<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13, OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
NORTHWESTERN STEEL AND WIRE COMPANY
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for 1994 on Form
10-K as set forth in the pages attached hereto;
Item 8 Financial Statements and Supplemental Data
Footnote 4 - Debt and Credit Arrangements
(market value of total debt
recorded for fiscal 1994 on
page F-13)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Northwestern Steel and Wire Company
-----------------------------------
(Registrant)
By
--------------------------------
Edward G. Maris
Chief Financial Officer
- ----------
(Date)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of Northwestern Steel and Wire Company on Form S-8 (File No.
33-56412, 33-67788 and 33-53471) of our report dated September 16, 1994 on
our audits of the consolidated financial statements and financial statement
schedules of Northwestern Steel and Wire Company as of July 31, 1994 and 1993
and for the years ended July 31, 1994, 1993 and 1992, which report is included
in this amended annual report on Form 10-K/A.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
November 3, 1994
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Northwestern Steel and Wire Company
We have audited the accompanying consolidated balance sheets of
Northwestern Steel and Wire Company and Subsidiaries as of July 31, 1994 and
1993 and the related consolidated statements of stockholders' equity, operations
and cash flows for each of the three years in the period ended July 31, 1994.
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 consolidated financial position of
Northwestern Steel and Wire Company and Subsidiaries as of July 31, 1994 and
1993 and the consolidated results of their operations and cash flows for each of
the three years in the period ended July 31, 1994 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
September 16, 1994
F-1
<PAGE>
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands except share data)
<TABLE>
<CAPTION>
As of July 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,817 $ 1,773
Receivables, less allowances of $1,000 57,276 54,029
Inventories 84,682 75,722
Deferred income taxes 7,402 7,602
Other assets 6,822 5,121
-------- --------
Total current assets 168,999 144,247
PLANT AND EQUIPMENT, at cost, less accumulated
depreciation of $118,278 and $96,117, respectively 217,178 216,515
DEFERRED FINANCING COSTS 6,877 8,652
ORGANIZATIONAL AND PRE-OPERATING COSTS 1,122 2,244
-------- --------
Total assets $394,176 $371,658
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 67,112 $ 53,857
Accrued expenses 22,880 26,945
Current portion of long term debt 90 87
-------- --------
Total current liabilities 90,082 80,889
LONG TERM DEBT 166,942 164,234
DEFERRED EMPLOYEE BENEFIT OBLIGATIONS 79,246 64,043
DEFERRED INCOME TAXES 7,402 7,602
-------- --------
343,672 316,768
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, par value $.01 per share; outstanding
24,715,022 and 24,631,955 shares, respectively 123,098 122,942
Retained earnings (deficit) (52,699) (62,709)
Minimum pension liability (14,572) -
Treasury shares, at cost; 420,014 shares (5,323) (5,343)
-------- --------
Total shareholders' equity 50,504 54,890
-------- --------
Total liabilities and shareholders' equity $394,176 $371,658
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-2
<PAGE>
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except share data)
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock Common Stock
$.01 Par Value $.01 Par Value $.01 Par Value Retained
--------------------- --------------------- --------------------- Earnings
Shares Amount Shares Amount Shares Amount (Deficit)
-------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
July 31, 1991 4,410,125 $ 25,000 3,305,667 $ 10,706 $ 7,358
Net loss (22,372)
Treasury shares
SARs distributed 39,487 553
ESOP compen-
sation earned
---------- --------- ---------- --------- ---------- --------- ---------
Balance at
July 31, 1992 4,410,125 25,000 3,345,154 11,259 (15,014)
Net loss (47,695)
Treasury shares
Shares converted (4,410,125) (25,000) (3,345,154) (11,259) 7,755,279 $ 36,259
Shares sold-
1992 Investment 8,750,000 29,225
SARs distributed
1992 Investment 425,481 1,702
SARs distributed 14,750 59
Shares sold to
employees 199,752 799
Options exercised 33,278 133
ESOP compen-
sation earned
Shares sold-
Recapitalization 7,392,680 54,279
ESOP compen-
sation earned-
Recapitalization
SARS distributed-
Recapitalization 60,735 486
---------- --------- ---------- --------- ---------- --------- ---------
Balance at
July 31, 1993 - - 24,631,955 122,942 (62,709)
Net income 10,010
Adjustment to
cost of
treasury shares (21)
Options exercised 83,067 332
Cost from prior year
stock issuance (155)
Establishment
of minimum
pension liability
---------- --------- ---------- --------- ---------- --------- ---------
Balance at
July 31, 1994 $ - $ - 24,715,022 $123,098 $(52,699)
========== ========= ========== ========= ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Treasury Shares Total
--------------------- Stockholders'
Other Shares Amount Equity
--------- ------- -------- -------------
<S> <C> <C> <C> <C>
Balance at
July 31, 1991 $(10,891) 98,014 $(2,865) $ 29,308
Net loss (22,372)
Treasury shares 71,177 (1,002) (1,002)
SARs distributed 553
ESOP compen-
sation earned 3,846 3,846
--------- ------- -------- ----------
Balance at
July 31, 1992 (7,045) 169,191 (3,867) 10,333
Net loss (47,695)
Treasury shares 250,823 (1,476) (1,476)
Shares converted 0
Shares sold-
1992 Investment 29,225
SARs distributed
1992 Investment 1,702
SARs distributed 59
Shares sold to
employees 799
Options exercised 133
ESOP compen-
sation earned 3,846 3,846
Shares sold-
Recapitalization 54,279
ESOP compen-
sation earned-
Recapitalization 3,199 3,199
SARS distributed-
Recapitalization 486
--------- ------- -------- ----------
Balance at
July 31, 1993 - 420,014 (5,343) 54,890
Net income 10,010
Adjustment to
cost of
treasury shares 20 (1)
Options exercised 332
Cost from prior year
stock issuance (155)
Establishment
of minimum
pension liability (14,572) (14,572)
--------- ------- -------- ----------
Balance at
July 31, 1994 $(14,572) 420,014 $(5,323) $ 50,504
========= ======= ======== ==========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-3
<PAGE>
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
<TABLE>
<CAPTION>
For the
Years Ended July 31,
----------------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 603,609 $ 539,210 $ 470,049
--------- --------- ---------
Cost and operating expenses:
Cost of goods sold (excluding depreciation) 540,701 484,122 435,953
Depreciation 22,205 21,926 22,082
Selling and administrative 10,882 11,608 6,884
--------- --------- ---------
Total cost and operating expenses 573,788 517,656 464,919
--------- --------- ---------
Operating profit 29,821 21,554 5,130
--------- --------- ---------
Other income and expenses:
Interest expense 19,221 23,200 27,745
Interest and other income (130) (124) (243)
--------- --------- ---------
Total other income and expenses 19,091 23,076 27,502
--------- --------- ---------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting change 10,730 (1,522) (22,372)
Provision for income taxes 720 - -
--------- --------- ---------
Income (loss) before extraordinary
item and cumulative effect of
accounting change 10,010 (1,522) (22,372)
Extraordinary loss related to early
retirement of debt - (6,395) -
Cumulative effect of accounting change - (39,778) -
--------- --------- ---------
Net income (loss) $ 10,010 $ (47,695) $ (22,372)
========= ========= =========
Income (loss) before extraordinary
item and cumulative effect of
accounting change per share $ 0.40 $ (0.08) $ (1.72)
Extraordinary item related to
early retirement of debt per share - (0.35) -
Cumulative effect of accounting
change per share - (2.19) -
--------- --------- ---------
Net income (loss) per share $ 0.40 $ (2.62) $ (1.72)
========= ========= =========
Net tons shipped 1,632 1,577 1,363
========= ========= =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-4
<PAGE>
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended July 31,
----------------------------------------------------
1994 1993 1992
-------- --------- ---------
<S> <C> <C> <C>
Cash Flow From Operations:
Net income (loss) $ 10,010 $ (47,695) $ (22,372)
Extraordinary item related to early retirement of debt - 6,395 -
Cumulative effect of accounting change - 39,778 -
