Credit Agreement.................................. $ 71,650 $ 51,340
First Mortgage Notes........................................ 100,000 100,000
Subordinated Intercompany Note.............................. 50,000 50,000
Industrial Revenue Bonds.................................... 30,875 30,875
Note to Parent.............................................. 444 435
Trade Loan Agreements....................................... 4,498 5,259
Bank of Tokyo Loan.......................................... 10,000 --
-------- --------
267,467 237,909
Less current maturities..................................... 14,942 435
-------- --------
$252,525 $237,474
======== ========
</TABLE>
On June 9, 1995, the Company entered into a revolving bank agreement (the
"Revolving Credit Agreement"), which 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
Revolving Credit Agreement expires on June 9, 1999.
The Revolving Credit Agreement contains certain covenants including, among
other restrictions, 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 was in compliance with these covenants
throughout fiscal 1997.
Loans under the Revolving Credit Agreement bear interest at a per annum
rate equal to one of several rate options (LIBOR, Fed Funds, or Cost of Funds)
based on the facility chosen at the time of borrowing plus an applicable margin
determined by tests of performance from time to time. The effective interest
rate at March 31, 1997 was 7.4%.
The First Mortgage Notes are collateralized senior obligations of the
Company limited in aggregate principal amount to $100 million and 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.
F-16
<PAGE> 67
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (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 (none were redeemed in fiscal 1997):
<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 was in compliance with these
covenants throughout fiscal 1997.
The Company has issued to a related party a $50 million note (the
"Subordinated Intercompany Note") which matures December 21, 2002. The
Subordinated Intercompany Note bears interest at variable rates. The weighted
average interest rate at March 31, 1997 was 7.01%.
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 IRBs by $20 million in fiscal 1996 for a solid
waste recycling facility in Jackson, Tennessee. 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 Revolving Credit Agreement.
As of March 31, 1997, the Company had approximately $37 million of outstanding
letters of credit, primarily for IRBs, insurance-related matters and surety
bonds.
The Note to Parent is an unsecured non-interest bearing note which is due
on demand. Accordingly, amounts due are classified as current in the
accompanying statements of financial position.
The Company has borrowed $5.3 million as of March 31, 1997, under the Trade
Loan Agreements. The loan bears interest at 7.3% and matures on June 30, 1998.
Proceeds were used for the purchase of steel mill equipment.
The maturities of long-term borrowings for the fiscal years subsequent to
March 31, 1997 are as follows:
<TABLE>
<CAPTION>
FISCAL AMOUNT
- ------ ----------------
($ IN THOUSANDS)
<S> <C>
1998....................................................... $ 435
1999....................................................... 58,079
2000....................................................... --
2001....................................................... 100,000
2002....................................................... --
Thereafter................................................. 79,395
--------
$237,909
========
</TABLE>
F-17
<PAGE> 68
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E -- INCOME TAXES
The provision for income taxes is comprised of the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal........................................ $3,572 $ 4,592 $7,391
State.......................................... -- 604 597
------ ------- ------
3,572 5,196 7,988
------ ------- ------
Deferred provision (benefit):
Federal........................................ 4,785 (1,301) (594)
State.......................................... 997 101 394
------ ------- ------
5,782 (1,200) (200)
------ ------- ------
$9,354 $ 3,996 $7,788
====== ======= ======
</TABLE>
A reconciliation of the difference between the effective income tax rate
for each year and the statutory federal income tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
Tax provision at statutory rates................... $6,949 $2,141 $5,544
State income taxes, net of federal income tax
effect........................................... 997 244 722
Goodwill amortization.............................. 1,611 1,611 1,446
Other items, net................................... (203) -- 76
------ ------ ------
$9,354 $3,996 $7,788
====== ====== ======
</TABLE>
F-18
<PAGE> 69
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of the deferred tax assets and liabilities consisted of the
following at March 31:
<TABLE>
<CAPTION>
1996 1997
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSET
Allowance for doubtful accounts........................... $ 390 $ 390
Worker's compensation accrual............................. 1,648 1,413
Employee benefits and related accruals.................... 2,229 2,351
Environmental remediation accrual......................... 4,611 3,414
Federal loss carryforward................................. 2,055 1,654
State loss carryforward................................... 596 40
Alternative minimum tax credit carryforward............... 468 --
Pension accrual........................................... 1,739 2,334
Post retirement benefits accrual.......................... 3,228 3,306
Other..................................................... 1,136 856
-------- --------
18,100 15,758
-------- --------
DEFERRED TAX LIABILITY
Inventories............................................... (2,988) (1,992)
Property, plant and equipment............................. (58,260) (57,903)
Assets held for sale...................................... (3,240) (2,432)
Deferred compensation..................................... (1,112) (731)
-------- --------
(65,600) (63,058)
-------- --------
NET DEFERRED TAX LIABILITY.................................. $(47,500) $(47,300)
======== ========
</TABLE>
The Company has a Federal net operating loss carryforward of approximately
$4.7 million and a state net operating loss of approximately $1.0 million, both
expiring in 2009. As a result of a change in tax fiscal year, recognition of
Federal net operating loss carryforwards are limited to approximately $1.6
million each year.
NOTE F -- BENEFIT PLANS
The Company maintains a defined benefit pension plan covering substantially
all employees. The benefits are based on years of service and compensation
during the period of employment. Annual contributions are made in conformity
with minimum funding requirements and maximum deductible limitations.
F-19
<PAGE> 70
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The plan's funded status and the amounts recognized in the accompanying
statements of financial position are as follows:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested benefits
of $65,617 and $66,249, at March 31, 1996 and 1997,
respectively........................................... $ 69,221 $ 71,157
======== ========
Projected benefit obligation for service rendered to date... $(84,950) $(84,646)
Plan assets at fair value................................... 82,808 85,828
-------- --------
Projected benefit obligation (in excess of) less than plan
assets.................................................... (2,142) 1,182
Unrecognized net gain....................................... (1,310) (6,549)
Unrecognized prior service cost............................. (426) (390)
-------- --------
Net accrued pension cost included in accrued salaries, wages
and employee benefits..................................... $ (3,878) $ (5,757)
======== ========
</TABLE>
The weighted average discount rates used in determining the actuarial
present value of the accumulated benefit obligation were 7.5% and 7.75%, for the
years ended March 31, 1996 and 1997, 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 1997.
Pension cost included in the accompanying statements of income is comprised
of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................... $ 2,574 $ 2,695 $ 2,802
Interest cost.................................. 5,357 5,756 6,223
Actual income from plan assets................. (6,783) (14,561) (7,395)
Net amortization and deferral.................. 982 8,025 249
------- -------- -------
Net pension cost............................... $ 2,130 $ 1,915 $ 1,879
======= ======== =======
</TABLE>
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. The Company
matches 50% of the employees' contributions up to 4% of employees' salaries.
Costs under this plan were $1.2 million, $1.1 million, and $1.1 million for the
years ended March 31, 1995, 1996 and 1997, 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 income under the
Supplemental Benefits Plan for the years ended March 31, 1995, 1996 and 1997
were $159 thousand, $0 and $282 thousand, respectively.
Post Retirement Benefits
The Company currently provides specified health care benefits to retired
employees. Employees who retire after a certain age with specified years of
service become eligible for benefits under this unfunded plan. The Company has
the right to modify or terminate these benefits. The following table summarizes
F-20
<PAGE> 71
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the accumulated post retirement benefit obligations included in the Company's
statements of financial position:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Retirees.................................................... $4,176 $4,496
Fully eligible active participants.......................... 238 232
Other active plan participants.............................. 3,178 3,015
------ ------
Total............................................. 7,592 7,743
Plan assets at fair value................................... -- --
Unrecognized net gain....................................... 1,303 1,319
------ ------
Accrued post retirement benefit obligation.................. $8,895 $9,062
====== ======
</TABLE>
The following table summarizes the net post retirement benefit costs:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Service cost................................................ $ 203 $ 216
Interest cost............................................... 543 558
Gain........................................................ (60) (23)
------ ------
Net post retirement benefit cost............................ $ 686 $ 751
====== ======
</TABLE>
The weighted average discount rate used in determining the accrued post
retirement benefit obligation was 7.50% for fiscal 1996 and 7.75% for fiscal
1997. The gross medical trend rate was assumed to be 10.31% in 1996 and dropping
.346% per year to 6.0% in 2008 and beyond for pre-65 retirees that retired
before January 1, 1994 and 9.0% 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 $230,448 and $16,699 to the accrued post
retirement benefit obligation and net post retirement benefit cost,
respectively, as of and for the year ended March 31, 1997.
NOTE G -- COMMON STOCK
In fiscal 1996, the Board of Directors approved a one time Stock
Purchase/Option Plan (the "Purchase Plan") available to essentially all
employees. Employees who purchased stock were awarded stock options equal to six
times the number of shares purchased. A total of 37,689 shares were sold under
the Purchase Plan at a purchase price of $10.63 per share, with 32,448 shares
outstanding as of March 31, 1997. The options were granted at fair value at the
date of the grants, determined based on an independent appraisal as of the end
of the previous fiscal year-end. The options have a four-year vesting period. A
total of 226,134 options were granted under the Purchase Plan. No options remain
available for future grant. The issued options and shares become one-third
vested two years from the grant date, another one-third vested three years from
the grant date and the remaining balance vested four years from the grant date.
Options may be exercised for 10 years from the grant date.
F-21
<PAGE> 72
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 up to 438,852 shares. The Company has granted 91,350
incentive stock options and 12,100 shares of common stock under the Equity
Ownership Plan through March 31, 1997. As of March 31, 1997, there remain
348,452 shares available for future grants. The issued options and shares become
one-third vested two years from the grant date, another one-third vested three
years from the grant date and the remaining balance vested four years from the
grant date. All grants were at the fair market value of the common stock on the
grant date, determined based on an independent appraisal as of the end of the
previous fiscal year-end. Options may be exercised for 10 years from the grant
date.
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25 (APB 25), under which no compensation
expense has been recognized for the instruments issued under the Purchase Plan
or the options issued under the Equity Ownership Plan. In October 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123),
which was effective for fiscal years beginning after December 15, 1995. SFAS No.
123 allows companies to continue following the accounting guidance of APB 25,
but requires pro forma disclosure of net income and earnings per share for the
effects on compensation expense had the accounting guidance of SFAS No. 123 been
adopted. The pro forma disclosures are required only for stock-based awards
granted subsequent to April 1, 1995.
The Company adopted SFAS No. 123 for disclosure purposes in fiscal 1997.
For SFAS No. 123 purposes, the fair value of each option grant under the
Purchase Plan and the Equity Ownership Plan has been estimated as of the date of
the grant using a minimum value calculation with the following weighted average
assumptions: risk-free interest rate of 6.5% and 6.3% for the Equity Ownership
Plan and Purchase Plan, respectively; expected life of 7 years for both the
Equity Ownership Plan and Purchase Plan; and dividend rate of 0% for both the
Equity Ownership Plan and Purchase Plan. Using these assumptions, the fair value
of the stock options granted in fiscal 1996 and 1997 is $1,009,501 and $347,159,
respectively, which would be amortized as compensation expense over the vesting
period of the options.
The fair value of the stock issued under the Purchase Plan has been
estimated at the date of the grant using a minimum value calculation with the
following weighted average assumptions: risk-free interest rate of 5.3%,
expected life of 7 years and dividend rate of zero percent. Using these
assumptions, the fair value of the issued stock in fiscal 1996 and fiscal 1997
is $75,755 and $0, respectively. The fiscal 1996 fair value would be
compensation expense for fiscal 1996. Had compensation cost been determined
consistent with SFAS No. 123, utilizing the assumptions detailed above, the
Company's net income and earnings per share ("EPS") would have been changed to
the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Net Income:
As Reported............................................... $2,120 $8,052
Pro Forma................................................. 2,003 7,858
EPS:
As Reported............................................... $ .21 $ .80
Pro Forma................................................. .20 .78
</TABLE>
F-22
<PAGE> 73
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Because the SFAS No. 123 method of accounting has not been applied to
stock-based compensation granted prior to April 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
The following table summarizes stock option activity for the years ended
March 31, 1996 and 1997:
<TABLE>
<CAPTION>
EQUITY OWNERSHIP PLAN PURCHASE PLAN
--------------------------------------------- ---------------------------------------------
1996 1997 1996 1997
--------------------- --------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of
year............... -- $ -- 12,000 $ 12.50 -- $ -- 221,094 $12.50
Granted............ 12,000 12.50 79,350 12.50 226,134 12.50 -- --
Exercised.......... -- -- -- -- -- -- -- --
Forfeited.......... -- -- (13,050) (12.50) (5,040) 12.50 (26,316) 12.50
Outstanding, end of
year............... 12,000 12.50 78,300 12.50 221,094 12.50 194,778 12.50
====== ======= ======= =======
Options vested at
year-end........... -- -- -- -- -- -- -- --
Weighted-average fair
value of options
granted during the
year............... -- $ 4.46 -- $ 4.38 -- $ 4.45 -- $ --
</TABLE>
No stock option activity occurred during fiscal 1995. The weighted-average
remaining contractual life of the options under the Purchase Plan and the Equity
Ownership Plan as of March 31, 1997 is 8.50 years and 9.15 years, respectively.
The weighted-average fair value of the shares sold under the Purchase Plan
during fiscal 1996 was $12.50.
Subsequent to year end, the Board of Directors granted options for an
additional 63,550 shares with an exercise price of $13.50 per share.
NOTE H -- INCENTIVE COMPENSATION PLAN
During 1989, the Board of Directors 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 and 1997 plans were based on actual return
on capital employed as compared to target return on capital employed. The prior
fiscal years plans were based on actual operating results as compared to target
operating results. The award was $1.9 million for fiscal 1995, $1.2 million for
fiscal 1996, and $1.4 million for fiscal 1997, which amounts were included in
salaries, wages and employee benefits.
NOTE I -- 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
$12.3 million with these costs recorded in accrued liabilities as of March 31,
1997. The Company paid approximately $5.2 million in remediation
F-23
<PAGE> 74
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
costs in fiscal 1997. Of the amount accrued at March 31, 1997, the Company
expects to pay approximately $5.1 million in fiscal 1998. 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.
