<PAGE>
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, 1998
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, 1998 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,
1998 1997
Net sales $ 84,555 $ 80,846
Costs and expenses:
Cost of products sold 77,638 73,870
Selling, general and administrative expenses 3,818 3,359
Depreciation 1,711 1,942
Interest expense, net 2,678 2,427
Unusual charges (credits) 2,093 (987)
Total costs and expenses 87,938 80,611
Earnings (loss) before income taxes (3,383) 235
Provision (credit) for income taxes (1,345) 100
Net earnings (loss) (2,038) 135
Preferred stock dividend requirement (94) (94)
Net earnings (loss) available to common $ (2,132) $ 41
shareholders
Basic and diluted
net earnings (loss) per share $ (0.53) $ 0.01
- 1 -
<PAGE>
LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
Mar. 31, Dec. 31,
1998 1997
Current Assets:
Cash and cash equivalents $ 195 $ 186
Accounts receivable, less allowances 41,849 40,282
Prepaid expenses 1,921 1,238
Inventories:
Finished 46,826 45,823
Semi-finished 18,380 18,166
Raw materials 5,793 4,681
Supplies 13,420 14,136
Total inventories 84,419 82,806
Total Current Assets 128,384 124,512
Non-Current Assets:
Intangible pension asset 13,909 14,652
Other intangible assets 2,083 2,119
Bond funds in trust 2,385 2,385
Prepaid pension contributions 3,417 5,441
Deferred income taxes 46,652 45,400
Notes receivable -- 3,396
Other 4,584 4,897
Total Non-Current Assets 73,030 78,290
Plant and Equipment, at cost 240,492 239,670
Less - accumulated depreciation 130,134 128,652
Net Plant and Equipment 110,358 111,018
Total Assets $ 311,772 $ 313,820
- 2 -
LIABILITIES AND STOCKHOLDERS' EQUITY
Mar. 31, Dec. 31,
1998 1997
Current Liabilities:
Accounts payable $ 43,018 $ 42,682
Accrued compensation 5,024 6,269
Current portion of long-term debt 2,356 2,356
Accrued costs of pension plans 13,577 13,577
Other 3,061 3,729
Total Current Liabilities 67,036 68,613
Non-Current Liabilities:
Accrued costs of pension plans 36,412 36,864
Accrued postretirement medical benefits 75,066 75,864
Other 1,999 2,221
Total Non-Current Liabilities 113,477 114,949
Long-Term Debt:
Bank revolving credit 79,967 76,516
Bank term loan 6,993 7,311
Revenue bonds 23,330 23,330
Other 2,000 2,000
Total Long-Term Debt 112,290 109,157
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 59,669 59,763
Accumulated deficit (17,345) (15,307)
Minimum pension liability adjustment (23,479) (23,479)
Total Stockholders' Equity 18,969 21,101
Total Liabilities and Stockholders' Equity $ 311,772 $ 313,820
- 3 -
<PAGE>
LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net earnings (loss) $ (2,038) $ 135
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation 1,711 1,942
Unusual charges (credits) 2,093 (987)
Change in deferred income taxes (1,252) 101
Changes in assets and liabilities that
provided (used) cash, net of effects from sale of facility:
Accounts receivable (1,567) 1,485
Inventories (1,613) 1,273
Accounts payable and accrued expenses (2,596) (365)
Accrued pension cost 2,322 2,220
Pension cash funding (2,100) (2,749)
Accrued postretirement medical benefits (798) (550)
Other assets and liabilities 141 275
Net cash provided by (used in) operating activities(5,697) 2,780
Cash flows from investing activities:
Capital expenditures (1,042) 176
Proceeds from sale of equipment 3,625 --
Proceeds from sale of facility -- 9,319
Net cash provided by investing activities 2,583 9,495
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit 3,451 (10,916)
Payments on long-term debt (318) (1,359)
Payment of financing costs (10) (7)
Net cash provided by (used in) financing activities 3,123 (12,282)
Cash and cash equivalents:
Net increase (decrease) during the period 9 (7)
At beginning of year 186 143
At end of period $ 195 $ 136
- 4 -
<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,
1998 1997
Preferred stock
(416,667 shares issued)
Beginning balance $ 83 $ 83
Sale of convertible preferred stock -- --
Ending balance 83 83
Common stock - $0.01 par value
(4,056,140 shares issued)
Beginning balance 41 41
Change in period -- --
Ending balance 41 41
Capital in excess of par value
Beginning balance 59,763 60,138
Dividend on convertible preferred stock (94) (375)
Ending balance 59,669 59,763
Accumulated deficit
Beginning balance (15,307) (12,300)
Net loss (2,038) (3,007)
Ending balance (17,345) (15,307)
Minimum pension liability
Beginning balance (23,479) (30,717)
Change in period -- 7,238
Ending balance (23,479) (23,479)
Total Stockholders' Equity at End of Period $ 18,969 $ 21,101
- - 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 - UNUSUAL CHARGES (CREDITS)
In the first quarter of 1998 the Company
recorded non-cash special charges of $2.1
million relating to the retirement of John B.