Depreciation 22,205 21,926 22,082
Loss on sale of plant and equipment 14 - -
Amortization of deferred financing costs and debt discount 2,294 1,690 1,549
Amortization of organizational and pre-operating costs 1,122 1,123 1,122
Increase in receivables (3,247) (8,355) (5,939)
Increase in inventories (8,960) (26,437) (755)
(Increase) decrease in other current assets (1,701) 919 1,271
Increase (decrease) in deferred employee benefits 631 3,545 (4,383)
Increase in accounts payable and accrued expenses 9,190 3,752 19,332
Deferred interest due at maturity 2,147 2,709 763
Unearned ESOP compensation - 7,045 3,846
-------- --------- ---------
Net cash provided by operations 33,705 6,395 16,516
-------- --------- ---------
Cash Flows Used in Investing Activities:
Capital expenditures (22,930) (12,271) (7,119)
Proceeds from sale of plant and equipment 48 - -
-------- --------- ---------
Net Cash Used in Investing Activities (22,882) (12,271) (7,119)
-------- --------- ---------
Cash Flows From Financing Activities:
Payment of long term debt and
repayment on revolver loans (97,645) (343,163) (234,779)
Purchase of treasury shares - (1,476) (1,002)
Payment of ESOP debt - (9,930) (2,885)
Issuance of long term debt and
borrowings under revolver loans 97,689 282,239 230,932
Proceeds from issuance of Common Stock 332 95,073 -
Costs related to the issuance of Common Stock (155) (8,637) -
Payment of deferred financing costs - (4,173) (1,208)
Payment of prepayment penalty - (3,084) -
-------- --------- ---------
Net Cash Provided by (Used in) Financing Activities 221 6,849 (8,942)
-------- --------- ---------
Increase in cash and cash equivalents 11,044 973 455
Cash and Cash Equivalents:
Beginning of period 1,773 800 345
-------- --------- ---------
End of period $ 12,817 $ 1,773 $ 800
======== ========= =========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest $ 14,859 $ 20,670 $ 22,551
Income taxes paid 1,380 159 13
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-5
<PAGE>
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS
Northwestern Steel and Wire Company (the "Company") operates in one
business segment as an electric arc furnace producer of a comprehensive line of
carbon steel products consisting primarily of structural shapes, bar and bar
shapes, rods, wire and fabricated wire products.
The Company's outstanding indebtedness had increased significantly as a
result of the leveraged buyout transaction in August 1988 (the "Acquisition")
and the subsequent acquisition and refurbishment of the Houston Facility. In
August 1992, an affiliate of Kohlberg & Co., a New York merchant banking firm
("Kohlberg"), purchased approximately 52% of the Company's Common Stock (the
"1992 Investment"). In June 1993, the Company effected a recapitalization (the
"Recapitalization") which included a Common Stock Offering and a concurrent Note
Offering (collectively, the "Offerings").
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
CONSOLIDATION
The Company has two wholly-owned subsidiaries, Northwestern Steel and
Wire Company (a Delaware corporation) which performs the sales, management and
other administrative services and Northwestern Steel and Wire Company (a Texas
corporation) which operates the Houston rolling mill. The consolidated
financial statements include accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
CONCENTRATION OF CREDIT RISK
The Company grants credit to its customers, a substantial portion of whom
are located in the Midwest, in the normal course of business. Credit limits,
on-going credit evaluation and account monitoring procedures are utilized to
minimize the risk of loss. Collateral is generally not required.
INVENTORIES AND PRODUCTION COSTS
Inventories are valued at the lower of cost or market. Cost is
determined on a monthly moving average method and includes materials, labor and
certain components of conversion overhead.
F-6
<PAGE>
PLANT AND EQUIPMENT
Plant and equipment is carried at cost and includes expenditures for new
facilities and those which substantially increase the useful lives of existing
plant and equipment. When properties are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the respective
accounts and any profit or loss on disposition is reflected in income.
The Company provides for depreciation of plant and equipment commencing
when placed in service based on methods and rates designed to amortize the cost
over the estimated useful lives (generally 40 years for buildings, 12 and 18
years for mill machinery and a 3 to 20 year range for all otherequipment).
Depreciation is computed principally on the straight line method for financial
reporting purposes while accelerated methods and straight line methods are used
for income tax purposes.
DEFERRED FINANCING COSTS
The Company defers direct costs of debt financing and amortizes such
costs over the life of the loan arrangement.
ORGANIZATIONAL AND PRE-OPERATING COSTS
The Company defers organizational and pre-operating costs incurred prior
to the opening of a new facility and amortizes such costs over 5 years, starting
with the first shipments of product to customers.
INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes" for the
years ended July 31, 1994 and 1993. The adoption of SFAS No. 109 for the year
ended July 31, 1993 did not have a material effect upon the Company's financial
position or net income. Prior years' financial statements were not restated to
apply the provisions of SFAS No. 109. Income taxes are accounted for in
accordance with Accounting Principles Board Opinion, ("APB") No. 11 for the year
ended July 31, 1992.
NET INCOME PER SHARE
Per share amounts are based on the average shares outstanding of
25,185,389, 18,170,143, and 13,014,589 for each of the three years in the period
ended July 31, 1994. Average shares outstanding for the year ended July 31,
1994 include the dilutive impact of shares issuable pursuant to the Company's
stock option plans. The average shares outstanding for the
F-7
<PAGE>
years ended July 31, 1993 and 1992 include the dilutive impact of shares issued
pursuant to the 1992 Investment and the dilutive impact of shares issuable
pursuant to the Management Stock Option Plan and the Employee Stock Purchase and
Option Plan, such shares being issued or issuable and such options granted
within one year prior to the initial public offering.
In accordance with Accounting Principles Board Opinion No. 15, net income
per share for the fiscal year ended July 31, 1994 is $.41 as compared to a net
loss of $2.72 and $2.78 for each of the two years in the period ended July 31,
1993. These per share amounts are based upon average shares outstanding of
24,679,249, 17,564,000 and 8,051,089 for each of the three years in the period
ended July 31, 1994.
BENEFITS FOR RETIRED EMPLOYEES
The Company provides pension benefits to substantially all hourly and
salaried employees under noncontributory plans. The pension costs are funded by
the Company in accordance with the requirements of ERISA. The estimated costs
of the pension benefits are recognized based on annual cost determinations
performed by the Company's independent actuarial firm.
The Company also provides postretirement welfare benefits (life insurance
and medical) to substantially all its retired employees. These benefits are
accounted for in accordance with Statement of Financial Accounting Standards
("SFAS") No. 106 for the years ended July 31, 1994 and 1993. Effective August
1, 1992, the Company adopted SFAS No. 106. Upon adoption, the Company elected
to record the transition obligation as a one-time charge against earnings,
rather than amortize it over a number of years. This charge was $39.8 million
or $2.19 per share and represents the actuarially computed present value of
estimated future benefits to current retirees plus that portion of benefits
earned to date by active employees. The plan is unfunded and the Company pays
for benefits on a current basis. The estimated costs of the postretirement
benefits are recognized based on annual cost determinations performed by the
Company's independent actuarial firm.
At the date of the Acquisition, the Company recorded a liability for the
actuarially determined vested portion of these postretirement benefits for all
retired and currently eligible to retire employees. Prior to 1993, the Company
recorded an expense charge to maintain the discounted liability at a balance
sufficient to provide the vested benefits to those remaining retirees who were
in the August 16, 1988 population.