The Company expensed approximately $6 million in fiscal 1995 and $2 million
in each of the past two fiscal years for environmental remediation costs.
Based on past use of certain technologies and remediation methods by third
parties, evaluation of those technologies and methods by the Company's
consultants and quotations and third-party estimates of costs of
remediation-related services provided to the Company or of which the Company and
its consultants are aware, the Company and its consultants believe that the
Company's cost estimates are reasonable. In light of the uncertainties inherent
in determining the costs associated with the clean-up of such contamination,
including the time periods over which such costs must be paid, the extent of
contribution by parties which are joint and severally liable, and the nature and
timing of payments to be made under cost sharing arrangements; there can be no
assurance the ultimate costs of remediation may not be greater or less than the
estimated remediation costs.
NOTE J -- COMMITMENTS
Operating Leases
The Company leases certain equipment and real property under noncancelable
operating leases. Aggregate future minimum payments under these leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
- --------------------- ----------------
($ IN THOUSANDS)
<S> <C>
1998..................................................... $1,644
1999..................................................... 1,210
2000..................................................... 1,134
2001..................................................... 863
2002..................................................... 735
Thereafter............................................... 1,345
--------
$6,931
========
</TABLE>
Total rent expense was approximately $5.0 million, $4.2 million, and $4.1
million, for the years ended March 31, 1995, 1996 and 1997, 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.
F-24
<PAGE> 75
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 (subsequently revised to $255,000 plus incentives
based on performance), 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 maintained an interest rate swap (the "Swap") agreement as a
hedge against fluctuations in interest rates on certain debt. The Swap had a
notional amount of $20 million and expired on February 24, 1997. Under the terms
of the Swap, the Company agreed to pay fixed interest at 9% and receive variable
interest at the LIBOR Rate plus 3.0%, computed on the notional amount. The
Company amortized 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 K -- OTHER OPERATING EXPENSES
The Company decided in June 1995 to close the Tampa rolling mill effective
September 1995. The Tampa mill was the Company's oldest facility and represented
the Company's highest operating cost minimill. In fiscal 1996, the Company
incurred non-cash charges of $12 million representing the write-down of
property, plant and equipment to its estimated fair market value, and incurred
cash charges of $3 million for severance payments and benefits costs for the
termination of substantially all 116 Tampa rolling mill employees. All severance
payroll and benefit costs were paid and charged against the liability during
fiscal 1996, resulting in no liability for severance payroll and benefit costs
at March 31, 1996. Approximately $1.8 million in net book value of property,
plant and equipment related to the Tampa site, primarily land and buildings, was
retained and is currently being used by the Company. The Company currently
incurs minimal ongoing costs related to the Tampa mill land and building,
primarily for ongoing warehousing and shipping operations, and the caretaking of
environmental cleanup (see "Note E to September 30, 1997 unaudited condensed
financial statements -- Environmental Matters"), totaling approximately $300,000
annually. These costs are offset by short-term rental income attributable to
this property of approximately $225,000 annually. Approximately $3.5 million
remains in Assets Held for Sale, which represents appraised values of machinery
and equipment and land being marketed for sale. Since the closure, the Tampa
market has been served by the Company's Jacksonville mill, minimizing lost
sales. The Company intends to sell the Tampa minimill property.
The Company incurred an additional $.8 million charge in fiscal 1996 for
the write-off of all future lease obligations (through November 1998) related to
the closure of its fabricating plant in Woodbridge, Virginia.
F-25
<PAGE> 76
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- SUBSEQUENT EVENTS
The Company proposes to sell shares of common stock to the public pursuant
to a Registration Statement filed with the Securities and Exchange Commission
(the "Offering"). In connection with the Offering, the Board of Directors
approved on October 16, 1997, subject to stockholder approval, amendments to the
Company's Articles of Incorporation. The Company expects the amendments to the
Articles of Incorporation to become effective on or about December 8, 1997. The
amendment authorizes 100,000,000 shares of $.01 par value Class A common stock
and 22,000,000 shares of $.01 par value Class B common stock. The rights of the
holders of both Class A and Class B common stock will be substantially the same
except that the holders of Class A common stock and Class B common stock will be
entitled to one vote per share and two votes per share, respectively. Only
shares of Class A common stock will be sold in the Offering.
During September 1997, the Board of Directors granted 9,200 common stock
options with an exercise price of $13.50 per share and 40,000 restricted shares
of common stock with a price of $13.50 per share. These options and shares will
relate to Class B common stock upon the Offering.
In September 1997, the Company incurred additional indebtedness of
$5,000,000 through an industrial revenue bond for the construction of steel mill
equipment. The loan bears interest at 50% to 75% of the prime rate and matures
in September 2014.
F-26
<PAGE> 77
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co. and Morgan Stanley
& Co. Incorporated are acting as representatives, has severally agreed to
purchase from the Company, the respective number of shares of Class A Common
Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co.........................................
Morgan Stanley & Co. Incorporated...........................
---------
Total..................................................... 3,160,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such a price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of Class A Common Stock
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the representatives.
The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the international offering
(the "International Underwriters") providing for the concurrent offer and sale
of 790,000 shares of Class A Common Stock in an international offering outside
the United States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
offering made hereby is a condition to the closing of the international
offering, and vice versa. The representatives of the International Underwriters
are Goldman Sachs International and Morgan Stanley & Co. International Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the U.S.
Underwriters named herein has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will offer, sell or
deliver the shares of Class A Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Class A Common Stock (a) in the
United States or to any U.S. persons or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States or to any
U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
U-1
<PAGE> 78
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial public offering price, less an amount not greater than the
selling concession.
In connection with the Offerings, the Underwriters may purchase and sell
the Class A Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offerings. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Class A Common Stock; and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Class A Common Stock than they are required to purchase from
the Company in the Offerings. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the securities sold in the Offerings for their account may be
reclaimed by the syndicate if such shares of Class A Common Stock are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Class A Common Stock, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of 474,000
additional shares of Class A Common Stock solely to cover over-allotments, if
any. If the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
3,160,000 shares of Class A Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
118,500 additional shares of Class A Common Stock.
The Company, certain executive officers of the Company and Kyoei have
agreed that, during the period beginning from the date of this Prospectus and
continuing to and including the date 180 days after the date of this Prospectus,
they will not offer, sell, contract to sell, pledge, hypothecate, grant any
option, right or warrant to purchase, or otherwise dispose of, directly or
indirectly, (which shall be deemed to include, without limitation, the entering
into of a cash-settled or Common Stock settled derivative instrument) any shares
of Common Stock, any securities of the Company which are substantially similar
to the shares of Class A Common Stock or any securities that are convertible
into or exchangeable for, or that represent the right to receive, Common Stock,
or any such substantially similar securities, (other than pursuant to employee
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Prospectus), without the prior written consent of the representatives, except
for the shares of Class A Common Stock offered in connection with the Offerings.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Class A Common Stock offered by them.
Prior to the Offerings, there has been no public market for the shares of
Class A Common Stock. The initial public offering price will be negotiated among
the Company and the representatives of the U.S. Underwriters and International
Underwriters. Among the factors considered in determining the initial public
offering price of the Class A Common Stock, in addition to prevailing market
conditions, were the Company's historical performance, estimates of the business
potential and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
The Class A Common Stock has been approved for listing, subject to notice
of issuance, on the New York Stock Exchange under the symbol "AST". In order to
meet one of the requirements for listing the
U-2
<PAGE> 79
Class A Common Stock on the New York Stock Exchange, the Underwriters have
undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial
holders.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Class A Common Stock, including shares initially sold in
the international offering, to persons located in the United States.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
U-3
<PAGE> 80
[ILLUSTRATED FLOW CHART OF THE STEEL-MAKING PROCESS]
<PAGE> 81
==========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH SOLICITATION IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 8
Use of Proceeds.......................... 12
Dividend Policy.......................... 12
Capitalization........................... 13
Dilution................................. 14
Selected Financial Data.................. 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 17
Business................................. 25
Management............................... 38
Principal Stockholders................... 44
Description of Capital Stock............. 45
Shares Eligible for Future Sale.......... 48
Validity of Class A Common Stock......... 49
Experts.................................. 49
Additional Information................... 49
Index to Financial Statements............ F-1
Underwriting............................. U-1
</TABLE>
----------------------
THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
==========================================================
==========================================================
3,950,000 SHARES
AMERISTEEL CORPORATION
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------
[AMERISTEEL LOGO]
------------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
REPRESENTATIVES OF THE UNDERWRITERS
==========================================================
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 31,660
NASD filing fee............................................. 10,275
NYSE listing fees........................................... 118,331*
Printing and engraving expenses............................. 250,000*
Accounting fees and expenses................................ 100,000*
Legal fees and expenses..................................... 150,000*
Blue Sky fees and expenses.................................. 18,000*
Transfer Agent's fees and expenses.......................... 50,000*
Miscellaneous............................................... 71,734
--------
Total............................................. $800,000*
========
</TABLE>
- ---------------
* Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act, as amended (the "Florida Act"),
provides that, in general, a business corporation may indemnify any person who
is or was a party to any proceeding (other than an action by, or in the right
of, the corporation) by reason of the fact that he or she is or was a director
or officer of the corporation, against liability incurred in connection with
such proceeding, including any appeal thereof, provided certain standards are
met, including that such officer or director acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and provided further that, with respect to any criminal action
or proceeding, the officer or director had no reasonable cause to believe his or
her conduct was unlawful. In the case of proceedings by or in the right of the
corporation, the Florida Act provides that, in general, a corporation may
indemnify any person who was or is a party to any such proceeding by reason of
the fact that he or she is or was a director or officer of the corporation
against expenses and amounts paid in settlement actually and reasonably incurred
in connection with the defense or settlement of such proceeding, including any
appeal thereof, provided that such person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made in respect of any
claim as to which such person is adjudged liable unless a court of competent
jurisdiction determines upon application that such person is fairly and
reasonably entitled to indemnity. To the extent that any officers or directors
are successful on the merits or otherwise in the defense of any of the
proceedings described above, the Florida Act provides that the corporation is
required to indemnify such officers or directors against expenses actually and
reasonably incurred in connection therewith. However, the Florida Act further
provides that, in general, indemnification or advancement of expenses shall not
be made to or on behalf of any officer or director if a judgment or other final
adjudication establishes that his or her actions, or omissions to act, were
material to the cause of action so adjudicated and constitute: (i) a violation
of the criminal law, unless the director or officer had reasonable cause to
believe his or her conduct was lawful or had no reasonable cause to believe it
was unlawful; (ii) a transaction from which the director or officer derived an
improper personal benefit; (iii) in the case of a director, a circumstance under
which the director has voted for or assented to a distribution made in violation
of the Florida Act or the corporation's articles of incorporation; or (iv)
willful misconduct or a conscious disregard for the best interests of the
corporation in a proceeding by or in the right of the corporation to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder.
Under the terms of the Company's Articles of Incorporation and Bylaws, the
Company may indemnify any director, officer or employee or any former director,
officer or employee to the fullest extent permitted by law.
II-1
<PAGE> 83
The Company intends to enter into indemnity agreements with each of its
directors and certain officers which provide that the Company will indemnify
such persons against any costs and expenses, judgments, settlements and fines
incurred in connection with any claim involving such person by reason of his or
her position as director or officer, provided that such person meets certain
standards of conduct.
The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities pursuant to the Underwriting Agreement
(see Exhibit 1).
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company sold 250,000 sales of Class B Common Stock to Mr. Casey for an
aggregate of $1.5 million in 1994, and 750,000 shares were granted as
compensation, pursuant to his employment agreement as described in the
Prospectus included in this Registration Statement. The Company sold 48,836
shares of Class B Common Stock to members of the Company's management for an
aggregate of $610,450 in 1996 in connection with the Company's bonus
compensation system. The Company believes that all such transactions were exempt
from registration pursuant to Section 4(2) and/or Rule 701 under the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1 -- Form of Underwriting Agreement
3.1 -- Articles of Incorporation, as amended to date (incorporated
by reference to Exhibit 3(I) to the Company's Annual Report
on Form 10-K for the year ended March 31, 1996)
3.2 -- Form of Article of Amendment to the Articles of
Incorporation to be filed immediately prior to completion of
the Offerings to which this Registration Statement relates
3.3 -- Amended and Restated Bylaws
4 -- Form of Class A Common Stock Certificate
5 -- Opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis, as to the legality of the Class A Common Stock being
Registered
10.1 -- AmeriSteel Equity Ownership Plan (incorporated by reference
to Exhibit 10 to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996)
10.2 -- AmeriSteel Strategic Value Added Executive Short-Term
Incentive Plan (incorporated by reference to Exhibit 10 to
the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996)
10.3 -- $140,000,000 Credit Agreement dated as of June 9, 1995 among
the Company, certain financial institutions, The Bank of
Tokyo, Ltd. and NationsBank of Florida, N.A., and The Bank
of Tokyo, Ltd. as agent, as amended**
10.4 -- Indenture dated as of December 15, 1992 by and between the
Company and The Connecticut National Bank for $100,000,000
11 1/2% First Mortgage Notes due 2000**
11 -- Statement re computation of per share earnings (incorporated
by reference to Exhibit 11 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997)
23.1 -- Consent of Counsel to the Company (included in Exhibit 5)
23.2 -- Consent of Arthur Andersen LLP
24 -- Powers of Attorney by persons whose names are signed to this
Registration Statement pursuant to such Powers of Attorney*
</TABLE>
- ---------------
* Previously filed
** To be filed by amendment
II-2
<PAGE> 84
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14), or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to the underwriter,
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt deliver to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida,
on the 17th day of November, 1997.