McKinney as President and Chief Executive
Officer. These charges increased the net
loss for the quarter by $1.3 million of $.31
per share.
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
approximately $11.0 million. This
transaction resulted in a gain on sale of
equipment of $987 thousand ($592 thousand
after tax) recorded in February 1997.
NOTE 3 - PER SHARE DATA
Per share amounts have been calculated based
on weighted average shares outstanding of
4,056,140. Net earnings (loss) per share for
1998 and 1997 were computed by dividing the
net earnings after deducting preferred
dividend requirements of $94 thousand, by the
weighted average shares outstanding.
The financial results for 1998 are subject to
annual audit.
- 6 -<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
In the first quarter of 1998 operating
activities used $5.7 million in cash. This
reflects increases in accounts receivable and
inventory totaling $3.2 million, and reductions
in accounts payable and accrued expenses of
$2.6 million.
In January 1998 the Company completed the
sale and leaseback transaction for the Ladle
Metallurgy Facility at the Alton Plant. This
final step of the sale and leaseback
transaction provided the company with $3.6
million in cash.
Long-term debt increased by $3.1 million
in the first quarter of 1998. Net working
capital increased by $5.4 million, and the
ratio of current assets to current liabilities
was 1.9 to 1.0 at March 31, 1998.
At March 31, 1998, $80.0 million in
borrowings were outstanding under the company's
revolving credit facility, with unused
availability of $4.0 million. Amounts
available under this facility were fully
utilized early in the second quarter of 1998 to
cover outstanding short-term commitments,
primarily trade accounts payable.
The Company has periodically amended its
Loan and Security Agreement to modify financial
covenants relating to operating results and net
worth. The most recent amendment was effective
March 27, 1998. In the event further amendment
to financial covenants is necessary in the
future, there can be no assurance that the
Company will be able to obtain such amendment.
As part of the modifications to the Loan
and Security Agreement previously mentioned, in
1997 the Company received the approval of
parties to the Solid Waste Revenue Bonds to
eliminate certain negative financial covenants
contained therein and to substitute therefor
certain collateral. Subsequent to that
substitution, the only remaining negative
financial covenant with respect to the Solid
Waste Revenue Bonds is that the Company may not
without the prior written consent of the Issuer
of the Bonds (i) borrow from its subsidiary,
Laclede Chain Manufacturing Company, or (ii)
take cash advances from Laclede Chain
Manufacturing Company, except to the extent
that the aggregate principal amount of all such
borrowings and cash advances at any one time do
not exceed $7.0 million. Collateral granted to
the Trustee of the Solid Waste Revenue Bonds
for the benefit of the bondholders consists of
(i) all of the issued and outstanding
- 7 -<PAGE>
shares of Laclede Chain Manufacturing Company
and (ii) all of Laclede Chain Manufacturing
Company's machinery and equipment now owned or
thereafter acquired. As of March 31, 1998, the
Company is in compliance with the remaining
negative covenant contained in the Solid Waste
Revenue Bonds.