F-8
<PAGE>
CASH FLOWS
Cash and cash equivalents include cash on hand, amounts due from banks,
and other liquid instruments purchased with an original maturity of three months
or less.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation. The reclassifications did not affect net operating
results.
2. EMPLOYEE BENEFIT PLANS
The provisions of SFAS No. 87 and SFAS No. 106 require the adjustment to
the discount rate in line with current and expected to be available interest
rates on high quality fixed-income instruments. Due to the recent trend in
long-term interest rates, the Company reduced its assumed discount rate from
9% to 8.45% for fiscal 1994. In addition, the Company has also reduced its
expected rate of increase in future compensation levels from 5% to 3.5% for its
pension plans and reduced its ultimate trend rate for postretirement benefits
from 5.1% to 4.6%.
The effect of the pension plan changes was a non-cash charge to
shareholders' equity of $14,572,000 during fiscal 1994. Unlike SFAS No. 87, the
changes described under SFAS No. 106 do not result in a charge to shareholders'
equity.
The aggregate cost to the Company of the hourly and salaried pension
plans retirement benefits for the three years ended July 31 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- -------
(In thousands)
<S> <C> <C> <C>
Benefits earned during
the period (service
cost) $ 4,004 $ 3,331 $ 3,359
Interest cost on projected
benefit obligation 17,075 17,822 17,119
Return on plan
assets - actual ( 4,401) (12,896) (15,917)
Net amortization
and deferral (11,045) (4,166) (601)
-------- ------- -------
Net pension cost $ 5,633 $ 4,091 $ 3,960
======== ======== =======
</TABLE>
Deferred gains and losses are amortized over the average remaining future
service periods (approximately 15 years).
F-9
<PAGE>
The Company's pension plan assets include principally equity and fixed
income securities. The following table presents a reconciliation of the funded
status of the pension plans to the amounts included as accrued expenses and
deferred employee benefit obligations in the accompanying balance sheets at July
31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
--------------------- --------------------
Hourly Salaried Hourly Salaried
Plan Plan Plan Plan
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
(In thousands)
Actuarial present value
of benefit obligations:
Accumulated benefit
obligations(including
vested benefits of
$143,359 for 1994 and
$131,924 for 1993 for
the Hourly Plan and
$47,506 for 1994 and
$44,279 for 1993 for
the Salaried Plan) $152,854 $49,906 $141,720 $46,707
Effect of increase in
compensation 13,065 4,206 13,703 4,759
-------- ------- -------- -------
Projected benefit
obligation 165,919 54,112 155,423 51,466
Plan assets at
fair value 136,829 51,380 142,616 53,640
-------- ------- -------- -------
Plan assets (less than)
in excess of projected
benefit obligation (29,090) (2,732) (12,807) 2,174
Unrecognized net loss 27,637 8,709 12,405 4,419
Adjustment required to
recognize minimum
liability (14,572) - - -
--------- ------- -------- -------
Pension (liability)
asset $(16,025) $ 5,977 $(402) 6,593
======== ======= ======== =======
</TABLE>
Significant assumptions used in determining plan benefit obligations at
the end of July 31, 1994 and 1993 include a discount rate of 8.45% and 9%,
respectively, and a rate of projected compensation increase of 3.5% and 5% for
1994 and 1993, respectively. The assumed long-term rate of return on plan
assets for determining net pension costs was 9% for 1994 and 1993.
F-10
<PAGE>
Summary information on the Company's postretirement plan other than
pensions is as follows:
<TABLE>
<CAPTION>
Financial Status of Plan:
Accumulated postretirement benefit
obligation (APBO) as of July 31: 1994 1993
--------- ---------
<S> <C> <C>
(In thousands)
Retirees $(36,095) $(35,274)
Fully eligible active plan participants ( 7,555) (10,487)
Other active plan participants (21,606) (19,135)
-------- --------
(65,256) (64,896)
Less plan assets at fair value 0 0
-------- --------
Funded status (65,256) (64,896)
Unrecognized net (gain)/loss ( 213) 254
-------- --------
Unfunded accrued cost $(65,469) $(64,642)
======== ========
The components of net periodic postretirement benefit cost for the two years
ended July 31 were as follows:
1994 1993
-------- --------
(In thousands)
Service cost, benefits attributed to
employee service during the year $1,177 $1,052
Interest cost on accumulated post-
retirement benefit obligation 4,754 5,532
------ ------
Net periodic postretirement benefit cost $5,931 $6,584
====== ======
</TABLE>
The discount rate used in determining the APBO was 8.45% and 9% at
July 31, 1994 and 1993, respectively. The assumed health care cost trend rate
used in measuring the accumulated postretirement benefit obligation was 8.6% in
1994 for pre-65 retirees and 7.7% for post-65 retirees declining to an ultimate
rate of 4.6% over a 10-year period for both populations. The assumed health
care cost trend rate used in measuring the accumulated postretirement benefit
obligation was 9% in 1993 for pre-65 retirees and 8% for post-65 retirees
declining to an ultimate rate of 5.1% over a 10-year period for both
populations.
If the health care cost trend rate assumptions were increased by 1% each
year, the APBO as of July 31, 1994, would be increased by $8,280,000 and the
aggregate of the service and interest cost components of net periodic post
retirement benefit cost for the year then ended would be increased by
$884,000.
For the fiscal year ended July 31, 1992, expense was $4.1 million under
previous accounting practices. The amounts paid for such benefits were $5.1
million, $5.4 million and $3.9 million for fiscal years ended July 31, 1994,
1993 and 1992, respectively.
F-11
<PAGE>
3. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Federal $ 720 $ - $ -
State - - -
----- ----- -----
$ 720 $ - $ -
----- ----- -----
</TABLE>
The current provision reflects alternative minimum tax for which a
deferred tax asset was not recognized.
The types of temporary differences resulting from the difference between
the tax bases of assets and liabilities and their financial reporting amounts
that give rise to the deferred tax liabilities and the deferred tax assets and
their approximate tax effects are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
Temporary Tax Temporary Tax
Difference Effect Difference Effect
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Trade accounts receivable $ 1,000 $ 390 $ 1,000 $ 390
Inventories 4,080 1,591 2,959 1,154
Intangible assets 3,655 1,425 3,657 1,426
Employee compensation 20,052 7,820 19,965 7,786
Other accrued liabilities 566 221 1,012 395
Retirement costs 57,670 22,491 58,918 22,978
ITC and AMT carryforwards 5,489 5,489 4,769 4,769
Net operating loss 39,032 15,222 52,178 20,349
-------- -------- -------- --------
Subtotal 131,544 54,649 144,458 59,247
Less: valuation
allowance (67,276) (29,584) (75,720) (32,439)
-------- -------- -------- --------
Total deferred tax asset $ 64,268 $ 25,065 $ 68,738 $ 26,808
-------- -------- -------- --------
Property, plant and
equipment $ 64,268 $ 25,065 $ 68,738 $ 26,808
-------- -------- -------- --------
Total deferred tax
liability $ 64,268 $ 25,065 $ 68,738 $ 26,808
-------- -------- -------- --------
Net deferred tax asset/
liability $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
</TABLE>
The Company has recorded a valuation allowance with respect to the future
tax benefits and the net operating loss reflected as a deferred tax asset due
to the uncertainty of their ultimate realization.
As of July 31, 1994, the Company had tax net operating loss carryforwards
of approximately $39,032,000. These net operating loss carryforwards are
available to offset future
F-12
<PAGE>
taxable income, if any, through the indicated years: $14,791,000 in 2006,
$20,238,000 in 2007, and $4,003,000 in 2008. The utilization of approximately
$35,402,000 of tax loss carryforwards is limited to approximately $1,900,000
each year as a result of an "ownership change" (as defined by Section 382 of
the Internal Revenue Code of 1986, as amended), which occurred in fiscal 1993.