AMERISTEEL CORPORATION
By: /s/ TOM J. LANDA
------------------------------------
Tom J. Landa
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
* Chief Executive Officer and November 17, 1997
- ----------------------------------------------------- Director (Principal
Phillip E. Casey Executive Officer)
/s/ TOM J. LANDA Chief Financial Officer, November 17, 1997
- ----------------------------------------------------- Vice President and
Tom J. Landa Director (Principal
Financial Officer and
Principal Accounting
Officer)
* Group Vice President, November 17, 1997
- ----------------------------------------------------- Fabricated Reinforcing
J. Donald Haney Steel, and Director
* Vice President of November 17, 1997
- ----------------------------------------------------- Engineering and
Shuzo Hikita Technology, and Director
* Director November 17, 1997
- -----------------------------------------------------
Koichi Takashima
* Director November 17, 1997
- -----------------------------------------------------
Akihiko Takishima
* Director November 17, 1997
- -----------------------------------------------------
Hideichiro Takashima
* Director November 17, 1997
- -----------------------------------------------------
Ryutaro Yoshioka
*By: /s/ TOM J. LANDA
------------------------------------------------
Tom J. Landa
Attorney-in-fact
</TABLE>
II-4
<PAGE> 1
EXHIBIT 1
AMERISTEEL CORPORATION
COMMON STOCK $.01 PAR VALUE
----------------------------------------------------------
UNDERWRITING AGREEMENT
(U.S. VERSION)
----------------------
November , 1997
Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
AmeriSteel Corporation, a Florida corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of - shares (the "Firm Shares") and, at the election of the Underwriters, up to
- - additional shares (the "Optional Shares") of Class A Common Stock, par value
$.01 per share ("Stock"), of the Company. The Firm Shares and the Optional
Shares that the Underwriters elect to purchase pursuant to Section 2 hereof are
herein collectively called the "Shares".
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Company of up to a total of - shares
of Stock (the "International Shares"), including the overallotment option
thereunder, through arrangements with certain underwriters outside the United
States (the "International Underwriters"), for whom Goldman Sachs International
and Morgan Stanley & Co., International Limited are acting as lead managers.
Anything herein or therein to the contrary notwithstanding, the respective
closings under this Agreement and the International Underwriting Agreement are
hereby expressly made conditional on one another. The Underwriters hereunder and
the International Underwriters are simultaneously entering into an Agreement
between U.S. and International Underwriting Syndicates (the "Agreement between
Syndicates") which
<PAGE> 2
provides, among other things, for the transfer of shares of Stock between
the two syndicates. Two forms of prospectus are to be used in connection with
the offering and sale of shares of Stock contemplated by the foregoing, one
relating to the Shares hereunder and the other relating to the International
Shares. The latter form of prospectus will be identical to the former except for
certain substitute pages. Except as used in Sections 2, 3, 4, 9 and 11 herein,
and except as the context may otherwise require, references hereinafter to the
Shares shall include all the shares of Stock which may be sold pursuant to
either this Agreement or the International Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
1. (a) The Company represents and warrants to, and agrees with,
each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333- )
(the "Initial Registration Statement") in respect of
the Shares has been filed with the Securities and Exchange
Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits
thereto, to you for each of the other Underwriters, have been
declared effective by the Commission in such form; other than
a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as
amended (the "Act"), which became effective upon filing, no
other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and
no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated
or threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement or filed with
the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act, is hereinafter
called a "Preliminary Prospectus"); the various parts of the
Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto
and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the
Initial Registration Statement at the time it was declared
effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, each
as amended at the time such part of the registration statement
became effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the
form first filed pursuant to Rule 424(b) under the Act, is
hereinafter called the "Prospectus";
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and
each Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the
Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be
-2-
<PAGE> 3
stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished
in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein;
(iii) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all
material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder and do not and
will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the
applicable filing date as to the Prospectus and any amendment
or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished
in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein;
(iv) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial
statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or
any material adverse change, or any development involving a
prospective material adverse change, in or affecting the
general affairs, management, financial position, shareholders'
equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in
the Prospectus;
(v) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them,
in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such
as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries; and any
real property and buildings held under lease by the Company
and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed
to be made of such property and buildings by the Company and
its subsidiaries;
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the state of Florida, with power and authority (corporate and
other) to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified as a
foreign corporation for
-3-
<PAGE> 4
the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any
such jurisdiction; and each subsidiary of the Company has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation;
(vii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of Stock
and Class B Common Stock, par value $.01 per share ("Class B
Stock"), of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable and conform to
the description of the Stock and Class B Stock, respectively,
contained in the Prospectus; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly
and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares)
are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(viii) The Shares to be issued and sold by the Company to
the Underwriters hereunder and under the International
Underwriting Agreement have been duly and validly authorized
and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued and fully
paid and non-assessable and will conform to the description of
the Stock contained in the Prospectus;
(ix) The issue and sale of the Shares to be sold by the
Company hereunder and under the International Underwriting
Agreement and the compliance by the Company with all of the
provisions of this Agreement and the International
Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company, any of its subsidiaries or
affiliates is a party or by which the Company, any of its
subsidiaries or affiliates is bound or to which any of the
property or assets of the Company, any of its subsidiaries or
affiliates is subject, nor will such action result in any
violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company, any of its
subsidiaries or affiliates or any of their properties; and no
consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency
or body is required for the issue and sale of the Shares or
the consummation by the Company of the transactions
contemplated by this Agreement and the International
Underwriting Agreement, except the registration under the Act
of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters and the
International Underwriters;
(x) Neither the Company nor any of its subsidiaries or
affiliates is in violation of its Certificate of Incorporation
or By-laws or in default in the performance or
-4-
<PAGE> 5
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust,
loan agreement lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be
bound;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they
purport to constitute a summary of the terms of the Stock and
Class B Stock, and under the caption "Underwriting", insofar
as they purport to describe the provisions of the documents
referred to therein, are accurate, complete and fair;
(xii) Other than as set forth in the Prospectus, there are
no legal or governmental proceedings pending to which the
Company, any of its subsidiaries or affiliates is a party or
of which any property of the Company, any of its subsidiaries
or affiliates is the subject which, if determined adversely to
the Company, any of its subsidiaries or affiliates, would
individually or in the aggregate have a material adverse
effect on the current or future consolidated financial
position, shareholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of the
Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
(xiii) Other than as set forth in the Prospectus, neither
the Company nor any of its subsidiaries or affiliates is in
violation of, or subject to any liability or claims relating
to any statute, rule, regulation, common law or any order or
directive of any governmental agency or court, relating to the
protection of the environment or human health and safety or
the use, disposal, release of, or exposure to, any substance
or waste regulated under such laws, including any hazardous or
toxic substances (collectively, "Environmental Laws"); has
owned or operated any real property contaminated with any
substance that might require remediation under any
Environmental Law; is liable for any off-site disposal or
contamination in connection with any Environmental Law; or is
subject to any other condition, circumstance, event, notice or
investigation which might lead to any claims, liabilities,
compliance expenditures, costs, damages or losses relating to
any Environmental Law except in each case as would not,
individually or in the aggregate, have a material adverse
effect on the financial condition, shareholders' equity or
result of operations of the Company, any of its subsidiaries
or affiliates;
(xiv) The Company is the only subsidiary of FLS Holdings,
Inc. and FLS Holdings, Inc. owns no assets other than, and
conducts no business other than the ownership of, - shares of
Class B Stock (representing 89.3% of the outstanding shares of
Class B Stock);
(xv) The New York choice of law provision contained in
Section 15 of this Agreement is valid and will be recognized
and given effect by the courts of the State of Florida;
(xvi) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment
company" or an entity "controlled" by an
-5-
<PAGE> 6
"investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment
Company Act");
(xvii) Arthur Andersen LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company at a purchase
price per share of $......................, the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Firm Shares to be sold by the Company by a fraction, the
numerator of which is the aggregate number of Firm Shares to be purchased by
such Underwriter as set forth opposite the name of such Underwriter in Schedule
I hereto and the denominator of which is the aggregate number of Firm Shares to
be purchased by all of the Underwriters from the Company hereunder and (b) in
the event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to - Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Company, given within a
period of 30 calendar days after the date of this Agreement and setting forth
the aggregate number of Optional Shares to be purchased and the date on which
such Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered
in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company shall be delivered by or
on behalf of the Company to Goldman, Sachs & Co., for the account of
such Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by certified or official bank check or
checks, payable to the order of the Company in New York Clearing House
(next day) funds. The Company will cause the certificates
-6-
<PAGE> 7
representing the Shares to be made available for checking and packaging
at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004 (the "Designated Office"). The
time and date of such delivery and payment shall be, with respect to
the Firm Shares, 9:30 a.m., New York City time, on ............., 1997
or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing, and, with respect to the Optional Shares, 9:30
a.m., New York City time, on the date specified by Goldman, Sachs & Co.
in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other
time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date for delivery of the Shares is herein called
the "First Time of Delivery", such time and date for delivery of the
Optional Shares, if not the First Time of Delivery, is herein called
the "Second Time of Delivery", and each such time and date for delivery
is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof,
including the cross-receipt for the Shares and any additional documents
requested by the Underwriters pursuant to Section 7(k) hereof, will be
delivered at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York 10004 (the "Closing Location"), and the Shares will be
delivered at the Designated Office, all at each Time of Delivery. A
meeting will be held at the Closing Location at 3:00 p.m., New York
City time, on the New York Business Day next preceding each Time of
Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to
close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
-7-
<PAGE> 8
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to
amend or supplement the Prospectus in order to comply with the Act, to
notify you and upon your request to prepare and furnish without charge
to each Underwriter and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell, pledge, hypothecate,
grant any option, right or warrant to purchase, or otherwise dispose
of, directly or indirectly, (which shall be deemed to include, without
limitation, the entering into of a cash-settled or Stock or Class B
Stock settled derivative instruments) any shares of Stock or Class B
Stock, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares or any securities that are
convertible into or exchangeable for, or that represent the right to
-8-
<PAGE> 9
receive, Stock or Class B Stock, or any such substantially similar
securities, (other than pursuant to employee stock option plans
existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement),
without your prior written consent;
(f) To furnish to its shareholders as soon as practicable
after the end of each fiscal year an annual report (including a balance
sheet and statements of income, shareholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company
and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to shareholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished
to its shareholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International
Underwriting Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list, subject to notice of
issuance, the Shares on the New York Stock Exchange (the "Exchange");
and
(j) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
(a) the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreements, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state
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securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky surveys; (iv) all fees and
expenses in connection with listing the Shares on the Exchange; (v) the filing
fees incident to, and the fees and disbursements of counsel for the Underwriters
in connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost
of preparing stock certificates; (vii) the cost and charges of any transfer
agent or registrar; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that except as provided
in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its and their
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become
effective by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion
is attached as Annex II(a) hereto), dated such Time of Delivery, with
respect to the incorporation of the Company, the validity of the Shares
being delivered at such Time of Delivery, the Registration Statement
and such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters; Sullivan &
Cromwell may rely upon the opinion of Trenam, Kember, Scharf, Barkin,
Frye, O'Neil & Mullis referenced in subsection (c) below as to all
matters of Florida law in connection with the matters covered by
paragraphs (i), (ii) and (viii) of subsection (c) below;
(c) Trenam, Kember, Scharf, Barkin, Frye, O'Neil & Mullis, counsel
for the Company, shall have furnished to you their written opinion (a
draft of each such opinion is attached as Annex II(b) hereto), dated
such Time of Delivery, in form and substance satisfactory to you, to
the effect that:
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<PAGE> 11
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Florida,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and issued and are fully paid and
non-assessable; and the Shares conform to the description of the Stock
contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of failure to
be so qualified in any such jurisdiction (such counsel being entitled
to rely in respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of officers
of the Company, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such
opinions and certificates);
(iv) Each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation; and all of the issued shares of
capital stock of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, and (except
for directors' qualifying shares) are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or
claims (such counsel being entitled to rely in respect of the opinion
in this clause upon opinions of local counsel and in respect of matters
of fact upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they believe
that both you and they are justified in relying upon such opinions and
certificates);
(v) The Company and its subsidiaries have good and marketable title
in fee simple to all real property owned by them, in each case free and
clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its subsidiaries (in
giving the opinion in this clause, such counsel may state that no
examination of record titles for the purpose of such opinion has been
made, and that they are relying upon a general review of the titles of
the Company and its subsidiaries, upon opinions of local counsel and
abstracts, reports and policies of title companies rendered or issued
at or subsequent to the time of acquisition of such property by the
Company or its subsidiaries, upon opinions of counsel to the lessors of
such property and, in respect of matters of fact, upon certificates of
officers of the Company or its subsidiaries, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such opinions, abstracts, reports, policies and
certificates);
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<PAGE> 12
(vi) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, shareholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(vii) To the best of such counsel's knowledge and other than as set
forth in the Prospectus: neither the Company nor any of its
subsidiaries is in violation of, or subject to any liability or claims
relating to any Environmental Law; has owned or operated any real
property contaminated with any substance that might require remediation
under any Environmental Law; is liable for any off-site disposal or
contamination in connection with any Environmental Law; or is subject
to any other condition, circumstance, event, notice or investigation
which might lead to any claims, liabilities, compliance expenditures,
costs, damages or losses relating to any Environmental Law except in
each case as would not, individually or in the aggregate, have a
material adverse effect on the financial condition, shareholders'
equity or result of operations of the Company or any of its
subsidiaries;
(viii) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company;
(ix) The issue and sale of the Shares being delivered at such Time of
Delivery to be sold by the Company and the compliance by the Company
with all of the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties;
(x) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Shares or the consummation by
the Company of the transactions contemplated by this Agreement and the
International Underwriting Agreement, except the registration under the
Act of the Shares, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters;
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<PAGE> 13
(xi) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound;
(xii) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock and the Class B Stock, and under the
caption "Underwriting", insofar as they purport to describe the
provisions of the documents referred to therein, are accurate, complete
and fair;
(xiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act; and
(xiv) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such
Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Act and the rules and regulations thereunder; although they do not
assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the
Prospectus, except for those referred to in the opinion in subsection
(xii) of this Section 7(c), they have no reason to believe that, as of
its effective date, the Registration Statement or any further amendment
thereto made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules therein, as to which
such counsel need express no opinion) contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as of
such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed or
described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and, in
connection with the matters covered by
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<PAGE> 14
paragraph (viii) of this subsection (c), such counsel may rely upon the opinion
of Sullivan & Cromwell as referenced in subsection (b) above as to matters of
New York law;
(d) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Arthur Andersen LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(e) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(f) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the Company's securities on the New York Stock
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(h) The Shares to be sold by the Company at such Time of Delivery shall
have been duly listed, subject to notice of issuance, on the New York Stock
Exchange;
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<PAGE> 15
(i) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from the parties listed on Schedule II hereto to the
effect set forth in Section 5(e) hereof in form and substance satisfactory to
you;
(j) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement; and
(k) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company satisfactory to
you as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the Company
if all its obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as you may reasonably request, and the
Company shall have furnished or caused to be furnished certificates as to the
matters set forth in subsections (a) and (e) of this Section, and as to such
other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
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<PAGE> 16
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of the Shares
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters with respect to the Shares purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the
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<PAGE> 17
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that they have so arranged
for the purchase of such Shares, you or the Company shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the
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<PAGE> 18
aggregate number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of all of the Shares to be purchased at
such Time of Delivery, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all of the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason any Shares are
not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004,
-18-
<PAGE> 19
Attention: Registration Department; and if to the Company shall be delivered or
sent by mail, telex or facsimile transmission to the address of the Company set
forth in the Registration Statement, Attention: Secretary; provided, however,
that any notice to an Underwriter pursuant to Section 8 (c) hereof shall be
delivered or sent by mail, telex or facsimile transmission to such Underwriter
at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
by you upon request. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters and the Company, and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
-19-
<PAGE> 20
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and for each of the Representatives plus
one for each counsel, counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters and
the Company. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters (U.S. Version), the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
AmeriSteel Corporation
By:
------------------------------
Name:
Title:
Accepted as of the date hereof at
85 Broad Street,
New York, New York, 10004
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
By:
-------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
-20-
<PAGE> 21
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE EXERCISED
PURCHASED
<S> <C> <C>
Goldman, Sachs & Co................................................
