<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 January 31, 1995
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 1-4288
NORTHWESTERN STEEL AND WIRE COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-1562920
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 Wallace Street, Sterling, Illinois 61081
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 815/625-2500
------------
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
------ ------
Number of shares of common stock outstanding as of March 10, 1995:
Common Stock 24,789,658 shares
(includes 420,144 treasury shares)
Page 1 of 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share data)
<TABLE>
<CAPTION>
January 31, July 31,
1995 1994
----------- --------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,108 $ 12,817
Receivables, less allowance of $1,000 51,086 57,276
Deferred income taxes 7,402 7,402
Other assets 7,235 6,822
-------- --------
74,831 84,317
-------- --------
Inventories, at lower of cost or market:
Finished products 35,969 39,719
Semi-finished products 43,520 25,633
Raw materials and supplies 22,338 19,330
-------- --------
101,827 84,682
-------- --------
Total current assets 176,658 168,999
-------- --------
PLANT AND EQUIPMENT, at cost 350,812 335,456
Accumulated depreciation 129,629 118,278
-------- --------
Net plant and equipment 221,183 217,178
-------- --------
DEFERRED FINANCING COSTS 6,266 6,877
ORGANIZATIONAL AND PRE-OPERATING COSTS 561 1,122
-------- --------
Total assets $404,668 $394,176
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 53,395 $ 67,112
Accrued expenses 21,844 22,880
Current portion of long term debt 3,239 90
-------- --------
Total current liabilities 78,478 90,082
LONG TERM DEBT 181,354 166,942
DEFERRED EMPLOYEE BENEFIT OBLIGATIONS 80,071 79,246
DEFERRED INCOME TAXES 7,402 7,402
-------- --------
Total liabilities 347,305 343,672
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share;
outstanding 24,774,842 and 24,715,022 shares, respectively 123,481 123,098
Retained earnings (deficit) (46,223) (52,699)
Minimum pension liability (14,572) (14,572)
Treasury shares, at cost; 420,144 and 420,014 shares
of common stock, respectively (5,323) (5,323)
-------- --------
Total shareholders' equity 57,363 50,504
-------- --------
Total liabilities and shareholders' equity $404,668 $394,176
======== ========
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
-2-
<PAGE>
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
---------------------- -----------------------
1995 1994 1995 1994
(Unaudited)
(in thousands of dollars except
per share data and tonnage data)
Net sales $ 145,818 $ 140,247 $ 299,364 $ 296,290
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cost and operating expenses:
Cost of goods sold (excluding depreciation) 128,875 125,406 263,225 264,604
Depreciation 5,730 5,404 11,351 10,775
Selling and administrative 2,868 2,478 5,668 5,095
--------- --------- --------- ---------
Total cost and operating expenses 137,473 133,288 280,244 280,474
--------- --------- --------- ---------
Operating profit 8,345 6,959 19,120 15,816
--------- --------- --------- ---------
Other income and expenses:
Interest expense 4,923 4,795 9,680 9,489
Interest and other income (21) (28) (89) (120)
--------- --------- --------- ---------
Total other income and expenses 4,902 4,767 9,591 9,369
--------- --------- --------- ---------
Income before income taxes 3,443 2,192 9,529 6,447
Provision for income taxes 1,228 521 3,053 1,534
--------- --------- --------- ---------
Net income $ 2,215 $ 1,671 $ 6,476 $ 4,913
========= ========= ========= =========
Net income per share $ 0.09 $ 0.07 $ 0.26 $ 0.20
========= ========= ========= =========
Net tons shipped 388,257 383,346 803,932 826,295
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
-3-
<PAGE>
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
January 31,
------------------------
1995 1994
-------- -----
(Unaudited)
(In thousands of dollars)
<S> <C> <C>
Cash Flow From Operations:
Net income $ 6,476 $ 4,913
Depreciation 11,351 10,775
Amortization of deferred financing costs and debt discount 1,050 1,019
Amortization of organizational and pre-operating costs 561 561
Decrease in receivables 6,190 3,175
Increase in inventories (17,145) (6,378)
Increase in other current assets (413) (670)
Increase in deferred employee benefits 825 1,232
Decrease in accounts payable and accrued expenses (14,753) (7,079)
Deferred interest due at maturity 15 1,157
-------- --------
Net cash (used in) provided by operations (5,843) 8,705
-------- --------
Cash Flows Used in Investing Activities:
Capital expenditures (15,356) (10,157)
-------- --------
Net cash used in investing activities (15,356) (10,157)
-------- --------
Cash Flows From Financing Activities:
Payment of long term debt and repayment on revolver loans (38,593) (29,350)
Borrowings under revolver loans 55,700 30,346