The Company also has investment tax credit and alternative minimum tax
credit carryforwards of approximately $3,000,000 and $2,489,000. The ability
to utilize such investment tax credit carryforwards and $1,769,000 of the
alternative minimum tax credit carryforwards are subject to yearly limitations
under Internal Revenue Code Section 382.
<TABLE>
<CAPTION>
4. DEBT AND CREDIT ARRANGEMENTS
Interest
1994 1993 Rate
-------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Credit Agreement:
Rollover Term Loan $ 44,503 $ 42,356 13.1%
Revolver Loan - - 8.75% Variable
Deferred Financing Fee 6,818 6,397 8.44% Variable
9.5% Senior Notes due
2001, net of discount 114,320 114,221 9.5%
Other notes payable 1,391 1,347 3.0%
-------- --------
167,032 164,321
Less Current Portion 90 87
-------- --------
$166,942 $164,234
======== ========
Market value of total debt $164,281 $181,253
======== ========
</TABLE>
Chemical Bank and certain other lenders provided financing (as so
amended, the "Senior Credit Facility") to the Company in the form of four
facilities: (i) a standby term loan in the amount of $70 million; (ii) an
ESOP term loan in the amount of approximately $22 million; (iii) a rollover
term loan in the amount of $50 million; and (iv) a revolving credit loan
providing available borrowings up to $65 million. The revolving credit loan
has a final maturity on May 9, 1997, but may be renewed on an annual basis
thereafter with the unanimous approval of Chemical Bank and any other
participating lenders. The interest rates indicated above are as of July 31,
1994.
The Senior Credit Facility contains various covenants, including covenants
prohibiting or limiting the incurrence of additional indebtedness, the granting
of liens or guarantees, sales of assets, and capital expenditures, as well as
financial covenants requiring maintenance of a specified current ratio, a
F-13
<PAGE>
consolidated interest expense coverage ratio, a fixed charge coverage ratio
and a leverage ratio.
The rollover term loan is required to be repaid in quarterly installments
beginning October 31, 1995, with final maturity on April 30, 1999. The Senior
Credit Facility provides that the rollover term loan bears interest at a fixed
annual rate of 13.07%, provided, that, through July 31, 1994, interest on the
term loan is required to be paid at a floating annual rate equal to the
Alternate Base Rate (as defined in the Senior Credit Facility) plus 1.5% and,
provided further, that the difference between interest accrued at the fixed
annual rate of 13.07% and interest paid as described above will be deferred
monthly in arrears and added to the principal of the rollover term loan. Such
deferred interest bears interest which is required to be paid monthly in
arrears at a floating rate equal to the Alternate Base Rate plus 1.5%, and the
deferred interest added to principal is required to be paid in full on the
date of the final installment of principal of the rollover term loan. The
Company is also required to prepay the rollover term loans to the extent of
Excess Cash Flow (as defined in the Senior Credit Facility).
The loans under the Senior Credit Facility are collateralized by a lien
on substantially all of the Company's assets, and all loans are cross-
collateralized. The revolving credit loan under the Senior Credit Facility
will be available to the extent that the Company satisfies certain borrowing
base criteria. At July 31, 1994 there were no borrowings under the revolver
loan and $64.8 million was available to the Company.
In connection with the Senior Credit Facility, the Company had previously
agreed to pay Chemical Bank a fee of $5 million, which was to be deferred
until the Houston Facility began to earn revenue (as described) and which
would be payable thereafter in accordance with a formula. As a result of an
amendment to the Senior Credit Facility in September 1991, the terms of the $5
million fee were modified to provide that the entire fee became due and
payable immediately, but that Chemical Bank would defer payment until the
principal amount of all loans under the Senior Credit Facility has been paid
in full. The deferred fee bears interest at the adjusted LIBOR for the
interest period then in effect plus 4% compounded monthly, with the payment of
interest also being deferred until such principal amount has been paid in
full.
Pursuant to the Senior Credit Facility, Chemical Bank receives a $200,000
annual administration fee and the lenders receive a quarterly commitment fee
of 1/2% per annum based on the average unused amount of the commitment of the
lenders under the Senior Credit Facility.
F-14
<PAGE>
In consideration for the September 1991 amendment to the Senior Credit
Facility, the Company agreed to pay Chemical Bank approximately $238,000 which
is deferred until the principal amount of all loans under the Senior Credit
Facility has been paid in full.
At July 31, 1994, $114,320,000 (net of unamortized discount of $680,000)
of Senior Notes were outstanding. The Senior Notes bear interest at the rate
of 9.5% per annum, payable semi-annually on June 15 and December 15. The
Company will be required to redeem on June 15, 2001 the aggregate principal
amount of the Senior Notes plus accrued and unpaid interest. The Senior Notes
may not be redeemed prior to June 15, 1997. On or after June 15, 1997, the
Company may, at its option, redeem the Senior Notes in whole or in part at a
premium plus accrued and unpaid interest. On or after June 15, 1999, the
Company may redeem in whole or in part the Senior Notes at the aggregate
principal amount plus accrued and unpaid interest.
The Senior Notes are unsecured obligations of the Company. They will be
senior to all subordinated indebtedness of the Company and rank pari passu
with all other existing and future senior indebtedness of the Company. Upon
the occurrence of a change in control, the holders will have the option to
cause the Company to repurchase all or a portion of the outstanding Senior
Notes at 101% of the principal amount.
The Senior Notes contain certain restrictive covenants that, among other
things, will limit the ability of the Company to incur additional
indebtedness, create liens, issue preferred stock of subsidiaries, pay
dividends, repurchase capital stock, make certain other restricted payments,
engage in transactions with affiliates, sell assets, engage in sale and
leaseback transactions and engage in mergers and consolidation.
Annual maturities of long term debt for the years subsequent to fiscal
1994 are; 1995, $90,000; 1996, $6,833,000; 1997, $8,025,000; 1998, $8,028,000;
1999, $28,824,000 and thereafter of $115,232,000.
The Company estimated the market value of its total debt by utilizing a
discounted cash flow methodology.
F-15
<PAGE>
5. SUPPLEMENTAL BALANCE SHEET DATA
The following balance sheet information is provided as of July 31,:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(In thousands)
<S> <C> <C>
INVENTORIES:
Raw materials and supplies $ 19,330 $ 16,902
Semi-finished products 25,633 19,828
Finished products 39,719 38,992
-------- --------
$ 84,682 $ 75,722
======== ========
PLANT AND EQUIPMENT:
Land $ 5,559 $ 5,522
Buildings 29,511 29,206
Machinery and equipment 296,734 277,671
Construction in progress 3,652 233
-------- --------
Total 335,456 312,632
Less accumulated depreciation 118,278 96,117
-------- --------
Net plant and equipment $217,178 $216,515
======== ========
ACCRUED EXPENSES:
Salaries and wages $ 11,291 $ 12,386
Pensions (6,385) (6,104)
Postretirement welfare benefits 5,000 5,000
Other employment costs 7,667 7,953
Accrued interest 1,530 1,957
Taxes other than income 2,393 2,687
Insurance and other 1,384 3,066
-------- --------
$ 22,880 $ 26,945
======== ========
DEFERRED EMPLOYEE BENEFIT OBLIGATIONS:
Postretirement welfare benefits $ 60,469 $ 59,642
Supplemental unemployment benefits 1,058 1,078
Deferred minimum pension liability 14,572 -
Workers' compensation 3,000 3,000
Other benefit plan 147 323
-------- --------
$ 79,246 $ 64,043
======== ========
</TABLE>
F-16
<PAGE>
6. DESCRIPTION OF LEASING ARRANGEMENTS
The Company has entered into various operating leases for transportation
equipment (principally over-the-road tractors and trailers for shipment of a
portion of the Company's products) and other equipment. The majority of the
transportation equipment leases expire during fiscal 1999.