Morgan Stanley & Co. Incorporated..................................
------------------ --------------
Total................................................
================== ==============
</TABLE>
-21-
<PAGE> 22
SCHEDULE II
-22-
<PAGE> 23
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been [SEPARATELY] furnished to the
representatives of the Underwriters (the "Representatives")[AND ARE
ATTACHED HERETO];
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as indicated in their reports thereon copies
of which [HAVE BEEN SEPARATELY FURNISHED TO THE REPRESENTATIVES][ARE
ATTACHED HERETO]; and on the basis of specified procedures including
inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited
condensed consolidated financial statements referred to in paragraph
(vi)(A)(i) below comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that caused them
to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years which were included or incorporated by reference
in the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures
-1-
<PAGE> 24
specified in such letter nothing came to their attention as a result
of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations, or (ii) any material modifications should be made
to the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and
any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible
-2-
<PAGE> 25
securities, in each case which were outstanding on the date of
the latest financial statements included in the Prospectus) or
any increase in the consolidated long-term debt of the Company
and its subsidiaries, or any decreases in consolidated net
current assets or stockholders' equity or other items
specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet
included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or
per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of
minute books, inquiries and other procedures referred to in paragraphs
(iii) and (vi) above, they have carried out certain specified
procedures, not constituting an examination in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Prospectus, or in Part II of,
or in exhibits and schedules to, the Registration Statement specified
by the Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in
agreement.
-3-
<PAGE> 1
EXHIBIT 3.2
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
AMERISTEEL CORPORATION
AMERISTEEL CORPORATION, a corporation organized and existing under the
laws of the State of Florida (the "Corporation"), in order to amend its Articles
of Incorporation as now in effect (the "Articles of Incorporation"), in
accordance with the requirements of Chapter 607, Florida Statutes, does hereby
certify as follows:
1. The name of the Corporation is AMERISTEEL CORPORATION and its
Document Number with the Florida Department of State is 195537.
2. The amendment being effected hereby (the "Amendment") was duly
adopted and approved by the Board of Directors of the Corporation at a meeting
thereof on October 16, 1997.
3. In accordance with Section 607.0704, Florida Statutes: the Amendment
was duly adopted and approved by a majority of the shareholders of the
Corporation by the execution of one or more written consents effective December
7, 1997, dated and signed by shareholders having the requisite number of votes
to vote thereon, such vote was sufficient for approval of the Amendment, such
consents described the action taken and were duly and timely delivered to the
Corporation by delivery to its corporate secretary, and notice thereof was given
to those shareholders who did not consent in writing to the matters approved.
4. These Articles of Amendment of the Articles of Incorporation of
AmeriSteel Corporation (these "Articles of Amendment") shall be effective upon
filing hereof with the Department of State of the State of Florida.
5. Immediately prior to the filing of these Articles of Amendment, the
authorized capital stock of the Corporation consists of 30,000,000 shares of
common stock ("Old Common Stock"), par value $.01 per share, of which 10,114,385
shares are issued and outstanding. The Amendment causes the authorized capital
stock of the Corporation to consist of 100,000,000 shares of Class A Common
Stock ("Class A Common Stock"), par value $.01 per share, and 22,000,000 shares
of Class B Common Stock ("Class B Common Stock"), par value $.01 per share. Upon
the effectiveness of these Articles and the Amendment, each issued and
outstanding share of Old Common Stock shall be automatically converted and
reclassified into one issued and outstanding share of Class B Common Stock and
every option or other right to purchase or otherwise acquire a share of Old
Common Stock shall be automatically converted and reclassified into an identical
option or other right to purchase or otherwise acquire one share of Class B
Common Stock, in each case without any other or further action by or on the part
of the Corporation or any other person. Further,
Page 1 of 6
<PAGE> 2
every reference to any number of shares of Old Common Stock in any contract,
agreement, document or instrument to which the Corporation is a party shall be
deemed to be a reference to the same number of shares of Class B Common Stock.
6. The Articles of Incorporation are hereby amended by deleting Article
IV thereof, and in its place and stead substituting the following:
ARTICLE IV
4.1 General. The total number of shares of stock which the Corporation shall
have authority to issue is 100,000,000 shares of Class A Common Stock ("Class A
Common Stock"), par value $.01 per share, and 22,000,000 shares of Class B
Common Stock ("Class B Common Stock"), par value $.01 per share. Class A Common
Stock and Class B Common Stock are together referred to as "Common Stock."
Except as otherwise set forth below, the rights, powers, preferences, privileges
and limitations of shares of Class A Common Stock and Class B Common Stock shall
be identical in all respects.
4.2 Voting Rights. Every holder of Class A Common Stock shall be entitled to one
vote in person or by proxy for each share of Class A Common Stock standing in
his or her name on the transfer books of the Corporation, and every holder of
Class B Common Stock shall be entitled to two votes in person or by proxy for
each share of Class B Common Stock standing in his or her name on the transfer
books of the Corporation, in connection with all other matters submitted to a
vote of shareholders. Except as may be otherwise required by law or by these
Articles of Incorporation, the holders of Class A Common Stock and Class B
Common Stock shall vote together as a single voting group on all matters
submitted to a vote of the holders of Common Stock. Every reference in these
Articles of Incorporation or in the Bylaws of the Corporation to a majority or
other proportion of shares of Common Stock, Class A Common Stock or Class B
Common Stock, as the case may be, shall refer to such majority or other
proportion of the votes to which such shares of Common Stock, Class A Common
Stock or Class B Common Stock, as the case may be, are entitled.
4.3 Voluntary Conversion of Class B Common Stock. Each share of Class B Common
Stock is convertible at any time at the option of the holder thereof into one
share of Class A Common Stock. In connection with any such conversion, the
holder of the share or shares of Class B Common Stock to be converted shall
surrender to the office of the Corporation, or to such other person as may be
designated from time to time by the Corporation, (i) the certificate or
certificates representing the shares of Class B Common Stock to be converted,
duly endorsed in blank or accompanied by proper instruments of transfer, and
(ii) written notice to the Corporation stating that such holder elects to
convert such share or shares and stating the name and address in which each
certificate for shares of Class A Common Stock issued upon such conversion is to
be issued. Such conversion shall be deemed to have been effected at the close of
business on the date when such surrender is made to the Corporation (or, as the
case may be, to such other person as may be designated from time to time by the
Corporation) of the shares to be converted.
Page 2 of 6
<PAGE> 3
4.4 Automatic Conversion of Class B Common Stock. Each share of Class B Common
Stock shall automatically convert into one share of Class A Common Stock on the
first date on which the number of shares of Class B Common Stock then owned of
record by Kyoei Steel, Ltd. ("Kyoei")and Phillip E. Casey would be entitled to
cast fewer than 50% of the aggregate number of votes that would be entitled to
be cast by all holders of shares of Common Stock then outstanding at a meeting
of such holders. For purposes of these Articles of Incorporation, any reference
to Kyoei shall be deemed to include wholly owned subsidiaries of Kyoei.
4.5 Reservation of Shares. The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Common Stock and its issued Common Stock held in its treasury for
the purpose of effecting any conversion of the Class B Common Stock pursuant to
these Articles of Incorporation, the full number of shares of Class A Common
Stock then deliverable upon any such conversion of all outstanding shares of
Class B Common Stock. Shares of Class A Common Stock have no conversion rights.
4.6 Notice of Automatic Conversion. The Corporation will provide notice of the
conversion of shares of Class B Common Stock pursuant to Section 4.4 to holders
of record of Common Stock not less than 30 nor more than 60 days prior to the
date fixed for such conversion; provided, however, that if the timing or nature
of the effectiveness of such conversion makes it impracticable to provide at
least 30 days' notice, the Corporation shall provide such notice as soon as
practicable. Such notice shall be provided by mailing notice of such conversion,
first class postage prepaid, to each holder of record of Common Stock, at such
holder's address as it appears on the transfer books of the Corporation;
provided, however, that no failure to give such notice nor any defect therein
shall affect the validity of the conversion of the shares of Class B Common
Stock. Each such notice shall state, as appropriate, (i) the date upon which
such conversion was or shall be effective, (ii) the place or places where
certificates for such shares are to be surrendered for conversion, and (iii)
that no dividends will be declared on the shares of Class B Common Stock after
such conversion date.
4.7 Effect of Conversion. Immediately upon any conversion of one or more shares
of Class B Common Stock to Class A Common Stock, the rights of the holders of
such share or shares of Class B Common Stock as such shall cease and such
holders shall be treated for all purposes as having become the holders of the
shares of Class A Common Stock issuable upon such conversion; provided, however,
that such persons shall be entitled to receive when paid any dividends declared
on the Class B Common Stock as of a record date preceding the time of such
conversion and unpaid as of the time of such conversion. As promptly as
practicable after the time of conversion, upon the surrender of certificates
formerly representing shares of Class B Common Stock, the Corporation shall
deliver or cause to be delivered, to or upon the written order of the record
holder of the surrendered certificates formerly representing shares of Class B
Common Stock, a certificate or certificates representing the number of fully
paid and nonassessable shares of Class A Common Stock into which the shares of
Class B Common Stock formerly represented by such certificates have been
converted in accordance with the provisions of these Articles of Incorporation.
The Corporation will pay any and all documentary, stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Class A
Common Stock or the related stock certificates on the conversion of shares of
Class B Common Stock; provided, however, that the Corporation shall not be
required to pay any
Page 3 of 6
<PAGE> 4
tax which may be payable in respect of any registration of transfer involved in
the issue or delivery of shares of Class A Common Stock or the related stock
certificates in a name other than that of the registered holder of such
converted shares of Class B Common Stock, and no such issue or delivery shall be
made unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
4.8 Restrictions on Additional Issuances, Etc. Other than pursuant to options or
other rights to purchase already outstanding, or pursuant to a stock split,
stock dividend or similar transaction effected in accordance with these
Articles of Incorporation, from and after the effective date of this provision
the Corporation may not issue or sell any shares of Class B Common Stock or any
securities (including, without limitation, any rights, options, warrants or
other securities) convertible into, or exchangeable or exercisable for, shares
of Class B Common Stock to any person who is not then either a record holder of
Class B Common Stock or Kyoei. Shares of Class B Common Stock may not be
transferred, whether by sale, assignment, gift, bequest, appointment or
otherwise, to a person other than another record holder of Class B Common Stock
or Kyoei. Notwithstanding the foregoing (i) any holder of Class B Common Stock
may pledge his, her or its shares of Class B Common Stock to a financial
institution pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee provided that such shares remain
subject to the transfer restrictions and that, in the event of foreclosure or
other similar action by the pledgee, such pledged shares of Class B Common
Stock may only be transferred as provided above or converted into shares of
Class A Common Stock, as the pledgee may elect, and (ii) the foregoing transfer
restrictions shall not apply in the case of a merger, consolidation or business
combination of the Corporation with or into another corporation in which all of
the outstanding shares of Common Stock of the Corporation regardless of class
are purchased by the acquiror.
4.9 Dividends. Holders of Class A Common Stock and Class B Common Stock shall be
entitled to receive such dividends and other distributions in cash, stock of any
corporation (other than Common Stock of the Corporation) or property of the
Corporation if, when and as may be declared thereon by the Board of Directors
from time to time out of assets or funds of the Corporation legally available
therefor and shall share equally on a per share basis in all such dividends and
other distributions. In the case of dividends or other distributions payable in
Common Stock, including distributions pursuant to stock splits or divisions of
Common Stock of the Corporation, only shares of Class A Common Stock shall be
paid or distributed with respect to Class A Common Stock and only shares of
Class B Common Stock shall be paid or distributed with respect to Class B Common
Stock. The number of shares of Class A Common Stock and Class B Common Stock so
distributed shall be equal in number on a per share basis.
