SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-3855
LACLEDE STEEL COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 43-0368310
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
One Metropolitan Square, St. Louis, Missouri 63102
(Address of principal executive offices)
(Zip code)
314-425-1400
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of April 22, 1997 there were 4,056,140 shares of $.01 par value
common stock outstanding.<PAGE>
ITEM 1: FINANCIAL STATEMENTS
LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
Three Months Ended
March 31,
1997 1996
Net sales $80,846 $80,975
Costs and expenses:
Cost of products sold 73,870 76,058
Selling, general and administrative expenses 3,359 3,452
Depreciation 1,942 1,991
Interest expense, net 2,427 2,765
Gain on sale of facility (987) --
Total costs and expenses 80,611 84,266
Earnings (loss) before income taxes 235 (3,291)
Provision (credit) for income taxes 100 (1,260)
Net earnings (loss) $ 135 $(2,031)
Net earnings (loss) per share $ 0.01 $(0.50)
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<PAGE>
LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
Mar. 31, Dec. 31,
1997 1996
Current Assets:
Cash and cash equivalents $ 136 $ 143
Accounts receivable, less allowances 37,287 38,772
Prepaid expenses 242 443
Notes receivable 1,653 --
Inventories:
Finished 45,435 46,631
Semi-finished 18,095 23,540
Raw materials 6,254 5,218
Supplies 15,253 14,720
Total inventories 85,037 90,109
Total Current Assets 124,355 129,467
Non-Current Assets:
Intangible pension asset 14,014 14,464
Other intangible assets 2,227 2,263
Bond funds in trust 2,385 2,385
Prepaid pension contributions 5,544 5,766
Deferred income taxes 47,456 47,557
Notes receivable 3,600 3,600
Other 3,876 4,104
Total Non-Current Assets 79,102 80,139
Plant and Equipment, at cost 237,186 245,624
Less - accumulated depreciation 123,566 124,120
Net Plant and Equipment 113,620 121,504
Total Assets $317,077 $331,110
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<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Mar. 31, Dec. 31,
1997 1996
Current Liabilities:
Accounts payable $ 44,118 $ 41,293
Accrued compensation 4,152 6,780
Current portion of long-term debt 2,484 2,484
Accrued costs of pension plans 14,711 14,049
Other 3,395 2,860
Total Current Liabilities 68,860 67,466
Non-Current Liabilities:
Accrued costs of pension plans 51,318 53,181
Accrued postretirement medical benefits 79,232 79,782
Other 4,449 5,244
Total Non-Current Liabilities 134,999 138,207
Long-Term Debt:
Bank revolving credit 65,210 76,126
Bank term loan 3,989 5,348
Revenue bonds 24,415 24,415
Other 2,000 2,000
Total Long-Term Debt 95,614 107,889
Minority Interest 318 303
Stockholders' Equity:
Preferred stock, no par value, authorized 2,000,000
shares; issued and outstanding 416,667 shares 83 83
Common stock, $0.01 par value, authorized 25,000,000
shares; issued and outstanding 4,056,140 shares 41 41
Capital in excess of par value 60,044 60,138
Accumulated deficit (12,165) (12,300)
Minimum pension liability adjustment (30,717) (30,717)
Total Stockholders' Equity 17,286 17,245
Total Liabilities and Stockholders' Equity $317,077 $331,110
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<PAGE>
LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net earnings (loss) $ 135 $(2,031)
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation 1,942 1,991
Change in deferred income taxes 101 (1,181)
Gain on sale of facility (987) --
Undistributed minority interest 15 19
Changes in assets and liabilities that
provided (used) cash, net of effects from sale of facility:
Accounts receivable 1,485 (4,574)
Inventories 1,273 (4,977)
Accounts payable and accrued expenses (365) 9,100
Accrued pension cost 2,220 2,655
Pension cash funding (2,749) (3,749)
Accrued postretirement medical benefits (550) 125
Other assets and liabilities 260 13
Net cash provided by (used in) operating activities 2,780 (2,609)
Cash flows from investing activities:
Capital expenditures 176 (3,795)
Proceeds from sale of facility 9,319 --
Net cash provided by (used in) investing activities 9,495 (3,795)
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit (10,916) 6,752
Payments on long-term debt (1,359) (358)
Payment of financing costs (7) --
Net cash provided by (used in) financing activities (12,282) 6,394
Cash and cash equivalents:
Net decrease during the period (7) (10)
At beginning of year 143 161
At end of period $ 136 $ 151
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<PAGE>
LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands Except Per Share Data)
Quarter Year
Ended Ended
Mar. 31, Dec.31,
1997 1996
Preferred stock
(416,667 shares issued)
Beginning balance $ 83 $ --
Sale of convertible preferred stock -- 83
Ending balance 83 83
Common stock - $0.01 par value
(4,056,140 shares issued)
Beginning balance 41 54,081
Reduction in par value of common stock -- (54,040)
Ending balance 41 41
Capital in excess of par value
Beginning balance 60,138 247
Sale of convertible preferred stock -- 6,007
Reduction in par value of common stock -- 54,040
Dividend on convertible preferred stock (94) (156)
Ending balance 60,044 60,138
Accumulated deficit
Beginning balance (12,300) (2,315)
Net earnings (loss) 135 (9,985)
Ending balance (12,165) (12,300)
Minimum pension liability
Beginning balance (30,717) (35,495)
Change in period -- 4,778
Ending balance (30,717) (30,717)
Total Stockholders' Equity at End of Period $ 17,286 $17,245
- - 5 -
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The accompanying unaudited consolidated financial statements include the
accounts of Laclede Steel Company and its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated. The consolidated
financial statements reflect all adjustments (such adjustments are of a normal
recurring nature unless otherwise disclosed in these interim financial
statements) which are in the opinion of Management necessary for a fair
statement of the results for the interim periods.