The future minimum rental payments required for the noncancelable lease
term of the operating leases as of July 31, 1994, were as follows:
Fiscal year ending July 31:
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
1995 $ 3,172
1996 3,028
1997 2,646
1998 2,041
1999 1,491
Remaining years 12,898
-------
Total minimum future
lease payments $25,276
=======
</TABLE>
Rental expense under operating leases for the years ended July 31, 1994,
1993 and 1992 was approximately $4,300,000; $4,603,000; and $4,327,000,
respectively.
7. STOCKHOLDERS' EQUITY
The Company's authorized shares are as follows:
Common Stock ..................... 75,000,000
Preferred Stock .................. 1,000,000
The Company established an ESOP in 1988 which borrowed $25,000,000 from
the Company (which borrowed an identical amount in the form of the ESOP term
loan under the Senior Credit Facility) to fund the ESOP's purchase of
4,410,125 shares of Class A Common Stock (which after the 1992 Investment
became Common Stock). The Company committed to make contributions to the ESOP
to enable it to repay the loan from the Company. As the contributions were
made, an equal amount of unearned ESOP compensation was charged to expense.
Effective with the Recapitalization, the Company paid the final balance of the
contributions to the ESOP. With this payment and the allocation of all
remaining shares to ESOP participants, the unamortized balance of the unearned
ESOP compensation of $3.2 million was charged to fiscal 1993 expense.
F-17
<PAGE>
Prior to the 1992 Investment on August 12, 1992, outside investors and
senior management held 3,345,154 shares of Class B Common Stock which were
reclassified in connection with the 1992 Investment into shares of Common
Stock. On August 12, 1992, the Company sold 8,687,000 newly-issued shares of
its Common Stock to Kohlberg. Simultaneously with the consummation of the
sale, certain members of the Company's management purchased an aggregate of
63,000 newly-issued shares of Common Stock. In addition, the rights of members
of senior management to receive shares of Common Stock pursuant to the
Company's stock appreciation rights plan became fully vested with a grant
price of zero. Accordingly, 425,481 shares of Common Stock (valued at
approximately $1,702,000) were distributed and cash was paid totaling
approximately $877,000 to the holders of the rights.
As of August 12, 1992, after the sale and distribution of Common Stock
aggregating 9,175,481 shares, as discussed above, stockholders' equity was
increased by $30,927,000, net of $5,775,000 of related costs of which
$2,000,000 was paid on August 12, 1993.
The Company established a Management Stock Option Plan and reserved
900,000 shares of Common Stock for future grants at fair market value at the
date of grant to certain members of senior management. Options to purchase an
aggregate of 765,750 shares of Common Stock at an exercise price of $4.00 per
share and 37,500 shares of Common Stock at an exercise price of $9.88 per
share remain outstanding under the Management Stock Option Plan. At July 31,
1994, 549,750 exercisable options were outstanding. The remaining options
granted will vest based upon the continued employment of the employees. The
options granted pursuant to the Management Stock Option Plan expire on the
earlier of ten years from date of grant or one year from the date of the
employee's termination. The Company also approved the establishment of an
Employee Stock Purchase and Option Plan, subject to applicable securities law
requirements, for certain salaried and hourly employees which provides
participants with a one-time opportunity to purchase up to 200,000 shares of
Common Stock at $4.00 per share and the granting of options to purchase a
total of 300,000 shares of Common Stock at an exercise price of $4.00 per
share, plus subject to certain restrictions, those remaining shares not
purchased at the time of the one-time purchase opportunity.
As of July 31, 1994, certain salaried and hourly employees purchased
114,595 shares of Common Stock pursuant to the Employee Stock Purchase and
Option Plan at an exercise price of $4.00 per share. Options to purchase
185,653 shares of Common Stock at an exercise price of $4.00 per share remain
outstanding under the Employee Stock Purchase and Option Plan.
F-18
<PAGE>
Two-thirds of the options granted pursuant to the Employee Stock Purchase and
Option Plan expired on September 30, 1994. The remainder expire on the
earlier of August 12, 2002 or one year from the date of the employee's
termination.
Effective with the Recapitalization on June 11, 1993, the Company sold
7,000,000 shares of Common Stock. Stockholders' equity increased by
$51,358,000, net of $4,642,000 of related costs. Within 30 days of the
Initial Public Offering, the underwriters exercised their option to purchase
up to an additional 15% of the Common Stock Offering on the same terms. After
this sale and distribution of Common Stock aggregating 392,680 shares,
stockholders' equity was increased by $2,921,000, net of $220,000 of related
costs.
During fiscal 1994, the Company approved the establishment of the 1994
Long-Term Incentive Plan (the "1994 Plan") and reserved 1,250,000 shares of
Common Stock for issuance under the 1994 Plan. The 1994 Plan provides for the
granting to key employees and other key individuals who perform services for
the Company stock options, stock appreciation rights and restricted stock that
the Board of Directors or a duly appointed committee thereof deems to be
consistent with the purposes of the 1994 Plan. Options to purchase 137,000
shares of Common Stock at an exercise price of $9.00 per share are outstanding
at July 31, 1994.
The Company also approved the establishment of the 1994 Director Stock
Plan ("the 1994 Director Plan") and reserved 50,000 shares of Common Stock for
issuance under the 1994 Director Plan. The 1994 Director Plan provides solely
for the award of non-qualified stock options to Directors who are not
employees of the Company or affiliates of Kohlberg & Co., L.P. Each eligible
director will be awarded 2,500 stock options upon such director's election or
reelection to the Board of Directors. Each such award will be at fair market
value on the date of the grant. Options become exercisable six months after
the date of the grant and generally expire five years following the date of
the grant. Options to purchase an aggregate of 7,500 shares of Common Stock
at an exercise price of $11.25 per share are outstanding.
There are no Shares of Preferred Stock outstanding.
The Company entered into a fee agreement with Kohlberg at the time of the
closing of the sale of the Common Stock to Kohlberg pursuant to the Stock
Purchase Agreement. Under the Fee Agreement, Kohlberg will provide such
advisory and management services to the Company and its subsidiaries as the
Board of Directors reasonably requests. The Company paid Kohlberg a fee of
$2,000,000 on August 12, 1993. In addition, in consideration of the services
being provided, the Company
F-19
<PAGE>
pays Kohlberg a fee of $43,435 per quarter at the beginning of each quarter.
Kohlberg, but not the Company, will be able to terminate the Fee Agreement at
any time, and it will terminate automatically on the earlier of either the end
of the fiscal year in which Kohlberg's percentage interest in the outstanding
Common Stock falls below 25% or the tenth anniversary of the 1992 Investment.
The Company paid management fees of $75,000 and $36,000 to certain former
Class B Stockholders for the fiscal years ended July 31, 1993 and 1992,
respectively. No such fees were incurred in fiscal 1994.
8. COMMITMENTS AND CONTINGENCIES
At July 31, 1994, the Company has commitments for capital expenditures of
approximately $23,111,000. The major expenditures committed to include
approximately $6,700,000 for improvements to the primary facility and
$5,600,000 for a new mesh facility for our wire products group.
There are various claims and legal proceedings arising in the normal
course of business pending against or involving the Company wherein monetary
damages are sought. These claims and proceedings are generally covered by
insurance, and it is management's opinion that the Company's liability, if
any, under such claims or proceedings would not materially affect its
financial position or results of operations.