Proceeds from issuance of Common Stock and contributed capital 383 224
Costs related to the issuance of Common Stock - (144)
-------- --------
Net cash provided by financing activities 17,490 1,076
-------- --------
Decrease in cash and cash equivalents (3,709) (376)
Cash and Cash Equivalents:
Beginning of period 12,817 1,773
-------- --------
End of period $ 9,108 $ 1,397
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest $ 8,628 $ 9,489
Income taxes 2,800 217
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
-4-
<PAGE>
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) COMPANY STRUCTURE
The consolidated financial statements include accounts of the Company and
its wholly-owned subsidiaries. The Company has two wholly-owned subsidiaries:
(i) Northwestern Steel and Wire Company, a Texas corporation ("NSW - Texas"),
which operates the Company's Houston rolling and finishing mill; and (ii)
Northwestern Steel and Wire Company, a Delaware corporation ("NSW - Delaware"),
which provides administrative services to the Company and NSW - Texas for which
it receives payment from the Company. All significant intercompany accounts and
transactions have been eliminated. The Company operates in one business segment,
producing steel and steel products.
(2) INTERIM ACCOUNTING POLICIES
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations; however, the Company believes that the
disclosures are adequate to make the information included herein not misleading.
The consolidated financial statements included herein should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1994.
In the opinion of management, the unaudited consolidated financial
statements of the Company included herein contain all adjustments, consisting of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of January 31, 1995, and the results of operations and cash
flows for the three month and six month periods ended January 31, 1995 and 1994.
The results of operations for such interim periods are not necessarily
indicative of the results for the full year. The balance sheet as of July 31,
1994 has been derived from the Company's audited historical financial
statements.
(3) EMPLOYEE BENEFITS
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.
5
<PAGE>
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. 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.
(4) SHAREHOLDERS' EQUITY
As of January 31, 1995, certain salaried and hourly employees purchased
153,665 shares of Common Stock pursuant to the exercise of options granted on
August 12, 1992 under the Employee Stock Purchase and Option Plan at an exercise
price of $4.00 per share. Options to purchase 47,030 shares of Common Stock at
an exercise price of $4.00 per share remain outstanding under the Employee Stock
Purchase and Option Plan. Additionally, options granted on August 12, 1992 under
the Management Stock Option Plan aggregate 745,000 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.
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 January 31,
1995.
During fiscal 1994, the Company also approved the establishment of the 1994
Director Stock Option 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. Options to purchase an aggregate of 7,500
shares of Common Stock at an exercise price of $11.25 per share, and which
generally expire five years from the grant date, are outstanding. The 1994
Director Plan was amended at the 1994 Annual Shareholders' Meeting whereby
future awards would generally expire ten years from date of grant. Options to
purchase an aggregate of 10,000 shares of common Stock at an exercise price of
$7.13 per share, and which generally expire ten years from the grant date, are
outstanding.
6
<PAGE>
(5) NET INCOME PER SHARE
Per share amounts, as presented on the Consolidated Statements of
Income, are based on the average shares outstanding of 25,029,937 and 25,282,604
for the three and six months ended January 31, 1995 and 1994, respectively. The
average shares outstanding for each period include the dilutive impact of shares
issued pursuant to the Company's 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.
(6) DEBT AND CREDIT ARRANGEMENTS
Long-term debt at January 31, 1995, consisted of the following:
<TABLE>
<CAPTION>
Principal Interest
Amount Rate
--------- ---------
(In Thousands)
<S> <C> <C>
Amended and Restated Credit Agreement
Rollover Term Loan $ 41,912 13.1%
Revolver Loan 19,750 10.0%
Deferred Financing Fee 7,207 8.9%
9.5% Senior Notes due 2001,
Net of Discount 114,370 9.5%
Other notes payable 1,354 3.0%
--------
184,593
</TABLE>
Less current portion ( 3,239)
--------
$181,354
--------
Chemical Bank and certain other lenders provided financing (as so
amended, the "Senior Credit Facility") to the Company in the form of two
remaining facilities: (i) a rollover term loan in the amount of $50 million
and (ii) 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 January 31, 1995.