NOTE 2 - BENWOOD SALE
In February 1997, the Company sold the assets of its electric weld structural
and mechanical tubing operation, located in Benwood, West Virginia. Cash
proceeds from the sale of these assets, which consist primarily of equipment
and inventory, totaled $9,319,000. The Company used the funds from the sale to
improve its working capital position. This transaction resulted in a gain on
sale of equipment of $987,000 ($592,000 after tax) recorded in February 1997.
NOTE 3 - PER SHARE DATA AND PREFERRED STOCK DIVIDENDS
Per share amounts for 1996 and 1997 have been calculated based on weighted
average shares outstanding of 4,056,140. Net earnings per share in 1997 were
computed by dividing the net earnings after deducting preferred dividend
requirements of $94,000 by the weighted average shares outstanding.
Preferred stock dividends relate to Series A Preferred Stock in the amount of
$6,250,000 issued as of July 30, 1996. Dividends, payable at an annual rate
equal to 6%, accrue from the date of issuance but will be payable when, as and
if declared by the Company's Board of Directors. No dividend has been declared
on the Series A Preferred Stock.
Each share of Series A Preferred Stock is convertible into 4.69 shares of
common stock. Fully diluted earnings per share in 1997, reflecting conversion
of Series A Preferred Stock, are not presented as the result is anti-dilutive.
The financial results for 1997 are subject to annual audit.
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ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
In the first quarter of 1997 operating activities provided $2.8 million in
cash and contributions to Company pension plans totaled $2.7 million.
In February 1997 the Company completed the sale of its electric weld
structural and mechanical tubing operation, located in Benwood, West Virginia.
Cash proceeds from the sale of these assets, which consist primarily of
equipment and inventory, were $9.3 million.
Long-term debt decreased by $12.3 million in the first quarter of 1997. Net
working capital decreased by $6.5 million and the ratio of current assets to
current liabilities was 1.8 to 1.0 at March 31, 1997.
At March 31, 1997, $65.2 million in borrowings were outstanding under the
Company's revolving credit facility. Amounts available under this facility
were utilized early in the second quarter of 1997 to cover outstanding
short-term commitments, primarily trade accounts payable.
Under terms of the Company's Loan and Security Agreement, the limit on
amounts available based on Company inventory levels will be reduced by $1.7
million by September 30, 1997. The Company believes that planned inventory
levels will be consistent with revolving credit limits and, thus, this
reduction should not affect current availability. During 1997 the Company
anticipates capital expenditures of approximately $3.0 million, and
contributions to pension plans of $14.2 million. Taking into account the
proceeds from the February 1997 sale of the Benwood facility and assuming
that the Company is able to (i) maintain its existing level of sales, (ii)
avoid sales price decreases and (iii) continue to capture savings from
recently completed productivity improvements, the Company will
generate sufficient cash flow to finance its 1997 liquidity requirements
including the above referenced expenditures. If the Company is unable to
maintain its existing level of sales and current pricing or if
the productivity improvements fail to produce positive financial results, the
Company may not generate sufficient cash flow to
finance its 1997 liquidity requirements. In such event, the
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Company would evaluate other methods of generating cash flow such as the sale
of significant businesses or assets or refinancing transactions. There can be
no assurance, however, that any such alternative could be successfully
completed.
The Company has amended its Loan and Security Agreement modifying financial
covenants relating to operating results and net worth for the year 1997. In
the event further amendment to financial covenants is necessary, there can be
no assurance that the Company will be able to obtain such amendment.
The Company is also required to comply with various covenants related to
limits on liabilities as defined in the Agreements for the Solid Waste Revenue
Bonds and Pollution Control Revenue Bonds. At March 31, 1997 the Company was
in compliance with these covenants. Furthermore the sale of the Benwood
Operations described above in February 1997 improved the Company's financial
position with regard to continued compliance. If future operations result in
increases in liabilities as defined in the Agreements, the Company could be in
violation of these covenants. In the event amendment of the covenants is
required in the future, there can be no assurance that the Company can obtain
such amendment.
At March 31, 1997 the Company has net deferred tax assets of $47.5 million.
Management currently believes that its long-term profitability should
ultimately be sufficient to enable it to realize full benefit of future tax
deductions. Thus no deferred tax valuation allowance is deemed necessary.