A wrongful death action against the Company is pending in the 113th
Judicial District Court of Harris County, Texas. The action stems from the
death of an employee at the Company's Houston Facility. Defense of this
action is currently being provided by the Company's insurers. The Company's
insurance carriers will not make a determination regarding coverage until this
action is settled; however, the Company believes that losses arising from the
complaint, if any, will be covered by the Company's insurance carriers. The
Company has not provided an accrual for these losses as the outcome cannot be
predicted at this time.
The Company is subject to a broad range of federal, state and local
environmental requirements, including those governing discharges to the air
and water, the handling and disposal of solid and/or hazardous wastes and the
remediation of contamination associated with releases of hazardous substances.
Primarily because the melting process at the Sterling Operations produces
dust that contains lead and cadmium, the Company is classified, in the same
manner as other similar steel mills in its industry, as a generator of
hazardous waste.
F-20
<PAGE>
The Company believes that it is currently in substantial compliance with
applicable environmental requirements and does not anticipate the need to make
substantial expenditures for environmental control measures during fiscal
1995. Nevertheless, as is the case with steel producers in general, if a
release of hazardous substances located on the Company's property or used in
general in the conduct of the Company's business occurs, the Company may be
held liable and may be required to pay the cost of remedying the condition.
The amount of any such liability and remedial cost could be material.
9. QUARTERLY SALES AND EARNINGS DATA (Unaudited)
The following information is for the years ended July 31, 1994 and 1993:
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------
October January April July Total for
31 31 30 31 the Year
-------- -------- -------- -------- ---------
(In thousands of dollars except per share data)
<S> <C> <C> <C> <C> <C> <C>
1994
----
Net sales $156,043 $140,247 $150,356 $156,963 $603,609
Gross profit (1) 16,845 14,841 13,716 17,506 62,908
Net income 3,242 1,671 1,660 3,437 $ 10,010
Net income per share $ .13 $ .07 $ .06 $ .14 $ .40
1993
----
Net sales $130,660 $115,829 $141,923 $150,798 $539,210
Gross profit 13,859 13,061 15,777 12,391 55,088
Income (loss) before
extraordinary item and
cumulative effect of
accounting change (493) (481) 2,017 (2,565) (1,522)
Extraordinary items (2) (6,395) (6,395)
Cumulative effect of
accounting change (39,778) (39,778)
Net income (loss) (40,271) (481) 2,017 (8,960) (47,695)
Income (loss) before
extraordinary item and
cumulative effect of
accounting change
per share $ (.02) $ (.03) $ .11 $ (.15) $ (.09)
Extraordinary item
per share $ ( .34) $ (.34)
Cumulative effect of
accounting change
per share $ (2.19) $ (2.19)
Net income (loss)
per share $ (2.21) $ (.03) $ .11 $ (.49) $ (2.62)
</TABLE>
Notes:
(1) Gross profit is defined here as net sales less cost of
goods sold excluding depreciation.
(2) As a result of the Recapitalization, the Company recorded
an extraordinary loss related to the early retirement of
debt.
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Northwestern Steel and Wire Company
Our report on the consolidated financial statements of Northwestern Steel
and Wire Company and Subsidiaries is included on page F-1 of this Form 10-K.
In connection with our audits of such financial statements, we have also
audited the related financial statement schedules listed in the index included
in Item 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information required to
be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
September 16, 1994
F-22
<PAGE>
Schedule V
NORTHWESTERN STEEL AND WIRE COMPANY
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JULY 31, 1994, 1993 AND 1992
(In thousands of dollars)
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions Sales And at Close
Classification of Period at Cost Retirements Other of Period
- --------------------------- ---------- --------- ----------- ----- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
JULY 31, 1994
Land $ 5,522 $ 37 $ - $ - $ 5,559
Buildings 29,206 142 163 29,511
Machinery and equipment 277,671 18,969 (106) 200 296,734
Construction in progress 233 3,782 (363) 3,652
-------- ------- ----- ----- --------
$312,632 $22,930 $(106) 0 $335,456
======== ======= ===== ===== ========
FOR THE YEAR ENDED
JULY 31, 1993
Land $ 5,522 $ - $ - $ - $ 5,522
Buildings 29,030 176 29,206
Machinery and equipment 265,981 11,862 (172) 277,671
Construction in progress - 233 233
-------- ------- ----- ----- --------
$300,533 $12,271 $(172) - $312,632
======== ======= ===== ===== ========
FOR THE YEAR ENDED
JULY 31, 1992
Land $ 5,524 $ - $ (2) $ - $ 5,522
Buildings 28,980 50 29,030
Machinery and equipment 258,360 7,071 550 265,981
Construction in progress 550 (550) -
-------- ------- ----- ----- --------
$293,414 $ 7,121 $ (2) $ - $300,533
======== ======= ===== ===== ========
</TABLE>
F-23
<PAGE>
Schedule VI
NORTHWESTERN STEEL AND WIRE COMPANY
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION, AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JULY 31, 1994, 1993 AND 1992
(In thousands of dollars)
<TABLE>
<CAPTION>
Balance at Charged Retirements, Balance
Beginning To Costs and Renewals and at Close
Classification of Period Expenses Replacements of Period
- --------------------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED
JULY 31, 1994
Buildings $ 4,905 $ 1,041 $ - $ 5,946
Machinery and equipment 91,212 21,164 (44) 112,332
---------- ---------- ----------- ----------
$ 96,117 $ 22,205 $ (44) $ 118,278
========== ========== =========== ==========
FOR THE YEAR ENDED
JULY 31, 1993
Buildings $ 3,866 $ 1,039 $ - $ 4,905
Machinery and equipment 70,497 20,887 (172) 91,212
---------- ---------- ----------- ----------
$ 74,363 $ 21,926 $ (172) $ 96,117
========== ========== =========== ==========
FOR THE YEAR ENDED
JULY 31, 1992
Buildings $ 2,795 $ 1,071 $ - $ 3,866
Machinery and equipment 49,486 21,011 70,497
---------- ---------- ----------- ----------
$ 52,281 $ 22,082 $ - $ 74,363
========== ========== =========== ==========
</TABLE>
F-24
<PAGE>
SCHEDULE VIII
NORTHWESTERN STEEL AND WIRE COMPANY
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1994, 1993 AND 1992
(In thousands of dollars)
<TABLE>
<CAPTION>
Charged
Balance At To Costs Balance at
Beginning and End of
Description of Period Expenses Deductions Period
- --------------------------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
FOR THE YEAR
ENDED JULY 31, 1994 $ 1,000 $ 91 $ (91) $ 1,000
========== ========== =========== ==========
FOR THE YEAR
ENDED JULY 31, 1993 $ 1,500 $ 135 $ (635) $ 1,000
========== ========== =========== ==========
FOR THE YEAR
ENDED JULY 31, 1992 $ 1,000 $ 788 $ (288) $ 1,500
========== ========== =========== ==========
Inventory valuation allowance:
FOR THE YEAR
ENDED JULY 31, 1994 $ 809 $ - $ (119) $ 690
========== ========== =========== ==========
FOR THE YEAR
ENDED JULY 31, 1993 $ 665 $ 144 $ - $ 809
========== ========== =========== ==========
FOR THE YEAR
ENDED JULY 31, 1992 $ 1,982 $ - $ (1,317) $ 665
========== ========== =========== ==========
</TABLE>
F-25
<PAGE>
SCHEDULE X
NORTHWESTERN STEEL AND WIRE COMPANY
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JULY 31, 1994, 1993 AND 1992
(In thousands of dollars)
<TABLE>
<CAPTION>
Description Charged to Costs and Expenses
- ---------------------------------- --------------------------------------
1994 1993 1992
---------- --------- --------
<S> <C> <C> <C>
Maintenance and repairs $58,921 $56,458 $49,158
Taxes, other than income taxes:
Payroll taxes 8,798 7,621 6,946
Other state and local taxes 2,864 2,637 2,011
</TABLE>
NOTE: Royalty expense, advertising costs and
depreciation and amortization of intangible
assets during the years ended July 31, 1994,
1993 and 1992 were not significant.