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 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 was 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
7
<PAGE>
further, that the difference between interest accrued at the fixed
annual rate of 13.07% and interest paid as described above was 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 loan, to the extent of excess cash flow on
an annual basis (as defined in the Senior Credit Facility), which resulted in a
prepayment of approximately $2,606,000 during the quarter ended October 31,
1994.
The loans under the Senior Credit Facility are collateralized by a
lien on substantially all of the Company's and its subsidiaries 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 January 31, 1995 additional borrowings of
approximately $45,250,000 under the revolving credit facility were 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.
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 January 31, 1995, $114,370,000 (net of unamortized discount of
$630,000) of Senior Notes were outstanding. The Senior Notes earn 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,
8
<PAGE>
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 (as defined), 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.
(7) INCOME TAX
The Company estimates that annual income taxes will be incurred, thus
the allocation of income tax to interim periods is required. The Company
recorded an income tax provision by estimating the annual effective income tax
rate and applied that rate to pretax income.
The effective income tax rate for the Company varies from the Federal
statutory tax rate due to permanent differences and the utilization of net
operating loss carryforwards.
(8) COMMITMENTS AND CONTINGENCIES
At January 31, 1995, the Company had commitments for capital
expenditures of approximately $26,200,000. The major expenditures committed
include approximately $4,100,000 for new concrete reinforcing mesh production
equipment and $11,800,000 for improvements to the Sterling facility. The
improvements to the Sterling facility consist of a second ladle metallurgical
station, a state-of-the-art high voltage transformer and a neural control
network.
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,
9
<PAGE>
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 Company's Sterling
facility 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.
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.
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
The following discussion should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations included as Item 7 of Part II of the Company's Annual Report on Form
10-K for the year ended July 31, 1994.
Results of Operations
- ---------------------
Net sales for the Company were $299.4 million on shipments of 803,932
net tons for the six months ended January 31, 1995, compared to $296.3 million
on shipments of 826,295 net tons for the six months ended January 31, 1994. The
Company experienced increased sales and volume shipped for its structural, rod
and wire products. Sales for the Company's lower margin semi-finished steel
products decreased as the Company elected to build semi-finished steel
inventories in support of a planned short term steelmaking outage. This outage,
for installation of capital equipment, was completed during the second fiscal
quarter ended January 31, 1995.
Steel shipments (tons) decreased 22,363 net tons in the six-month
period ended January 31, 1995 compared to the same period in the prior year due
to a reduction in semi-finished steel shipments of approximately 45,000 net
tons.
The Company experienced renewed pricing pressures in its principal raw
material, steel scrap. These rising costs led to several price increases to the
Company's customers during the six months ended January 31, 1995. Due to these
price increases, together
10
<PAGE>
with a richer product mix of shipments, the Company's net sales increased 4% or
$5.6 million for the three months ended January 31, 1995 compared to the same
period in the prior year.
Cost of goods sold, excluding depreciation, as a percentage of net
sales for the six-month and three-month periods ended January 31, 1995, improved
to 88% from 89% for the same periods in the prior year. This decrease was
achieved despite the escalation in scrap cost of approximately 3% for the six
months ended January 31, 1995 compared to the same period in the prior year.
The continuing improvements in operating margins are the result of improved
steelmaking efficiencies, record throughput in the rod mill, reduced wire
products processing costs and increased selling prices.
Selling and administrative expense was $5.7 million for the six months
ended January 31, 1995 compared to $5.1 million for the six months ended January
31, 1994. For the quarter ended January 31, 1995, selling and administrative
expense was $2.9 million compared to $2.5 million for the same period ended
January 31, 1994. The increase in selling and administrative expense is
primarily due to increased sales commissions, accrued executive compensation
resulting from earnings improvements and expenditures for professional fees.
Interest expense increased from $9.5 million for the six months ended
January 31, 1994 to $9.7 million for the same period in the current year. For
the quarter ended January 31, 1995, interest expense increased to $4.9 million
from $4.8 million for the comparable quarter of the prior year. The increase in
interest expense is primarily due to the increase in borrowing levels and
increases in interest rates on the Company's variable rate debt.
The provision for income taxes increased from $1.5 million for the six
months ended January 31, 1994 to $3.1 million for the six months ended January
31, 1995. The increase in the provision for income taxes is the result of a 48%
increase in income before taxes, from $6.5 million for the six-month period
ended January 31, 1994 to $9.5 million for the same period in the current year.