The Company will continue to monitor and evaluate its deferred tax assets and
the need for a deferred tax valuation allowance. In the event a deferred tax
valuation allowance is required in the future, amendment of financial covenants
in the Company's Loan and Security Agreement, as well as its Bond Agreements,
may be required. There can be no assurance that the Company will be able to
obtain such amendments.
Results of Operations
Net sales decreased by $.1 million in the first quarter of 1997 compared to
the first quarter of 1996. The decline in sales of electric weld structural
tubing was offset by increased semi-finished sales and shipments of hot rolled
products. Increases in prices for continuous weld pipe were largely offset by
further weakness in pricing for hot rolled SBQ bars. Laclede Chain
- 8 -<PAGE>
Manufacturing Company experienced a drop in traction chain sales, reflecting a
mild winter, partially offset by increased shipments of hardware and industrial
products.
The reduction in cost of products sold in 1997 is primarily due to the effect
of cost reductions which were implemented in late 1996. The Company also
benefited from a continuation of the productivity gains which it began to
experience in most of its operations in the second half of 1996.
The decrease in interest expenses in the first quarter of 1997 is the result
of the decrease in bank borrowings, offset by an increase in average interest
rates of .5%. The gain on sale of facility in 1997 is from the sale of the
Benwood Operation discussed above.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation
Reform Act of 1995
The foregoing Management's Discussion and Analysis and other portions of this
report on Form 10-Q, contain various "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Sections
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's expectations or beliefs concerning future events, including the
following: statements regarding the overall demand for steel; statements
regarding the ability to maintain sales prices; statements
regarding productivity improvement programs; statements regarding the Company's
long-term profitability; and statements regarding future borrowing capacity.
In addition, statements containing expressions such as
"believes," "anticipates" or "expects" used in the Company's periodic reports
on Forms 10-K and 10-Q filed with the SEC are intended to identify
forward-looking statements. The Company cautions that these and
similar statements included in this report and in previously filed periodic
reports including reports filed on Forms 10-K and 10-Q and further qualified by
important factors that could cause actual results to differ
materially from those in the forward-looking statement, including, without
limitation, the following: decline in sales prices for steel products;
increases in the cost of steel scrap; failure to obtain
significant benefits from the Company's recently completed cost reduction and
productivity improvement programs; and increased domestic or foreign steel
competition.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3)(a) By-Laws of Registrant amended April 7, 1997. (Incorporated by
reference to Exhibit 4.3 in Registrant's Form S-8 filed on
April 25, 1997.)
(4)(a) Registrant's Loan and Security Agreement dated as of September
7, 1994. (Incorporated by reference to Exhibit (4)(a) in
Registrant's quarterly report on Form 10-Q for September 30,
1994.)
(4)(b) First Amendment dated February 15, 1995 to Registrant's Loan
and Security Agreement. (Incorporated by reference to Exhibit
(4)(b) in Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)
(4)(c) Second Amendment dated May 10, 1995 to Registrant's Loan and
Security Agreement. (Incorporated by reference to Exhibit
(4)(c) in Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1995.)
(4)(d) Third Amendment dated June 1, 1995 to Registrant's Loan and
Security agreement. (Incorporated by reference to Exhibit
(4)(c) in Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1995.)
(4)(e) Fourth Amendment dated December 7, 1995 to Registrant's Loan
and Security Agreement. (Incorporated by reference to Exhibit
(4)(e) in Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)
(4)(f) Fifth Amendment dated January 26, 1996 to Registrant's Loan
and Security Agreement. (Incorporated by reference to Exhibit
(4)(f) in Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)
- 10 -<PAGE>
(4)(g) Sixth Amendment dated June 26, 1996 to the Company's Loan and
Security Agreement. (Incorporated by reference to Exhibit
(4)(g) in Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1996.)
(4)(h) Seventh Amendment dated July 30, 1996 to the Company's Loan
and Security Agreement. (Incorporated by reference to Exhibit
(4)(h) in Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1996.)
(4)(I) Eighth Amendment dated November 14, 1996 to Registrant's Loan
and Security Agreement. (Incorporated by reference to Exhibit
(4)(i) in Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.)
(4)(j) Ninth Amendment dated February 7, 1997 to Registrant's Loan
and Security Agreement. (Incorporated by reference to Exhibit
(4)(j) in Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.)
(4)(k) Tenth Amendment dated February 26, 1997 to Registrant's Loan
and Security Agreement. (Incorporated by reference to Exhibit
(4)(k) in Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.)
Instruments with respect to long-term debt issues have been omitted
where the amount of securities authorized under such instruments does
not exceed 10% of the total consolidated assets of the Registrant.
Registrant hereby agrees to furnish a copy of any such instrument to
the Commission upon its request.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter.
- 11 -<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LACLEDE STEEL COMPANY
(Registrant)
/s/ Michael H. Lane
Michael H. Lane
Vice President - Finance
Treasurer and Secretary
Duly Authorized Officer and
Principal Financial Officer
Date: May 6, 1997
<PAGE>
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<PERIOD-START> JAN-1-1997
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<PERIOD-TYPE> 3-MOS
<CASH> 136
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<ALLOWANCES> 2,298
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83
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