4.10 Reclassification and Merger. Neither the shares of Class A Common Stock nor
the shares of Class B Common Stock may be reclassified, subdivided or combined
unless such reclassification, subdivision or combination occurs simultaneously
and in the same proportion for each class. In the event the Corporation enters
into any consolidation, merger, combination or other transaction in which shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then, and in such event, the shares of each
class of Common Stock will
Page 4 of 6
<PAGE> 5
be exchanged for or changed into either (1) the same amount of stock,
securities, cash and/or any other property, as the case may be, into which or
for which each share of any other class of Common Stock is exchanged or changed;
provided, however, that if shares of Common Stock are exchanged for or changed
into shares of capital stock, such shares so exchanged for or changed into may
differ to the extent and only to the extent that the Class A Common Stock and
Class B Common Stock differ as provided in the Corporation's Articles of
Incorporation or (2) if holders of each class of Common Stock are to receive
different distributions of stock, securities, cash and/or any other property, an
amount of stock, securities, cash and/or property per share having a value, as
determined by an independent investment banking firm of national reputation
selected by the Board of Directors, equal to the value per share into which or
for which each share of any other class of Common Stock is exchanged or changed.
4.11 Amendment to Eliminate Class B Common Stock. If at any time there are no
shares of Class B Common Stock issued and outstanding and the Corporation would
not then be permitted under these Articles of Incorporation to issue any shares
of Class B Common Stock, then the Board of Directors of the Corporation, without
shareholder action, may adopt and caused to be filed one or more amendments to
these Articles of Incorporation to delete any reference to or provision relating
to Class B Common Stock as a matter of historical interest, to change the
designation or name of Class A Common Stock and to make any appropriate
conforming changes to these Articles of Incorporation, including but not limited
to changing the numbering or the headings of the provisions hereof.
4.12 No Preemptive Rights. No holder of any share or shares of Common Stock
shall have or be entitled to, as a matter of right solely by reason of such
holding, any preemptive or other right to subscribe for or purchase any number
of such additional shares of Common Stock (or any other class or series of
capital stock now or hereafter authorized for issuance by the Corporation) as
may be issued by the Corporation from time to time, whether such additional
shares are issued for cash, property, services or any other consideration and
whether or not such shares are now authorized or are authorized by subsequent
amendment to these Articles of Incorporation, nor shall any such holder have or
be entitled to, as a matter of right solely by reason of such holding, any
preemptive or other right to subscribe for or purchase securities convertible
into or exchangeable for shares of the Corporation or to which there shall be
attached or appertain any warrants or rights entitling the holders thereof to
purchase or subscribe for such shares.
4.13 Dissolution, Liquidation, Etc. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, the assets and funds of the Corporation, if any, available for
distribution to shareholders shall be distributed equally on a per share basis
to the holders of Common Stock. For the purposes of this paragraph, the
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
assets of the Corporation or a consolidation or merger of the Corporation with
one or more other corporations (whether or not the Corporation is the
corporation surviving such consolidation or merger) shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
Page 5 of 6
<PAGE> 6
4.14 Payment for Stock. The consideration for the issuance of shares of Common
Stock may be paid, in whole or in part, in cash, in promissory notes, in other
property (tangible or intangible), in labor or services actually performed for
the Corporation, in promises to perform services in the future evidenced by a
written contract, or in other benefits to the Corporation at a fair valuation to
be fixed by the Board of Directors. When issued, all shares of Common Stock
shall be fully paid and nonassessable.
4.15 Treasury Stock. The Board of Directors of the Corporation shall have the
authority to acquire by purchase and hold from time to time any shares of its
issued and outstanding capital stock for such consideration and upon such terms
and conditions as the Board of Directors in its discretion shall deem proper and
reasonable in the interests of the Corporation.
7. Any reference in the Amendment to "these Articles of Incorporation"
or any other reference of similar import shall be deemed a reference to the
Articles of Incorporation as amended by the Amendment.
IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed these Articles of Amendment of the Articles of Incorporation of
AmeriSteel Corporation this day of November, 1997.
AMERISTEEL CORPORATION
By:
-------------------------------------
Page 6 of 6
<PAGE> 1
EXHIBIT 3.3
* * * * * * *
AMENDED AND RESTATED
BY-LAWS
OF
AMERISTEEL CORPORATION
(Effective as of October 16, 1997)
* * * * * * *
i
<PAGE> 2
AMENDED AND RESTATED
BY-LAWS
OF
AMERISTEEL CORPORATION
(Effective as of October 16, 1997)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
ARTICLE I
<S> <C> <C>
OFFICES................................................................................................1
Section 1. Principal Office.....................................................................1
Section 2. Other Offices........................................................................1
ARTICLE II
STOCKHOLDERS...........................................................................................1
Section 1. Annual Meeting.......................................................................1
Section 2. Special Meetings.....................................................................1
Section 3. Place of Meeting.....................................................................1
Section 4. Notice of Meeting....................................................................2
Section 5. Notice of Adjourned Meeting..........................................................2
Section 6. Waiver of Call and Notice of Meeting.................................................2
Section 7. Quorum...............................................................................2
Section 8. Adjournment; Quorum for Adjourned Meeting............................................2
Section 9. Voting on Matters Other than Election of Directors...................................3
Section 10. Voting for Directors.................................................................3
Section 11. Voting Lists.........................................................................3
Section 12. Voting of Shares.....................................................................3
Section 13. Proxies..............................................................................3
Section 14. Informal Action by Stockholders. ....................................................4
Section 15. Inspectors...........................................................................4
ARTICLE III
BOARD OF DIRECTORS.....................................................................................4
Section 1. General Powers.......................................................................4
Section 2. Number, Election, Tenure and Qualifications..........................................4
Section 3. Annual Meeting.......................................................................5
Section 4. Regular Meetings.....................................................................5
Section 5. Special Meetings.....................................................................5
Section 6. Notice...............................................................................5
Section 7. Quorum...............................................................................5
Section 8. Adjournment; Quorum for Adjourned Meeting............................................5
Section 9. Manner of Acting.....................................................................6
Section 10. Removal..............................................................................6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 11. Vacancies............................................................................6
Section 12. Compensation.........................................................................6
Section 13. Presumption of Assent................................................................6
Section 14. Informal Action by Board.............................................................6
Section 15. Meeting by Telephone, Etc............................................................7
ARTICLE IV
OFFICERS...............................................................................................7
Section 1. Number...............................................................................7
Section 2. Appointment and Term of Office.......................................................7
Section 3. Resignation..........................................................................7
Section 4. Removal..............................................................................7
Section 5. Vacancies............................................................................7
Section 6. Duties of Officers...................................................................7
Section 7. Salaries.............................................................................8
Section 8. Delegation of Duties.................................................................8
ARTICLE V
EXECUTIVE AND OTHER COMMITTEES.........................................................................8
Section 1. Creation of Committees...............................................................8
Section 2. Executive Committee..................................................................8
Section 3. Other Committees.....................................................................9
Section 4. Removal or Dissolution...............................................................9
Section 5. Vacancies on Committees..............................................................9
Section 6. Meetings of Committees...............................................................9
Section 7. Absence of Committee Members.........................................................9
Section 8. Quorum of Committees.................................................................9
Section 9. Manner of Acting of Committees......................................................10
Section 10. Minutes of Committees...............................................................10
Section 11. Compensation........................................................................10
Section 12. Informal Action.....................................................................10
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS.............................................................10
Section 1. General.............................................................................10
Section 2. Actions by or in the Right of the Corporation.......................................11
Section 3. Determination that Indemnification Is Proper........................................12
Section 4. Evaluation and Authorization........................................................12
Section 5. Prepayment of Expenses..............................................................12
Section 6. Obligation to Indemnify.............................................................12
Section 7. Nonexclusivity and Limitations......................................................13
Section 8. Continuation of Indemnification Right...............................................13
Section 9. Insurance...........................................................................13
ARTICLE VII
INTERESTED PARTIES....................................................................................14
</TABLE>
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<TABLE>
<S> <C> <C>
Section 1. General.............................................................................14
Section 2. Determination of Quorum.............................................................14
Section 3. Approval by Stockholders............................................................14
ARTICLE VIII
CERTIFICATES OF STOCK.................................................................................15
Section 1. Certificates for Shares.............................................................15
Section 2. Signatures of Past Officers.........................................................15
Section 3. Transfer Agents and Registrars......................................................15
Section 4. Transfer of Shares..................................................................15
Section 5. Lost Certificates...................................................................16
ARTICLE IX
RECORD DATE...........................................................................................16
Section 1. Record Date for Stockholder Actions.................................................16
Section 2. Record Date for Dividend and Other Distributions....................................16
ARTICLE X
DIVIDENDS.............................................................................................17
ARTICLE XI
FISCAL YEAR...........................................................................................17
ARTICLE XII
SEAL..................................................................................................17
ARTICLE XIII
STOCK IN OTHER CORPORATIONS...........................................................................17
ARTICLE XIV
AMENDMENTS............................................................................................17
ARTICLE XV
EMERGENCY BY-LAWS.....................................................................................18
Section 1. Scope of Emergency By-laws..........................................................18
Section 2. Call and Notice of Meeting..........................................................18
Section 3. Quorum and Voting...................................................................18
Section 4. Appointment of Temporary Directors..................................................18
Section 5. Modification of Lines of Succession.................................................19
Section 6. Change of Principal Office..........................................................19
Section 7. Limitation of Liability.............................................................19
Section 8. Amendment or Repeal.................................................................19
ARTICLE XVI
PRECEDENCE OF LAW AND ARTICLES OF INCORPORATION.......................................................19
</TABLE>
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AMENDED AND RESTATED
BY-LAWS
OF
AMERISTEEL CORPORATION
(Effective as of October 16, 1997)
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of AmeriSteel
Corporation (the "Corporation") shall be in Hillsborough County, Florida, or
such place within or without the State of Florida as the Board of Directors of
the Corporation (the "Board of Directors" or the "Board") shall from time to
time determine.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Florida as the Board of
Directors or the officers of the Corporation acting within their authority may
from time to time determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders shall
be held between January 1 and December 31, inclusive, in each year for the
purpose of electing directors and for the transaction of such other proper
business as may come before the meeting. The exact date of the meeting shall be
established by the Board of Directors from time to time.
Section 2. Special Meetings. Special meetings of the stockholders may
be called, for any purpose or purposes, by the Board of Directors or the
Chairman of the Board. Special meetings of the stockholders shall be called by
the Chairman of the Board, the President or the Secretary if the holders of not
less than ten (10) percent of all the votes entitled to be cast on any issue
proposed to be considered at such special meeting sign, date and deliver to the
Secretary one or more written demands for a special meeting, describing the
purpose(s) for which it is to be held. Special meetings of the stockholders of
the Corporation may not be called by any other person or persons. Notice and
call of any such special meeting shall state the purpose or purposes of the
proposed meeting, and business transacted at any special meeting of the
stockholders shall be limited to the purposes stated in the notice thereof.
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Florida, as the place of meeting
for any annual or special meeting of the stockholders. If no designation is
made, the place of meeting shall be the principal office of the Corporation in
the State of Florida.
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Section 4. Notice of Meeting. Written notice stating the place, day and
hour of an annual or special meeting and, in the case of a special meeting, the
purpose or purposes for which it is called shall be given no fewer than ten (10)
nor more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote at such meeting, except that no notice of a meeting need be
given to any stockholders for which notice is not required to be given under
applicable law. Notice may be delivered personally, via United States mail,
telegraph, teletype, facsimile or other electronic transmission, or by private
mail carriers handling nationwide mail services, by or at the direction of the
President, the Secretary, the Board of Directors, or the person(s) calling the
meeting. If mailed via United States mail, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the stockholder
at the stockholder's address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid. If the notice is mailed at least
thirty (30) days before the date of the meeting, the mailing may be by a class
of United States mail other than first class.
Section 5. Notice of Adjourned Meeting. If a stockholders' meeting is
adjourned to a different date, time or place, notice need not be given of the
new date, time or place if the new date, time or place is announced at the
meeting before an adjournment is taken; and any business may be transacted at
the adjourned meeting that might have been transacted on the original date of
the meeting. If, however, a new record date for the adjourned meeting is or must
be fixed under law, notice of the adjourned meeting must be given to persons who
are stockholders as of the new record date and who are otherwise entitled to
notice of such meeting.
Section 6. Waiver of Call and Notice of Meeting. Call and notice of any
stockholders' meeting may be waived by any stockholder before or after the date
and time stated in the notice. Such waiver must be in writing signed by the
stockholder and delivered to the Corporation. Neither the business to be
transacted at nor the purpose of any meeting need be specified in such waiver. A
stockholder's attendance at a meeting (a) waives such stockholder's ability to
object to lack of notice or defective notice of the meeting, unless the
stockholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (b) waives such stockholder's ability
to object to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, unless the
stockholder objects to considering the matter when it is presented.
Section 7. Quorum. Except as otherwise provided in these By-laws or in
the Articles of Incorporation of the Corporation, a majority (based on voting)
of the outstanding shares of the Corporation entitled to vote, represented in
person or by proxy, shall constitute a quorum at any meeting of the
stockholders. Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for that
adjourned meeting; and the withdrawal of stockholders after a quorum has been
established at a meeting shall not affect the validity of any action taken at
the meeting or any adjournment thereof.
Section 8. Adjournment; Quorum for Adjourned Meeting. If less than a
majority (based on voting) of the outstanding shares are represented at a
meeting, a majority (based on voting) of the shares so represented may adjourn
the meeting from time to time without further notice. At such
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adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
noticed.
Section 9. Voting on Matters Other than Election of Directors. At any
meeting at which a quorum is present, action on any matter other than the
election of directors shall be approved if the votes cast by the holders of
shares represented at the meeting and entitled to vote on the subject matter
favoring the action exceed the votes cast opposing the action, unless a greater
number of affirmative votes or voting by classes is required by law, the
Articles of Incorporation of the Corporation or these By-laws.
Section 10. Voting for Directors. Directors shall be elected by a
plurality of the votes cast by the shares entitled to vote at a meeting at which
a quorum is present.
Section 11. Voting Lists. At least ten (10) days prior to each meeting
of stockholders, the officer or agent having charge of the stock transfer books
for shares of the Corporation shall make a complete list of the stockholders
entitled to vote at such meeting, or any adjournment thereof, with the address
and the number, class and series (if any) of shares held by each. The list shall
be subject to inspection by any stockholder during normal business hours for at
least ten (10) days prior to the meeting. The list also shall be available at
the meeting and shall be subject to inspection by any stockholder at any time
during the meeting or its adjournment. The list shall be prima facie evidence as
to who are the stockholders entitled to examine such list or the transfer books
and to vote at any meeting of the stockholders.