The provision for income taxes increased $0.7 million for the quarter ended
January 31, 1995 compared to the same quarter in the prior year due to a 57%
increase in income before taxes.
For the foregoing reasons, the net income for the six months ended
January 31, 1995 was $6.5 million or $0.26 per share, compared to $4.9 million
or $0.20 per share for the six months ended January 31, 1994, for an improvement
of approximately 32%. For the quarter ended January 31, 1995, net income was
$2.2 million or $0.09 per share, compared to $1.7 million or $0.07 per share for
the quarter ended January 31, 1994, for an improvement of approximately 33%.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. Funds for the Company's operational needs have been provided
from internally generated cash and through utilization of the Senior Credit
Facility. As of January 31, 1995, the Company's
11
<PAGE>
consolidated total debt aggregated approximately $184.6 million (net of
unamortized discount on the Senior Notes), of which approximately $181.4 million
was classified as long term debt. The consolidated debt-to-equity ratio improved
to 3.2:1 at January 31, 1995 compared to 3.3:1 at July 31, 1994. As of January
31, 1995, the Company had cash on hand of approximately $9.1 million and
approximately $45.1 million available for borrowing under its existing revolving
credit facility. The Company's current ratio improved to 2.3:1 at January 31,
1995 compared to 1.9:1 at July 31, 1994. The Company's increased financial and
operating flexibility has enabled it to better manage inventory levels which,
when combined with the Company's enhanced product line, have enabled it to
better serve its customers' needs.
On a longer term basis, the Company has significant future debt
service obligations. The Company's ability to satisfy these obligations and to
secure adequate capital resources in the future will be dependent on its ability
to generate adequate operating cash flow. The Company expects that its cash
flow from operations and available borrowings will be sufficient to fund the
repayment of the Senior Notes, other investing activities and other required
debt amortization through the maturity of the Senior Notes. This will be
dependent on its overall operating performance and be subject to general
business, financial and other factors affecting the Company and the domestic
steel industry, as well as prevailing economic conditions, certain of which are
beyond the control of the Company.
At January 31, 1995, the Company had commitments for capital
expenditures of approximately $26,200,000. The major expenditures committed
include approximately $4,100,000 for new concrete reinforcing mesh production
equipment and $11,800,000 for improvements to the Sterling facility. The
improvements to the Sterling facility consist of a second ladle metallurgical
station, a state-of-the-art high voltage transformer and a neural control
network. The Company's fiscal 1995 capital program will total approximately $50
million.
As reported in the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1994 in "Item 3, Legal Proceedings," the Company is seeking
a declaratory judgment in the Circuit Court of Cook County, Illinois that
certain provisions of the state's recently amended workers' compensation
regulations are unconstitutional. The effect of the amended regulations is to
require the Company to increase the amount of security posted by the Company
from $200,000 to $8.8 million to maintain the Company's right to self-insure its
workers' compensation obligations. Upon the posting of a $400,000 bond, the
Company obtained a temporary restraining order which effectively restrains the
imposition of this increased security requirement and the ability of the
Illinois Industrial Commission (the "Industrial Commission") to terminate the
Company's self-insurer status, pending further order of the Circuit Court of
Cook County. If the Company is unsuccessful in its challenge to the Industrial
Commission's actions or regulations and is unable to post the required bond, the
Company would be required under the Illinois law to obtain insurance for its
workers' compensation claims. Insurance would be much more expensive than the
Company's self-insurance plan or may be
12
<PAGE>
unavailable and obtaining a letter of
credit under the Senior Credit Facility would reduce the Company's borrowing
capacity.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on January
19, 1995 for the purpose of electing nine Directors, to amend the 1994 Director
Stock Option and to elect an Auditor for the Company for the coming year. There
were a total of 19,307,408 shares of Common Stock cast.