F-26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED BY REFERENCE
NUMBER DESCRIPTION TO OTHER DOCUMENT
- ------- ----------- -------------------------
<C> <S> <C>
2.1 Stock Purchase Agreement Current Report on Form 8-K dated
dated as of July 27, 1992 July 27, 1992, File No. 1-4288,
between the Company and Exhibit 2.1
KNSW
2.2 Management Subscription Current Report on Form 8-K dated
Agreement dated as of July August 12, 1992, File No. 1-4288,
27, 1992 between the Exhibit 2.3
Company and the management
investors named therein
(the "Management
Investors")
3.1 Second Amended and Annual Report on Form 10-K for the
Restated Articles of fiscal year ended July 31, 1992,
Incorporation of the File No. 1-4288, Exhibit 3.1
Company dated as of August
12, 1992
3.2 Amended and Restated Annual Report on Form 10-K for the
By-Laws of the Company fiscal year ended July 31, 1992,
File No. 1-4288, Exhibit 3.2
4.1 Articles Four through See Exhibit 3.1 above
Eight and Eleven of the
Second Amended and
Restated Articles of
Incorporation of the
Company dated as of August
12, 1992
4.2 Articles II, VII, IX and See Exhibit 3.2 above
XIII of the amended and
Restated By-Laws of the
Company
4.3 Management Subscription See Exhibit 2.2 above
Agreement dated as of July
27, 1992 between the
Company and Management
Investors
4.6 Fourth Amendment dated as Quarterly Report on Form 10-Q for
of March 2, 1994 to the the quarterly period ended April
Amended and Restated 30, 1994. File No. 1-4288,
Credit Agreement Exhibit 4.1
4.4 Amended and Restated Current Report on Form 8-K dated
Credit Agreement dated as August 12, 1992, File No. 1-4288,
of August 16, 1988, as Exhibit 2.4
amended and restated as of
July 27, 1992, among the
Company (as successor, by
merger, to NW Acquisition
Corporation), Northwestern
Steel and Wire Company
(formerly known as H/N
Steel Company, Inc.), the
Lenders named therein and
Chemical Bank, as Agent
(the "Amended and Restated
Credit Agreement")
4.5 Revolving Credit Note Annual Report on Form 10-K for the
dated June 22, 1989 from fiscal year ended July 31, 1989,
the Company and H/N Steel File No. 1-4288, Exhibit 19.1
Company, Inc. to Chemical
Bank as agent under the
Amended and Restated
Credit Agreement
</TABLE>
38
<PAGE>
<TABLE>
<S> <C> <C>
4.6 Rollover Term Note dated Annual Report on Form 10-K for the
June 22, 1989 from the fiscal year ended July 31, 1989,
Company and H/N Steel File No. 1-4288, Exhibit 19.2
Company, Inc. to Chemical
Bank as agent under the
Amended and Restated
Credit Agreement
4.9 Form of Revolving Credit Annual Report on Form 10-K for the
Notes dated June 22, 1989 fiscal year ended July 31, 1992,
as amended as of July 27, File No. 1-4288, Exhibit 4.11
1992 from the Company and
Northwestern Steel and
Wire Company (formerly H/N
Steel Company, Inc.), a
Texas corporation, to
lenders under the Amended
and Restated Credit
Agreement
4.10 Form of Rollover Term Annual Report on Form 10-K for the
Notes dated June 22, 1989 fiscal year ended July 31, 1992,
as amended as of July 27, File No. 1-4288, Exhibit 4.12
1992 from Northwestern
Steel and Wire Company and
Northwestern Steel and
Wire Company (formerly H/N
Steel Company, Inc.), a
Texas corporation, to
lenders under the Amended
and Restated Credit
Agreement
4.13 Mortgage, Security Annual Report on Form 10-K for the
Agreement and Assignment fiscal year ended July 31, 1989,
of Rents dated as of File No. 1-4288, Exhibit 19.5
August 16, 1988 from the
Company to Chemical Bank
as collateral agent
4.14 Agreement of Modification Annual Report on Form 10-K for the
of Mortgage, Security fiscal year ended July 31, 1989,
Agreement and Assignment File No. 1-4288, Exhibit 19.6
of Rents dated as of June
21, 1989 between the
Company and Chemical Bank
as collateral agent
4.15 Deed of Trust, Security Annual Report on Form 10-K for the
Agreement and Assignment fiscal year ended July 31, 1989,
of Leases and Rents dated File No. 1-4288, Exhibit 19.7
as of June 21, 1989 from
H/N Steel Company, Inc. to
David W. Hannah, Jr. as
Trustee for the benefit of
Chemical Bank as
collateral agent
4.16 Amended and Restated Annual Report on Form 10-K for the
Security Agreement dated fiscal year ended July 31, 1989,
as of August 16, 1989 File No. 1-4288, Exhibit 19.8
among the Company, H/N
Steel Company, Inc. and
Chemical Bank as
collateral agent
4.17 Second Amendment dated as Annual Report on Form 10-K for the
of August 12, 1992 to fiscal year ended July 31, 1992,
Mortgage, Security File No. 1-4288, Exhibit 4.19
Agreement and Assignment
of Rents dated as of
August 16, 1988 and
amended as of June 21,
1989 from the Company to
Chemical Bank collateral
agent
</TABLE>
39
<PAGE>
<TABLE>
<S> <C> <C>
4.18 Amendment dated as of Annual Report on Form 10-K for the
August 12, 1992 to Deed of fiscal year ended July 31, 1992,
Trust, Security Agreement File No. 1-4288, Exhibit 4.20
and Assignment of Rents
and Leases dated as of
June 21, 1989 from
Northwestern Steel and
Wire Company (formerly H/N
Steel Company, Inc.), a
Texas corporation, to
David W. Hannah, Jr. as
Trustee for the benefit of
Chemical Bank as
collateral agent
4.19 Collateral Assignment of Annual Report on Form 10-K for the
and Ratification of fiscal year ended July 31, 1992,
Security Interest in File No. 1-4288, Exhibit 4.21
Intellectual property
Rights dated as of August
12, 1992 by and among the
Company, Northwestern
Steel and Wire Company
(formerly known as H/N
Steel Company, Inc.), a
Texas corporation, and
Chemical Bank as
collateral agent
4.20 Pledge Agreement dated as Annual Report on Form 10-K for the
of June 21, 1989 between fiscal year ended July 31, 1989,
the Company and Chemical File No. 1-4288, Exhibit 19.9
Bank as collateral agent
4.21 Amended and Restated Annual report on Form 10-K for the
Lockbox Agreement dated as fiscal year ended July 31, 1989,
of June 21, 1989 between File No. 1-4288, Exhibit 19.10
the Company, H/N Steel
Company, Inc. and Chemical
Bank as collateral agent
for certain lenders under
the Amended and Restated
Credit Agreement and
American National Bank and
Trust Company of Chicago
4.22 Collateral Assignment Annual Report on Form 10-K for the
dated as of June 21, 1989 fiscal year ended July 31, 1989.