If the requirements of this Section have not been substantially
complied with, the meeting shall be adjourned on the demand of any stockholder
(in person or by proxy) until there has been substantial compliance with the
requirements. If no demand for adjournment is made, failure to comply with the
requirements of this Section does not affect the validity of any action taken at
the meeting.
Section 12. Voting of Shares. Except as otherwise provided in the
Articles of Incorporation of the Corporation, each stockholder entitled to vote
shall be entitled at every meeting of the stockholders to one vote in person or
by proxy on each matter for each share of voting stock held by such stockholder.
Such right to vote shall be subject to the right of the Board of Directors to
fix a record date for voting stockholders as hereinafter provided. Treasury
shares, and shares of stock of the Corporation owned directly or indirectly by
another corporation the majority of the voting stock of which is owned or
controlled by the Corporation, shall not be voted at any meeting and shall not
be counted in determining the total number of outstanding shares.
Section 13. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy, executed in writing and delivered to the Corporation in the
original or transmitted via telegram, or as a photographic, photostatic or
equivalent reproduction of a written proxy by the stockholder or by the
stockholder's duly authorized attorney-in-fact. No proxy shall be valid after
eleven (11) months from its date, unless the proxy provides for a longer period.
Each proxy shall be filed with the Secretary before or at the time of the
meeting. A proxy may be revoked at the pleasure of the record owner of the
shares to which it relates, unless the proxy provides otherwise. In the event
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that a proxy shall designate two or more persons to act as proxies, a majority
of such persons present at the meeting, or, if only one is present, that one,
shall have all of the powers conferred by the proxy upon all the persons so
designated, unless the instrument shall provide otherwise.
Section 14. Informal Action by Stockholders. Unless otherwise provided
in the Articles of Incorporation of the Corporation, any action required or
permitted to be taken at a meeting of the stockholders may be taken by means of
one or more written consents that satisfy the requirements set forth below. In
such event, no meeting, prior notice or formal vote shall be required. To be
effective, a written consent (which may be in one or more counterparts) shall
set forth the action taken and shall be signed by stockholders holding shares
representing not less than the minimum number of votes of each voting group
entitled to vote thereon that would be necessary to authorize or take such
action at a meeting at which all voting groups and shares entitled to vote
thereon were present and voted. No written consent shall be effective unless,
within sixty (60) days of the date of the earliest dated consent delivered to
the Secretary, written consent signed by the number of stockholders required to
take action is delivered to the Secretary. If authorization of an action is
obtained by one or more written consents but less than all stockholders so
consent, then within ten (10) days after obtaining the authorization of such
action by written consents, notice must be given to each stockholder who did not
consent in writing and to each stockholder who is not entitled to vote on the
action. The notice shall fairly summarize the material features of the
authorized action and, if the action be such for which dissenters' rights are
provided under the Florida Business Corporation Act, the notice shall contain a
clear statement of the right of stockholders dissenting therefrom to be paid the
fair value of their shares upon compliance with the provisions of the Florida
Business Corporation Act regarding the rights of dissenting stockholders.
Section 15. Inspectors. For each meeting of the stockholders, the Board
of Directors or the Chairman of the Board may appoint two inspectors to
supervise the voting. If inspectors are so appointed, all questions respecting
the qualification of any vote, the validity of any proxy and the acceptance or
rejection of any vote shall be decided by such inspectors. Before acting at any
meeting, the inspectors shall take an oath to execute their duties with strict
impartiality and according to the best of their ability. If any inspector shall
fail to be present or shall decline to act, the Chairman of the Board shall
appoint another inspector to act in his or her place. In case of a tie vote by
the inspectors on any question, the presiding officer shall decide the issue.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by law, the
Articles of Incorporation of the Corporation or these By-laws directed or
required to be exercised or done only by the stockholders.
Section 2. Number, Election, Tenure and Qualifications. The number of
directors of the Corporation shall be not less than seven (7) nor more than
eleven (11). The exact number of directors shall be fixed by resolution adopted
by a vote of a majority of the then authorized number
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of directors; provided that no decrease in the number of directors shall have
the effect of shortening the term of any then incumbent director. At each annual
meeting of stockholders, the stockholders shall elect directors to hold office
until the next succeeding annual meeting. Each director shall hold office until
his or her term of office expires and until such director's successor is elected
and qualifies, unless such director sooner dies, resigns or is removed by the
stockholders at any annual or special meeting. It shall not be necessary for
directors to be stockholders or residents of the State of Florida. All directors
shall be natural persons who are 18 years of age or older.
Section 3. Annual Meeting. Promptly after each annual meeting of
stockholders, the Board of Directors shall hold its annual meeting for the
purpose of the election of officers and the transaction of such other business
as may come before the meeting. If such meeting is held at the same place as and
immediately following such annual meeting of stockholders and if a majority of
the directors are present at such place and time, no prior notice of such
meeting shall be required to be given to the directors.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall be determined
from time to time by the Board of Directors.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President or any two directors.
The person or persons authorized to call special meetings of the Board of
Directors may fix the place for holding any special meetings of the Board of
Directors called by such person or persons. If no such designation is made, the
place of meeting shall be the principal office of the Corporation in the State
of Florida.
Section 6. Notice. Whenever notice of a meeting is required, written
notice stating the place, day and hour of the meeting shall be delivered at
least two (2) days prior thereto to each director, either personally, or by
first-class United States mail, telegraph, teletype, facsimile or other form of
electronic communication, or by private mail carriers handling nationwide mail
services, to the director's business address. If notice is given by first-class
United States mail, such notice shall be deemed to be delivered five (5) days
after deposited in the United States mail so addressed with postage thereon
prepaid or when received, if such date is earlier. If notice is given by
telegraph, teletype, facsimile transmission or other form of electronic
communication or by private mail carriers handling nationwide mail services,
such notice shall be deemed to be delivered when received by the director. Any
director may waive notice of any meeting, either before, at or after such
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened and so states at the beginning of the
meeting or promptly upon arrival at the meeting.
Section 7. Quorum. A majority of the total number of directors as
determined from time to time to comprise the Board of Directors shall constitute
a quorum.
Section 8. Adjournment; Quorum for Adjourned Meeting. If less than a
majority of the total number of directors are present at a meeting, a majority
of the directors so present may adjourn
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the meeting from time to time without further notice. At any adjourned meeting
at which a quorum shall be present, any business may be transacted that might
have been transacted at the meeting as originally noticed.
Section 9. Manner of Acting. If a quorum is present when a vote is
taken, the act of a majority of the directors present at the meeting shall be
the act of the Board of Directors unless otherwise provided in the Articles of
Incorporation of the Corporation.
Section 10. Removal. Any director may be removed by the stockholders,
with or without cause, at any meeting of the stockholders called expressly for
that purpose. Any such removal shall be without prejudice to the contract
rights, if any, of the person removed.
Section 11. Vacancies. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, or by the
stockholders, unless otherwise provided in the Articles of Incorporation of the
Corporation. The term of a director elected to fill a vacancy shall expire at
the next following annual meeting of stockholders, and the person elected shall
hold office until such time and until such director's successor is elected and
qualifies, unless such director sooner dies, resigns or is removed by the
stockholders at any annual or special meeting.
Section 12. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors, a stated salary as directors and/or such
other reasonable compensation as may be determined by the Board from time to
time. No payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 13. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
such director objects at the beginning of the meeting (or promptly upon his or
her arrival) to the holding of the meeting or the transacting of specified
business at the meeting or such director votes against such action or abstains
from voting in respect of such matter.
Section 14. Informal Action by Board. Any action required or permitted
to be taken by any provisions of law, the Articles of Incorporation of the
Corporation or these By-laws at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if each and every member of the
Board or of such committee, as the case may be, signs a written consent thereto
and such written consent is filed in the minutes of the proceedings of the Board
or such committee, as the case may be. Action taken under this section is
effective when the last director signs the consent, unless the consent specifies
a different effective date, in which case it is effective on the date so
specified.
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Section 15. Meeting by Telephone, Etc. Directors or the members of any
committee thereof shall be deemed present at a meeting of the Board of Directors
or of any such committee, as the case may be, if the meeting is conducted using
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall consist of a
Chairman of the Board, a President, a Secretary and a Treasurer, each of whom
shall be appointed by the Board of Directors. The Board of Directors may also
appoint one or more vice presidents, one or more assistant secretaries and
assistant treasurers and such other officers as the Board of Directors shall
deem appropriate. The same individual may simultaneously hold more than one
office in the Corporation.
Section 2. Appointment and Term of Office. The officers of the
Corporation shall be appointed annually by the Board of Directors at its annual
meeting. If the appointment of officers shall not be made at such meeting, such
appointment shall be made as soon thereafter as is convenient. Each officer
shall hold office until such officer's successor is appointed and qualifies,
unless such officer sooner dies, resigns or is removed by the Board. The
appointment of an officer does not itself create contract rights. The failure to
elect a Chairman of the Board, a President, a Secretary or a Treasurer shall not
affect the existence of the Corporation.
Section 3. Resignation. An officer may resign at any time by delivering
notice to the Corporation. A resignation shall be effective when the notice is
delivered unless the notice specifies a later effective date. An officer's
resignation shall not affect the Corporation's contract rights, if any, with the
officer.
Section 4. Removal. The Board of Directors may remove any officer at
any time with or without cause. An officer's removal shall not affect the
officer's contract rights, if any, with the Corporation.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
Section 6. Duties of Officers.
(a) The Chairman of the Board of the Corporation shall be the
chief executive officer of the Corporation and shall, subject to the direction
of the Board, have general charge of the business and affairs of the
Corporation. The Chairman of the Board shall preside at all meetings of the
Board of Directors and of the stockholders.
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(b) The President, if there be one, shall have such duties as
may be assigned to such office by the Board.
(c) The Secretary shall be responsible for preparing minutes of
the directors' and stockholders' meetings and for authenticating records of the
Corporation.
(d) The Treasurer shall (i) have charge and custody of and be
responsible for all funds of the Corporation and (ii) receive and give receipts
for monies due and payable to the Corporation from any source whatsoever, and
deposit monies in the name of the Corporation in the banks, trust companies or
other depositaries as shall be selected by the Corporation.
(e) Subject to the foregoing, the officers of the Corporation
shall have such powers and duties as ordinarily pertain to their respective
offices and such additional powers and duties specifically conferred by law, the
Articles of Incorporation of the Corporation and these Bylaws, or as may be
assigned to them from time to time by the Board of Directors or an officer
authorized by the Board of Directors to prescribe the duties of other officers.
Section 7. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving a salary by reason of the fact that the officer is also a director of
the Corporation.
Section 8. Delegation of Duties. In the absence or disability of any
officer of the Corporation, or for any other reason deemed sufficient by the
Board of Directors, the Board may delegate the powers or duties of such officer
to any other officer or to any other director for the time being.
ARTICLE V
EXECUTIVE AND OTHER COMMITTEES
Section 1. Creation of Committees. The Board of Directors may designate
an Executive Committee and one or more other committees. Each committee so
designated shall consist of two (2) or more of the directors of the Corporation.
Section 2. Executive Committee. The Executive Committee, if there shall
be one, shall consult with and advise the officers of the Corporation in the
management of its business. It shall have, and may exercise, except to the
extent otherwise provided in the resolution of the Board of Directors creating
such Executive Committee, such powers of the Board of Directors as can be
lawfully delegated by the Board. Included solely for information purposes, the
following is a list of the actions that, under Florida law in effect at the time
of the adoption of these By-laws, may not be delegated to a committee, but the
list shall be deemed automatically revised without further action by the Board
of Directors or the stockholders of this Corporation upon and to the extent of
any amendment to such law:
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(a) approve or recommend to stockholders actions or proposals
required by law to be approved by stockholders;
(b) fill vacancies on the Board of Directors or any committee
of the Board;
(c) adopt, amend or repeal these By-laws;
(d) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board of Directors; or
(e) authorize or approve the issuance or sale of shares, or any
contract to sell shares, or designate the terms of a series or class of shares.
Section 3. Other Committees. Such other committees, to the extent
provided in the resolution or resolutions creating them, shall have such
functions and may exercise such powers of the Board of Directors as can be
lawfully delegated by the Board. Notwithstanding the foregoing, no committee
shall have the authority to take any action listed in subsections (a) through
(e), inclusive, of Section 2 of this Article V.
Section 4. Removal or Dissolution. Any Committee of the Board of
Directors may be dissolved by the Board at any meeting; and any member of such
committee may be removed by the Board of Directors with or without cause. Such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Section 5. Vacancies on Committees. Vacancies on any committee of the
Board of Directors shall be filled by the Board of Directors at any meeting.
Section 6. Meetings of Committees. Regular meetings of any committee of
the Board of Directors may be held without notice at such time and at such place
as shall from time to time be determined by such committee. Special meetings of
any such committee may be called by any member thereof upon two (2) days notice
of the date, time and place of the meeting given to each of the other members of
such committee, or on such shorter notice as may be agreed to in writing by each
of the other members of such committee. Notice shall be given either personally
or in the manner provided in Section 6 of Article III of these By-laws
(pertaining to notice for directors' meetings).
Section 7. Absence of Committee Members. The Board of Directors may
designate one or more directors as alternate members of any committee of the
Board of Directors, who may replace at any meeting of such committee any member
not able to attend.
Section 8. Quorum of Committees. At all meetings of committees of the
Board of Directors, a majority of the total number of members of the committee
as determined from time to time shall constitute a quorum for the transaction of
business.
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Section 9. Manner of Acting of Committees. If a quorum is present when
a vote is taken, the act of a majority of the members of any committee of the
Board of Directors present at the meeting shall be the act of such committee.
Section 10. Minutes of Committees. Each committee of the Board of
Directors shall keep regular minutes of its proceedings and report the same to
the Board of Directors when requested.