During 1998 the Company anticipates
capital expenditures of approximately $6.0
million, and contributions to pension plans of
$13.6 million. Assuming that the Company is
able to (i) maintain its existing level of
sales, (ii) avoid sales price decreases and
(iii) capture savings from productivity
improvements, the Company will generate
sufficient cash flow to finance its 1998
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 Company's
productivity improvements fail to produce
positive financial results, the Company may not
generate sufficient cash flow to finance its
1998 liquidity requirements. In such event,
the Company would evaluate other methods of
generating cash flow such as the sale of
significant businesses or assets and
refinancing transactions. There can be no
assurance, however, that any such alternative
could be successfully completed.
At March 31, 1998 the Company has net
deferred tax assets of $46.7 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. For a more complete discussion of
the Company's deferred tax assets (including
issues related to Section 382 of the Internal
Revenue Code), see the Company's Annual Report
on Form 10-K for the year ended December 31,
1997.
Results of Operations
Net sales increased by $3.7 million in the
first quarter of 1998 compared to the first
quarter of 1997. This reflects a 5.8% increase
in steel shipments, partially offset by a 1.1%
decrease in average sales prices for steel
products.
- 8 -<PAGE>
Cost of products sold increased by 5.1% in
the first quarter of 1998, reflecting higher
steel shipments. Production costs in 1998 were
affected by slightly higher prices for the
Company's basic raw material, ferrous scrap.
However, increased shipments of semi-finished
steel had a favorable effect on average
production costs per ton. Selling, general and
administrative expenses increased by 13.6% in
1998, primarily as a result of consulting fees
paid in connection with Company efforts to
improve operations.
The increase in interest expenses in the
first quarter of 1998 is the result of an
increase in bank borrowings. Other non-cash
charges in 1998 of $2.1 million relate to the
retirement of John B. McKinney, President and
Chief Executive Officer.
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 profitability; statements regarding
future borrowing capacity; and statements
regarding future pension funding requirements.
In addition, statements containing expressions
such as "believes," "anticipates" or "expects"
used in the Company's periodic reports on Forms
10-K, 10-Q and 8-K filed with the SEC are
intended to identify forward-looking
statements. Forward-looking statements by the
Company and its management are based on
estimates, projections, beliefs and assumptions
of management and are not guarantees of future
performance. The Company disclaims any
obligation to update or revise any forward-looking
statement based on the occurrence of
future events, the receipt of new information,
or otherwise. 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, 10-Q and
8-K 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 cost reduction and productivity
improvement programs; increased domestic or
foreign steel competition and decreases in the
market value of the Company's qualified pension
plan assets.
- 9 - <PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3)(a) Registrant's Certificate of
Incorporation as restated
October 28, 1996. (Incorporated
by reference to Exhibit (3) in
Registrant's Quarterly Report on
Form 10-Q for September 30,
1996.)
(3)(b) By-laws of Registrant amended
December 19, 1997.
(Incorporated by reference to
Exhibit (3)(b) in Registrant's
Annual Report on Form 10-K for
the fiscal year ended December
31, 1997.)
(4)(a) Registrant's Loan and Security
Agreement dated as of September
7, 1994 amended and restated as
of August 20, 1997.
(Incorporated by reference to
Exhibit (4)(a) in Registrant's
Quarterly Report on Form 10-Q
for September 30, 1997.)
(4)(b) First Amendment dated December
30, 1997 to the Company's
Restated 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, 1997.)
(4)(c) Second Amendment effective March
27, 1998 to the Company's
Restated Loan and Security
Agreement. (Incorporated by
reference to Exhibit (4)(c) in
Registrant's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1997.)
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.
- 10 -<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 13, 1998
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<ARTICLE> 5
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<CASH> 186
<SECURITIES> 0
<RECEIVABLES> 42,694
<ALLOWANCES> 2,412
<INVENTORY> 82,806
<CURRENT-ASSETS> 124,512
<PP&E> 239,670
<DEPRECIATION> 128,652
<TOTAL-ASSETS> 313,820
<CURRENT-LIABILITIES> 68,613
<BONDS> 109,157
0
83
<COMMON> 41
<OTHER-SE> 20,977
<TOTAL-LIABILITY-AND-EQUITY> 313,820
<SALES> 325,029
<TOTAL-REVENUES> 325,029
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<TOTAL-COSTS> 302,939
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<INCOME-TAX> (1,943)
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