The nine Directors elected, which constitutes the entire Board of
Directors, and the votes cast for each Director were:
<TABLE>
<CAPTION>
Votes For
----------
One-Year Term
- -------------
<S> <C>
Warner C. Frazier 18,422,037
James A. Kohlberg 18,429,997
Christopher Lacovara 18,443,200
Albert G. Pastino 18,449,911
George W. Peck IV 18,439,460
Two-Year Term
- -------------
William F. Andrews 18,445,426
Darius W. Gaskins, Jr. 18,445,012
Robert N. Gurnitz 18,361,764
Richard F. Williams 18,448,395
</TABLE>
There were 17,277,011 cast for the amendment to the 1994 Stock Option Plan,
which was approved. There were a total of 18,531,802 votes for the election of
Coopers & Lybrand as auditors for the Company for the ensuing year, which
election was approved.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 11 - Computation of Income Per Share
(b) Exhibit 27
(c) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter ended January 31, 1995.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHWESTERN STEEL AND WIRE COMPANY
By /s/ E. G. Maris .
----------------------------------
E. G. Maris, Senior Vice President,
Chief Financial Officer
(Principal Financial Officer)
March 15, 1995
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Prior Filing
or Sequential
Exhibit No. Description Page Number .
- ----------- ----------- -------------
<S> <C> <C>
10.1 Employment Agreement for Robert N.
Gurnitz 16
11.0 Exhibit 11 34
27.0 Financial Data Schedule 35
</TABLE>
15
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CONFIDENTIAL EXECUTION COPY
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
THIS AMENDED AND RESTATED AGREEMENT, made effective as of July 22,
1994, by and between Northwestern Steel and Wire Company, an Illinois
corporation ("COMPANY"), with its principal office in Sterling, Illinois, and
Robert N. Gurnitz ("EXECUTIVE"), an individual residing in Rockford, Illinois;
WHEREAS, the Company and the Executive entered into an Employment
Agreement ("ORIGINAL AGREEMENT") dated November 29, 1990; and
WHEREAS, the Company wishes to retain the services of the Executive as
its Chairman, President and Chief Executive Officer for the remainder of, and
beyond, the period provided in the Original Agreement, and the Executive is
willing to continue to so serve.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, and intending to be legally
bound hereby, the parties hereto amend and restate the Original Agreement,
effective as stated above, as follows:
1. EMPLOYMENT. The Company agrees to employ the Executive and the
Executive agrees to serve in the employ of the Company, for the period stated in
Section 3 hereof and upon the other terms and conditions herein provided.
2. POSITION. The Company employs the Executive and the Executive
agrees to serve as its Chairman, President and Chief Executive Officer.
3. TERM AND DUTIES.
(a) TERM OF EMPLOYMENT. The period of the Executive's employment
under the Original Agreement commenced as of January 1, 1991 and, unless earlier
terminated
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in accordance with Section 5 hereof, was to (and shall) continue for a period of
sixty (60) months thereafter. After the end of the period described in the
immediately preceding sentence, the Executive's employment shall continue
without a fixed term under the provisions of this Amended and Restated
Employment Agreement ("AGREEMENT"), unless earlier terminated in accordance with
Section 5 hereof.
(b) DUTIES. During the period of his employment hereunder and except
for illness, reasonable vacation periods, and reasonable leaves of absence, the
Executive shall devote substantially all of his business time, attention, skill,
and efforts to the faithful performance of his duties hereunder. The Executive
shall perform such duties as are necessary to carry out his responsibilities as
Chairman, President and Chief Executive Officer, including such duties as may be
assigned to him from time to time by the Board of Directors of the Company.
4. COMPENSATION AND REIMBURSEMENT OF EXPENSES.
(a) COMPENSATION. For all services rendered by the Executive in any
capacity during his employment under this Agreement, including, without
limitation, services as an executive, officer, director, or member of any
committee of the Company or of any subsidiary, affiliate or division thereof,
the Company shall pay the Executive base salary at the annual rate of at least
Three Hundred Five Thousand Dollars ($305,000) per calendar year. Such base
salary shall be payable in accordance with the customary payroll practices of
the Company, but in no event less frequently than monthly.
(b) INCENTIVE COMPENSATION. In addition to the base salary provided
in Section 4(a), the Executive shall be entitled to receive annual performance
bonuses in accordance with target awards established for the Executive under the
Northwestern Steel and Wire Company Management Performance Incentive Plan
("PERFORMANCE INCENTIVE PLAN"),
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subject to the achievement of performance goals and other terms and conditions
applicable to the Executive under such plan. The annual target bonus from time
to time established for the Executive under the Performance Incentive Plan shall
be at least One Hundred Ninety-Five Thousand Seven Hundred Dollars ($195,700)
per calendar year. In addition, the Executive shall be entitled to participate
in the Northwestern Steel and Wire Company 1992 Management Stock Option Plan, in
the Northwestern Steel and Wire Company 1994 Long-Term Incentive Plan and in any
other incentive compensation and bonus programs maintained by the Company from
time to time for the benefit of the senior executives of the Company, in each
case subject to the terms and conditions of the particular plan.