Section 11. Compensation. Members of any committee of the Board of
Directors may be paid compensation in accordance with the provisions of Section
12 of Article III of these By-laws (pertaining to compensation of directors).
Section 12. Informal Action. Any committee of the Board of Directors
may take such informal action and hold such informal meetings as allowed by the
provisions of Sections 14 and 15 of Article III of these By-laws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. General.
(a) To the fullest extent permitted by law and consistent with
the principles set forth in Section 1(c) below, the Corporation shall indemnify
any person who is or was a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or other type of proceeding (other
than an action by or in the right of the Corporation), whether civil, criminal,
administrative, investigative or otherwise, and whether formal or informal, by
reason of the fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, trustee or fiduciary of another corporation, partnership,
joint venture, trust (including without limitation an employee benefit trust),
or other enterprise.
(b) To the fullest extent permitted by law and consistent with
the principles set forth in Section 1(c) below, the Corporation shall be
entitled but shall not be obligated to indemnify any person who is or was a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or other type of proceeding (other than an action by or
in the right of the Corporation), whether civil, criminal, administrative,
investigative or otherwise, and whether formal or informal, by reason of the
fact that such person is or was an employee or agent of the Corporation or is or
was serving at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
(c) Any person for whom indemnification is required or
authorized under Section 1(a) or Section 1(b) above shall be indemnified against
all liabilities, judgments, amounts paid in settlement, penalties, fines
(including an excise tax assessed with respect to any employee benefit plan) and
expenses (including attorneys' fees, paralegals' fees and court costs) actually
and reasonably incurred in connection with any such action, suit or other
proceeding, including any appeal thereof. Indemnification shall be available
only if the person to be indemnified acted in good faith and in a
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manner such person reasonably believed to be in, or not opposed to, the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any such action, suit or other proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner that such person reasonably believed to be
in, or not opposed to, the best interests of the Corporation or, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation.
(a) To the fullest extent permitted by law and consistent with
the principles set forth in Section 2(c) below, the Corporation shall indemnify
any person who is or was a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or other type of proceeding (as
further described in Section 1 of this Article VI) by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, trustee or fiduciary
of another corporation, partnership, joint venture, trust or other enterprise.
(b) To the fullest extent permitted by law and consistent with
the principles set forth in Section 2(c) below, the Corporation shall be
entitled but shall not be obligated to indemnify any person who is or was a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or other type of proceeding (as further described in
Section 1 of this Article VI) by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was an
employee or agent of the Corporation or is or was serving at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(c) Any person for whom indemnification is required or
authorized under Section 2(a) or Section 2(b) above shall be indemnified against
expenses (including attorneys' fees, paralegals' fees and court costs) and
amounts paid in settlement not exceeding, in the judgment of the Board of
Directors, the estimated expenses of litigating the action, suit or other
proceeding to conclusion, that are actually and reasonably incurred in
connection with the defense or settlement of such action, suit or other
proceeding, including any appeal thereof. Indemnification shall be available
only if the person to be indemnified acted in good faith and in a manner such
person reasonably believed to be in, or not opposed to, the best interests of
the Corporation. Notwithstanding the foregoing, no indemnification shall be made
under this Section 2 in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable unless, and only to the extent
that, the court in which such action, suit or other proceeding was brought, or
any other court of competent jurisdiction, shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnification
for such expenses that such court shall deem proper.
11
<PAGE> 16
Section 3. Determination that Indemnification Is Proper.
Indemnification pursuant to Section 1 or Section 2 of this Article VI, unless
made under the provisions of Section 6 of this Article VI or unless otherwise
made pursuant to a determination by a court, shall be made by the Corporation
only as authorized in the specific case upon a determination that the
indemnification is proper in the circumstances because the indemnified person
has met the applicable standard of conduct set forth in Section 1 or Section 2
of this Article VI. Such determination shall be made under one of the following
procedures:
(a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the action, suit or other
proceeding to which the indemnification relates;
(b) if such a quorum is not obtainable or, even if obtainable,
by majority vote of a committee duly designated by the Board of Directors (the
designation being one in which directors who are parties may participate)
consisting solely of two or more directors not at the time parties to such
action, suit or other proceeding;
(c) by independent legal counsel (i) selected by the Board of
Directors in accordance with the requirements of subsection (a) or by a
committee designated under subsection (b) or (ii) if a quorum of the directors
cannot be obtained and a committee cannot be designated, selected by majority
vote of the full Board of Directors (the vote being one in which directors who
are parties may participate); or
(d) by the stockholders by a majority vote of a quorum
consisting of stockholders who were not parties to such action, suit or other
proceeding or, if no such quorum is obtainable, by a majority vote of
stockholders who were not parties to such action, suit or other proceeding.
Section 4. Evaluation and Authorization. Evaluation of the
reasonableness of expenses and authorization of indemnification shall be made in
the same manner as is prescribed in Section 3 of this Article VI for the
determination that indemnification is permissible; provided, however, that if
the determination as to whether indemnification is permissible is made by
independent legal counsel, the persons who selected such independent legal
counsel shall be responsible for evaluating the reasonableness of expenses and
may authorize indemnification.
Section 5. Prepayment of Expenses. Expenses (including attorneys' fees,
paralegals' fees and court costs) incurred by a director or officer in defending
a civil or criminal action, suit or other proceeding referred to in Section 1 or
Section 2 of this Article VI shall be paid by the Corporation in advance of the
final disposition thereof, but only upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if such person is
ultimately found not to be entitled to indemnification by the Corporation
pursuant to this Article VI.
Section 6. Obligation to Indemnify. To the extent that a director of
officer has been successful on the merits or otherwise in defense of any action,
suit or other proceeding referred to in Section 1 or Section 2 of this Article
VI, or in the defense of any claim, issue or matter therein, such person shall,
upon application, be indemnified against expenses (including attorneys' fees,
12
<PAGE> 17
paralegals' fees and court costs) actually and reasonable incurred by such
person in connection therewith.
Section 7. Nonexclusivity and Limitations. The indemnification and
advancement of expenses provided pursuant to this Article VI shall not be deemed
exclusive of any other rights to which a person may be entitled under any law,
By-law, agreement, vote of stockholders or disinterested directors, or
otherwise, both as to action in such person's official capacity and as to action
in any other capacity while holding office with the Corporation. Such
indemnification and advancement of expenses shall continue as to any person who
has ceased to be a director or officer and shall inure to the benefit of such
person's heirs and personal representatives. The Board of Directors may, at any
time, approve indemnification of or advancement of expenses to any other person
that the Corporation has the power by law to indemnify. In all cases not
specifically provided for in this Article VI, indemnification or advancement of
expenses shall not be made to the extent that such indemnification or
advancement of expenses is expressly prohibited by law.
Section 8. Continuation of Indemnification Right.
(a) The right of indemnification and advancement of expenses
under this Article VI for directors and officers shall be a contract right
inuring to the benefit of the directors and officers entitled to be indemnified
hereunder. No amendment or repeal of this Article VI shall adversely affect any
right of such director or officer existing at the time of such amendment or
repeal. Indemnification and advancement of expenses as provided for in this
Article VI shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such person.
(b) Unless expressly otherwise provided when authorized or
ratified by this Corporation, indemnification and advancement of expenses that
have been specifically authorized and approved by the Corporation for a
particular employee or agent shall continue as to a person who has ceased to be
an employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
(c) For purposes of this Article VI, the term "corporation"
includes, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger, so that any person who is or was a director or officer of a constituent
corporation, or is or was serving at the request of a constituent corporation as
a director, officer, employee, agent, trustee or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, is in the
same position under this Article VI with respect to the resulting or surviving
corporation as such person would have been with respect to such constituent
corporation if its separate existence had continued.
Section 9. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or who is or was serving at the request of the
Corporation as a director, officer, trustee, fiduciary, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. Such
insurance may cover any liability asserted against such person and incurred by
such person in any such capacity
13
<PAGE> 18
or arising out of such person's status as such, whether or not the Corporation
is obligated to or would have the power to indemnify such person against the
liability under Section 1 or Section 2 of this Article VI.
ARTICLE VII
INTERESTED PARTIES
Section 1. General. No contract or other transaction between the
Corporation and any one or more of its directors or any other corporation, firm,
association or entity in which one or more of its directors are directors or
officers or are financially interested shall be either void or voidable because
of such relationship or interest, because such director or directors were
present at the meeting of the Board of Directors or of a committee thereof that
authorizes, approves or ratifies such contract or transaction, or because such
director's or directors' votes are counted for such purpose, as long as one or
more of the following requirements is satisfied:
(a) the fact of such relationship or interest is disclosed or
known to the Board of Directors or committee that authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested directors;
(b) the fact of such relationship or interest is disclosed or
known to the stockholders entitled to vote on the matter, and they authorize,
approve or ratify such contract or transaction by vote or written consent; or
(c) the contract or transaction is fair and reasonable as to
the Corporation at the time it is authorized by the Board of Directors, a
committee thereof or the stockholders.
Section 2. Determination of Quorum. Common or interested directors may
be counted in determining the presence of a quorum at a meeting of the Board of
Directors or a committee thereof that authorizes, approves or ratifies a
contract or transaction referred to in Section 1 of this Article VII.
Section 3. Approval by Stockholders. For purposes of Section 1(b) of
this Article VII, a conflict of interest transaction shall be authorized,
approved or ratified if it receives the vote of a majority of the shares
entitled to be counted under this Section 3. Shares owned by or voted under the
control of a director who has a relationship or interest in the transaction
described in Section 1 of this Article VII may not be counted in a vote of
stockholders to determine whether to authorize, approve or ratify a conflict of
interest transaction under Section 1(b) of this Article VII. The vote of the
shares owned by or voted under the control of a director who has a relationship
or interest in the transaction described in Section 1 of this Article VII shall
be counted, however, in determining whether the transaction is approved under
other sections of these By-laws and applicable law. A majority of those shares
that would be entitled, if present, to be counted in a vote on the transaction
under this Section 3 shall constitute a quorum for the purpose of taking action
under this Section 3.
14
<PAGE> 19
ARTICLE VIII
CERTIFICATES OF STOCK
Section 1. Certificates for Shares. Shares may but need not be
represented by certificates. The rights and obligations of stockholders shall be
identical whether or not their shares are represented by certificates. If shares
are represented by certificates, each certificate shall be in such form as the
Board of Directors may from time to time prescribe and shall be signed (either
manually or in facsimile) by the Chairman of the Board or the President (and may
be signed (either manually or in facsimile) by the Secretary or an Assistant
Secretary and/or sealed with the seal of the Corporation or its facsimile). Each
certificate shall set forth the holder's name and the number of shares
represented by the certificate, and shall state such other matters as may be
required by law. The certificates shall be numbered and entered on the books of
the Corporation as they are issued. If shares are not represented by
certificates, then, within a reasonable time after issue or transfer of shares
without certificates, the Corporation shall send the stockholder a written
statement in such form as the Board of Directors may from time to time
prescribe, certifying as to the number of shares owned by the stockholder and as
to such other information as would have been required to be on certificates for
such shares.
If and to the extent the Corporation is authorized to issue shares of
more than one class or more than one series of any class, every certificate
representing shares shall set forth or fairly summarize upon the face or back of
the certificate, or shall state that the Corporation will furnish to any
stockholder upon request and without charge a full statement of:
(a) the designations, relative rights, preferences and limitations of
the shares of each class or series authorized to be issued;
(b) the variations in rights, preferences and limitations between the
shares of each such series, if the Corporation is authorized to issue any
preferred or special class in series insofar as the same have been fixed and
determined; and
(c) the authority of the Board of Directors to fix and determine the
variations, relative rights and preferences of future series.
Section 2. Signatures of Past Officers. If the person who signed
(either manually or in facsimile) a share certificate no longer holds office
when the certificate is issued, the certificate shall nevertheless be valid.
Section 3. Transfer Agents and Registrars. The Board of Directors may,
in its discretion, appoint responsible banks or trust companies in such city or
cities as the Board may deem advisable from time to time to act as transfer
agents and registrars of the stock of the Corporation. When such appointments
shall have been made, no stock certificate shall be valid until countersigned by
one of such transfer agents and registered by one of such registrars.
Section 4. Transfer of Shares. Transfers of shares of the Corporation
shall be made upon its books by the holder of the shares in person or by the
holder's lawfully constituted representative,
15
<PAGE> 20
upon surrender of the certificate of stock for cancellation if such shares are
represented by a certificate of stock or by delivery to the Corporation of such
evidence of transfer as may be required by the Corporation if such shares are
not represented by certificates. The person in whose name shares stand on the
books of the Corporation shall be deemed by the Corporation to be the owner
thereof for all purposes; and the Corporation shall not be bound to recognize
any equitable or other claim to or interest in such share on the part of any
other person, whether or not it shall have express or other notice thereof, save
as expressly provided by the laws of the State of Florida.
Section 5. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation and alleged to have been lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or the owner's
legal representative, to pay a reasonable charge for issuing the new
certificate, to advertise the matter in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
ARTICLE IX
RECORD DATE
Section 1. Record Date for Stockholder Actions. The Board of Directors
is authorized from time to time to fix in advance a date as the record date for
the determination of the stockholders entitled to notice of and to vote at any
meeting of the stockholders and any adjournment thereof (unless a new record
date must be established by law for such adjourned meeting), or of the
stockholders entitled to give such consent or take such action, as the case may
be. In no event may a record date so fixed by the Board of Directors precede the
date on which the resolution establishing such record date is adopted by the
Board of Directors; and such record date may not be more than seventy (70) nor
less than ten (10) days before the date of any meeting of the stockholders,
before a date in connection with the obtaining of the consent of stockholders
for any purpose, or before the date of any other action requiring a
determination of the stockholders. Only those stockholders listed as
stockholders of record as of the close of business on the date so fixed as the
record date shall be entitled to notice of and to vote at such meeting and any
adjournment thereof, or to exercise such rights or to give such consent, as the
case may be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid. If the Board of
Directors fails to establish a record date as provided herein, the record date
shall be deemed to be the date ten (10) days prior to the date of the
stockholders' meeting.