between H/N Steel Company file No. 1-4288, Exhibit 19-11
and Chemical Bank as
collateral agent
4.23 Guarantee Agreement dated Annual Report on Form 10-K for the
as of September 25, 1990 fiscal year ended July 31, 1990,
between Northwestern Steel File No. 1-4288, Exhibit 4.24
and Wire Company, a
Delaware corporation, and
the lenders named in the
Amended and Restated
Credit Agreement
4.24 Second Amendment to Registration Statement No.
Amended and Restated 33-60716, Exhibit 4.37
Credit Agreement dated as
of April 15, 1993
4.25 Form of Indenture dated as Registration Statement No.
of 1993, between the 33-60766, Exhibit 4.38
Company and Continental
Bank, National
Association, as Trustee
(including form of Senior
Note)
4.26 Northwestern Steel and Rule 13e-3 Transaction Statement,
Wire Company Employee File No. 5-10871, Exhibit
Stock Ownership Plan 17(c)(vii)
4.27 Amendment No. 1 to ESOP Annual Report on Form 10-K for the
dated March 29, 1990 fiscal year ended July 31, 1992,
File No. 1-4288, Exhibit 19.1
</TABLE>
40
<PAGE>
<TABLE>
<S> <C> <C>
4.28 Amendment No. 2 to ESOP Annual Report on Form 10-K for the
effective as of August 1, fiscal year ended July 31, 1992,
1990 File No. 1-4288, Exhibit 19.2
4.29 Amendment No. 3 to ESOP Annual Report on Form 10-K for the
effective as of January 1, fiscal year ended July 31, 1992,
1992 File No. 1-4288, Exhibit 19.3
4.30 Amendment No. 4 to the Annual Report on Form 10-K for the
Northwestern Steel and fiscal year ended July 31, 1992,
Wire Company Employee File No. 1-4288, Exhibit 4.27
Stock Ownership Plan
effective as of August 12,
1992
10.1 Employment Agreement Annual Report on Form 10-K for the
between Robert N. Gurnitz fiscal year ended July 31, 1991,
and the Company dated as File No. 1-4288, Exhibit 10.1
of November 29, 1990
10.2 Employment Agreement Annual Report on Form 10-K for the
between John C. Meyer and fiscal year ended July 31, 1992,
the Company effective File No. 1-4288, Exhibit 10.2
February 10,1992
10.3 Form of Employment Annual Report on Form 10-K for the
Agreement between certain fiscal year ended July 31, 1988,
members of Senior File No. 1-4288, Exhibit 10.3
Management and the Company
dated as of August 16, 1988
10.6 Amendment to Employment Annual Report on Form 10-K for the
Agreement between Edward fiscal year ended July 31, 1991,
G. Maris and the Company File No. 1-4288, Exhibit 10.5
dated as of August 12, 1991
10.8 Amendment to Employment Annual Report on Form 10-K for the
Agreement between David C. fiscal year ended July 31, 1991,
Oberbillig and the Company File No. 1-4288, Exhibit 10.7
dated as of August 13, 1991
10.9 Amendment to Employment Annual Report on Form 10-K for the
Agreement between Robert fiscal year ended July 31, 1991,
W. Martin and the Company File No. 1-4288, Exhibit 10.8
dated as of August 9, 1991
10.12 Amendment to Employment Annual Report on Form 10-K for the
Agreement between Gerald fiscal year ended July 31, 1991,
T. Shinville and the File No. 1-4288, Exhibit 10.11
Company dated as of August
14, 1991
10.15 Indemnification Agreement Annual Report on Form 10-K for the
between former directors fiscal year ended July 31, 1988,
of the Company and the File No. 1-4288, Exhibit 10.3
Company dated as of August
16, 1988
10.16 Form of Indemnification Annual Report on Form 10-K for the
Agreements dated April, fiscal year ended July 31, 1992,
1992 between the Company File No. 1-4288, Exhibit 10.16
and its directors
10.17 Form of Indemnification Annual Report on Form 10-K for the
Agreements dated May 29, fiscal year ended July 31, 1992,
1992 between the Company File No. 1-4288, Exhibit 10.17
and members of the
Administrative Committee
of the ESOP
</TABLE>
41
<PAGE>
<TABLE>
<S> <C> <C>
10.18 Form of Amendments of Annual Report on Form 10-K for the
Indemnification Agreements fiscal year ended July 31, 1992,
dated as of July 23, 1992 File No. 1-4288, Exhibit 10.18
between the Company and
members of the
Administrative Committee
of the ESOP
10.19 Form of Deferred Annual Report on Form 10-K for the
Compensation Agreement fiscal year ended July 31, 1989,
File No. 1-4288, Exhibit 10.5
10.20 Northwestern Steel and Annual Report on Form 10-K for the
Wire Company Management fiscal year ended July 31, 1992,
Stock Option Plan File No. 1-4288, Exhibit 10.20
effective August 12, 1992
10.21 Form of Management Stock Annual Report on Form 10-K for the
Option Agreement dated as fiscal year ended July 31, 1992,
of August 12, 1992 File No. 1-4288, Exhibit 10.21
10.22 Fee Agreement dated as of Annual Report on Form 10-K for the
August 12, 1992 between fiscal year ended July 31, 1992,
the Company and Kohlberg File No. 1-4288, Exhibit 10.22
10.23 1994 Long Term Incentive Registration Statement on Form
Plan S-8 and Form S-3, No. 33-53471,
Exhibit 4(d)
10.24 1994 Director Stock Option Registration Statement on Form S-8
Plan and Form S-3, No. 33-53471,
Exhibit 4(e)
11.1 Computation of Income
(Loss) per share
22.1 The Company has two
subsidiaries:
Northwestern Steel and
Wire Company (formerly H/N
Steel Company, Inc.), a
Texas corporation, and
Northwestern Steel and
Wire Company, a Delaware
corporation
23 Consent of Coopers &
Lybrand
</TABLE>
42
<PAGE>
COMPUTATION OF INCOME (LOSS)
PER SHARE
Exhibit 11.1
<TABLE>
<CAPTION>
Years Ended July 31,
----------------------------------------------
1994 1993 1992
----------- ------------- -------------
<S> <C> <C> <C>
Income (loss) before extraordinary credit
and cumulative effect of accounting change $ 10,010 $ (1,522,000) $ (22,372,000)
Extraordinary loss related to early retirement
of debt - (6,395,000) -
Cumulative effect of accounting change - (39,778,000)
----------- ------------- -------------
Net income (loss) $ 10,010 $ (47,695,000) $ (22,372,000)
=========== ============= =============
Weighted average shares outstanding 24,679,249 17,564,000 8,051,089
Dilutive impact of shares issuable pursuant
to the Management Stock Option Plan
and Employee Stock Purchase and Option
Plan, such shares being issued or
issuable and such options granted
within one year of the proposed initial
public offering 535,000 620,000
Dilutive impact of shares issued pursuant
to the 1992 Investment, such shares
being issued within one year of the
proposed initial public offering - 4,343,500
Net additional shares outstanding assuming
dilutive stock options exercised and proceeds
used to purchase treasury stock at average
market price 506,140 71,143 -
----------- ------------- -------------
Shares outstanding for net income ( loss)
per share calculation 25,185,389 18,170,143 13,014,589
=========== ============= =============
Income (loss) before extraordinary item and
cumulative effect of accounting change per
share $ 0.40 $ (0.08) $ (1.72)
Extraordinary loss related to early
retirement for debt per share - (0.35) -
Cumulative effect of accounting change
per share - (2.19) -
----------- ------------- -------------
Net income (loss) per share $ 0.40 $ (2.62) $ (1.72)
=========== ============= =============
</TABLE>
[DESCRIPTION] CONSENT OF IND ACCOUNT
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of Northwestern Steel and Wire Company on Form S-8 (File No.
33-56412, 33-67788 and 33-53471) of our reports dated September 16, 1994 on
our audits of the consolidated financial statements and financial statement
schedules of Northwestern Steel and Wire Company as of July 31, 1994 and 1993
and for the years ended July 31, 1994, 1993 and 1992, which report is included
in this annual report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
October 27, 1994