Section 2. Record Date for Dividend and Other Distributions. The Board
of Directors is authorized from time to time to fix in advance a date as the
record date for the determination of the stockholders entitled to receive a
dividend or other distribution. Only those stockholders listed as stockholders
of record as of the close of business on the date so fixed as the record date
shall be entitled to receive the dividend or other distribution, as the case may
be, notwithstanding any transfer
16
<PAGE> 21
of any stock on the books of the Corporation after any such record date fixed as
aforesaid. If the Board of Directors fails to establish a record date as
provided herein, the record date shall be deemed to be the date of authorization
of the dividend or other distribution.
ARTICLE X
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares of capital stock in the
manner and upon the terms and conditions provided by the Articles of
Incorporation of the Corporation and by law. Subject to the provisions of the
Articles of Incorporation of the Corporation and to law, dividends may be paid
in cash or property, including shares of stock or other securities of the
Corporation.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Corporation shall be the period selected by the
Board of Directors as the fiscal year. Unless and until changed by the Board of
Directors, the fiscal year of the Corporation shall end on March 31 of each
year.
ARTICLE XII
SEAL
The corporate seal shall have the name of the Corporation and the word
"SEAL" inscribed thereon. It may be a facsimile, engraved, printed or impression
seal.
ARTICLE XIII
STOCK IN OTHER CORPORATIONS
Shares of stock in other corporations held by the Corporation shall be
voted by such officer or officers or other agent of the Corporation as the Board
of Directors shall from time to time designate for the purpose or by a proxy
thereunto duly authorized by said Board.
ARTICLE XIV
AMENDMENTS
These By-laws may be altered, amended or repealed and new By-laws may
be adopted either by the Board of Directors or by the holders of a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote;
provided, however, that the Board of Directors may not
17
<PAGE> 22
alter, amend or repeal any By-law adopted by the stockholders if the
stockholders specifically provided that the By-law is not subject to amendment
or repeal by the Board.
ARTICLE XV
EMERGENCY BY-LAWS
Section 1. Scope of Emergency By-laws. The emergency By-laws provided
in this Article XV shall be operative during any emergency, notwithstanding any
different provision set forth in the preceding Articles hereof; provided,
however, that to the extent not inconsistent with the provisions of this Article
XV and the emergency By-laws, the By-laws provided in the preceding Articles
shall remain in effect during such emergency. For purposes of the emergency
By-law provisions of this Article XV, an emergency shall exist if a quorum of
the Corporation's directors cannot readily be assembled because of some
catastrophic event. Upon termination of the emergency, these emergency By-laws
shall cease to be operative.
Section 2. Call and Notice of Meeting. During any emergency, a meeting
of the Board of Directors may be called by any officer or director of the
Corporation. Notice of the date, time and place of the meeting shall be given by
the person calling the meeting to such of the directors as it may be feasible to
reach by any available means of communication. Such notice shall be given at
such time in advance of the meeting as circumstances permit in the judgment of
the person calling the meeting.
Section 3. Quorum and Voting. At any such meeting of the Board of
Directors, a quorum shall consist of any one or more directors, and the act of
the majority of the directors present at such meeting shall be the act of the
Corporation.
Section 4. Appointment of Temporary Directors.
(a) The director or directors who are able to be assembled at a
meeting of directors during an emergency may assemble for the purpose of
appointing, if such directors deem it necessary, one or more temporary directors
(the "Temporary Directors") to serve as directors of the Corporation during the
term of any emergency.
(b) If no directors are able to attend a meeting of directors
during an emergency, then such stockholders as may reasonably be assembled shall
have the right, by majority vote of those assembled, to appoint Temporary
Directors to serve on the Board of Directors until the termination of the
emergency.
(c) If no stockholders can reasonably be assembled in order to
conduct a vote for Temporary Directors, then the Chairman of the Board or his or
her successor as determined under an emergency succession plan adopted by the
Board of Directors under Section 5 of this Article XV shall be deemed a
Temporary Director of the Corporation, and such Chairman of the Board or his or
her successor, as the case may be, shall have the right to appoint additional
Temporary Directors
18
<PAGE> 23
to serve with him or her on the Board of Directors of the Corporation during the
term of the emergency.
(d) Temporary Directors shall have all of the rights, duties
and obligations of directors appointed pursuant to Article III hereof; provided,
however, that a Temporary Director may be removed from the Board of Directors at
any time by the person or persons responsible for appointing such Temporary
Director, or by vote of the majority of the stockholders present at any meeting
of the stockholders during an emergency. In any event, the Temporary Director
shall automatically be deemed to have resigned from the Board of Directors upon
the termination of the emergency in connection with which the Temporary Director
was appointed.
Section 5. Modification of Lines of Succession. Either before or during
any emergency, the Board of Directors may provide, and from time to time modify,
lines of succession in the event that during such an emergency any or all
officers or agents of the Corporation shall for any reason be rendered incapable
of discharging their duties.
Section 6. Change of Principal Office. The Board of Directors may,
either before or during any such emergency, and effective during such emergency,
change the principal office of the Corporation or designate several alternative
head offices or regional offices, or authorize the officers of the Corporation
to do so.
Section 7. Limitation of Liability. No officer, director or employee
acting in accordance with these emergency By-laws during an emergency shall be
liable except for willful misconduct.
Section 8. Amendment or Repeal. These emergency By-laws shall be
subject to amendment or repeal by further action of the Board of Directors or by
action of the stockholders, but no such amendment or repeal shall modify the
provisions of Section 7 above with regard to actions taken prior to the time of
such amendment or repeal. Any amendment of these emergency By-laws may make any
further or different provision that may be practical or necessary under the
circumstances of the emergency.
ARTICLE XVI
PRECEDENCE OF LAW AND ARTICLES OF INCORPORATION
Any provision of the Articles of Incorporation of this Corporation
shall, subject to law, control and take precedence over any provision of these
By-laws inconsistent therewith.
19
<PAGE> 1
<TABLE>
<S> <C> <C>
- -------
NUMBER COMMON COMMON
AS STOCK STOCK
- -------- PAR VALUE $.01 [LOGO] CLASS A
-------------
SHARES
--------------
[LOGO] ------------------------
AMERISTEEL AMERISTEEL CORPORATION INCORPORATED UNDER
[LOGO] This is to certify that THE LAWS OF THE
is the owner of STATE OF FLORIDA
------------------------
FULLY PAID AND NON-ASSEMBLE SHARES OF THE COMMON STOCK OF THE PAR VLAUE OF ONE CENT ($.01) EACH OF
CUSIP 000000 00
SEE REVERSE FOR CERTAIN DEFINITION
AmeriSteel Corporation (hereinafter called the "Corporation") transferable on the books of the
Corporation by said owner in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to all the provisions of the Articles of Incorporation and all amendments
thereto, copies of which are on file at the office of the Transfer Agent, and the holder hereof, by
acceptance of this certificate, consents to and agrees to be bound by all of said provisions. This
certificate is not valid unless countersigned and registered by the Transfer Agent and Registration.
Witness, the facsimile seal of the Corporation and the facsimile signatures of its duly authorized
officer.
Dated: [Ameristeel Corporation Seal]
COUNTERSIGNED AND REGISTERED:
BANK NAME
TRANSFER AGENT
AND REGISTRAR,
/s/
AUTHORIZED SIGNATURE -------------------------------------
Chief Financial Officer and Secretary
/s/
--------------------------------------
Chairman and Chief Executive Officer
</TABLE>
<PAGE> 2
AMERISTEEL CORPORATION
The following abbreviations, when used in the Inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM- as tenants by common UNIF GIFT (TRAN) ACT-______Custodian _________
TEN ENT- as tenants by the entireties (Name) (Name)
JT TEN - as joint tenants with right of under Uniform Gifts (Transfers) to (Florida)
survivorship and not as tenants ACT_______________________
in common (Name)
</TABLE>
Additional abbreviations may also be used though not in the above Mst.
For value received_______________hereby sell, assign and transfer into
PLEASE INSERT SOCIAL SECURITY ON OTHER
IDENTIFING NUMBER OF ASSIGNEE
_____________________________________________________________________________
_____________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
innovacably constitute and appoint
___________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the promises.
Dated
----------------------------------------------------
NOTICE: THIS SIGNATURE TO THE AGREEMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE PAGE
OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ARBITRATION ON REPLACEMENT OR ANY CHANGE WHATEVER.
SIGNATURES(S) GUARANTEED:
-------------------------------------------------------
THE SIGNATURES SHOULD BE GUARANTEED BY A ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOANS ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE 17AD-15.
THE PROVISIONS OF THE CORPORATION'S ARTICLES OF INCORPORATION, AS PRESENTLY IN
EFFECT, SHOWING THE CLASSES AND SERIES OF STOCK AUTHORIZED TO BE ISSUED BY THE
CORPORATION AND THE DISTINGUISHING CHARACTERISTICS THEREOF, ARE HEREBY
INCORPORATED BY REFERENCE TO THE SAME EXTENT AS IF HEREIN SET FORTH AT LENGTH;
A COPY OF SAID PROVISIONS, CERTIFIED BY AN OFFICER OF THE CORPORATION, WILL BE
FURNISHED BY THE CORPORATION OR BY ITS TRANSFER AGENT, WITHOUT COST, TO AND
UPON THE REQUEST OF THE HOLDER OF THIS CERTIFICATE. REQUESTS MAY BE ADDRESSED
TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE OR TO THE
CORPORATION'S TRANSFER AGENT.
<TABLE>
- ----------------------------------- -----------------------------------
<S> <C>
AMERICAN BANK NOT COMPANY PRODUCTION COORDINATOR:
650 BLAIR MILL ROAD PROOF OF OCTOBER 27, 1997
HORSHAM, PA 10044 AMERISTEEL
(215) 657-3400 H 53290bk
- ----------------------------------- -----------------------------------
SALES: A. HOBBS: 404-525-1455 OPERATOR: EG
- ----------------------------------- -----------------------------------
NET/BANKNOTE/HOME/AMERISTEEL NEW
- ----------------------------------- -----------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 5
TRENAM, KEMKER, SCHARF, BARKIN, FRYE, O'NEILL & MULLIS
PROFESSIONAL ASSOCIATION
ATTORNEYS AT LAW
TAMPA OFFICE ST. PETERSBURG OFFICE
2700 BARNETT PLAZA 2100 BARNETT TOWER
101 EAST KENNEDY BOULEVARD ONE PROGRESS PLAZA
POST OFFICE BOX 1102 PLEASE REPLY TO POST OFFICE BOX 2245
TAMPA, FLORIDA 33601-1102 TAMPA ST. PETERSBURG, FLORIDA 33731-2245
TELEPHONE (813) 223-7474 TELEPHONE (813) 898-7474
TELEFAX (813) 229-6553 TELEFAX (813) 229-6553
November 17, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, DC 20549
Re: AmeriSteel Corporation
Registration Statement on Form S-1
File No. 333-37679
Ladies and Gentlemen:
We have represented AmeriSteel Corporation (the "Company") in
connection with the Company's Registration Statement on Form S-1 (File No.
333-37679), as amended (the "S-1 Registration Statement") relating to the
proposed public offering by the Company of up to 4,542,500 shares of the
Company's Class A Common Stock (the "Offering"). This opinion is being provided
as Exhibit 5 to the S-1 Registration Statement.
In our capacity as counsel to the Company in connection with the
Registration Statement and the Offering, we have examined and are familiar
with: 1. the Company's Articles of Incorporation and bylaws, as currently in
effect, 2. the Articles of Amendment to the Articles of Incorporation which are
to be filed by the Company immediately prior to the consummation of the
Offering, pursuant to which the Company's then existing authorized capital
stock consisting of 30,000,000 shares of common stock, par value $.01 per
share, will be reclassified to provide for 100,000,000 shares of Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), and 22,000,000
shares of Class B Common Stock, par value $.01 per share (the "Class B Common
Stock"), and the existing shares of Common Stock, par value $.01 per share,
will be converted into an equal number of Class B Common Stock (the
"Recapitalization"), 3. the S-1 Registration Statement and 4. such other
corporate records and documents and instruments as in our opinion are necessary
or relevant as the basis for the opinions expressed below.
As to various questions of fact material to our opinion, we have
relied without independent investigation on statements or certificates of
officials and representatives of the Company, the Department of State of the
State of Florida and others. In all such examinations, we have assumed the
genuineness of all signatures on original and certified documents and the
conformity to original and certified documents of all copies submitted to us as
conformed, photostatic or other exact copies.
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION NOVEMBER 17, 1997
AMERISTEEL CORPORATION PAGE 2
FILE NO. 333-37679
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We express no opinion as to the law of any jurisdiction other than of
the State of Florida and the Federal laws of the United States of America.
Based upon and in reliance on the foregoing, we are of the opinion
that:
1. The Company has been duly incorporated and is a validly
existing corporation under the laws of the State of Florida and its status is
active.
2. The Recapitalization has been duly and legally authorized by
all action required by the Board of Directors of the Company.
3. When the following events shall have occurred:
a. the S-1 Registration Statement shall have become
effective in accordance with the Securities Act of
1933, as amended;
b. the Recapitalization shall have become effective
under the laws of the State of Florida;
c. the shares of Class A Common Stock shall have been
offered and sold as provided in the S-1 Registration
Statement, the consideration specified in the S-1
Registration Statement shall have been received; and
d. the certificates representing such shares shall have
been duly executed, counter-signed and issued by or
on behalf of the Company,
the shares of Class A Common Stock so offered and sold in the Offering will be
duly authorized, validly issued, fully paid and non-assessable shares of the
capital stock of the Company.
This firm hereby consents to the filing of this opinion as an Exhibit
to the S-1 Registration Statement and to the reference to it under the heading
"Legal Matters."
Sincerely,
TRENAM, KEMKER, SCHARF,
BARKIN, FRYE, O'NEILL & MULLIS
Professional Association
By:
Albert C. O'Neill, Jr.
<PAGE> 1
EXHIBIT 23.2
CONSENT TO USE OF REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
report (and to all references to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Tampa, Florida
November 14, 1997