(c) WELFARE BENEFITS. The Executive shall be eligible for and shall
participate in any welfare or fringe benefit program or plan maintained from
time to time by the Company upon the same terms and subject to the same
conditions upon which participation in such plans is generally made available to
other key executives of the Company.
(d) REIMBURSEMENT OF EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable travel and other expenses incurred by the Executive
in the performance of his obligations under this Agreement.
(e) EMPLOYMENT STOCK OWNERSHIP PLAN. The Executive acknowledges that
he is not now and will not become eligible to participate in or receive benefits
under the Northwestern Steel and Wire Company Employee Stock Ownership Plan
("ESOP").
(f) SUPPLEMENTAL FUNDS FOR RETIREMENT ANNUITY. The Company previously
agreed to apply, on each of the first five anniversary dates of the Executive's
commencement of employment under the Original Agreement, the sum of Fifteen
Thousand Dollars ($15,000) to the purchase of a joint and survivor retirement
annuity for the benefit of the Executive to provide the Executive with a
supplemental retirement benefit commencing on
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the Executive's 65th birthday and continuing for the remainder of the
Executive's life with 50% of such benefit continuing for the life of the
Executive's surviving spouse. Pursuant to an understanding of the parties, such
amounts instead have been paid directly to the Executive for use in establishing
his own retirement program. Since a nonqualified supplemental retirement
program will be established for the Executive (in accordance with Section 4(g)
below), no additional amounts shall accrue for the Executive under this Section
4(f) after the effective date of this Agreement. The portion of the fourth
installment (due on January 1, 1995 under the above terms of this Section 4(f))
that had accrued through the effective date of this Agreement shall be
determined (as provided below in this Section 4(f)) and paid to the Executive on
January 1, 1995 as provided above. The amount of such fourth installment shall
be Eight Thousand Three Hundred Forty Two Dollars ($8,342), which amount is the
result of multiplying Fifteen Thousand Dollars ($15,000) by a fraction, the
numerator of which is the number of days elapsed in calendar year 1994 through
the effective date of this Agreement and the denominator of which is the total
number of days in such year.
(g) SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company shall
establish a nonqualified supplemental executive retirement plan ("SERP") for the
benefit of the Executive which SERP (described in the document attached as
Exhibit A) shall provide (x) the additional benefits which would have been
payable to the Executive under Pension Plan B of Northwestern Steel and Wire
Company ("PENSION PLAN") and (y) amounts equal to the additional matching
contributions and employer nonelective contributions which would have been made
by the Company under the Northwestern Steel and Wire Company 401(k) Salary
Deferral Plan ("401(k) PLAN"), if:
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(i) in each case, the limitations placed on compensation, benefits
and contributions by Sections 401(a)(17), 402(g) and 415 of the
Internal Revenue Code of 1986, as amended ("CODE"), did not
apply;
(ii) in the case of the 401(k) Plan, the Executive were entitled to a
matching contribution (on the same basis as the matching
contributions provided on the Executive's pre-tax contributions
under the 401(k) Plan) on his after-tax contributions, and to the
extent that the after-tax contributions which the Executive is
permitted to make for a plan year under the 401(k) Plan do not
provide matching contributions at least equal to two percent (2%)
of the Executive's compensation in excess of the then applicable
Code Section 401(a)(17) limit, the Executive also shall be
credited with such difference as additional amounts under the
Plan; and
(iii) the Executive were credited with his prior industrial service
which shall be deemed to be equivalent to an additional 1-1/2
years of service (credited as "continuous service" for purposes
of the Pension Plan and as "Benefit service" for purposes of the
401(k) Plan) for each year of his actual service on or after the
effective date of this Agreement through his attainment of age
65.
The additional benefits and contributions that the Company agrees under this
Section 4(g) to provide the Executive under the SERP shall not be affected by
(A) the termination or freeze of either the Pension Plan or the 401(k) Plan, (B)
the reduction of benefits under the Pension Plan or (C) the reduction of
contributions under the 401(k) Plan.
(h) SUPPLEMENTAL DISABILITY BENEFITS. The Company shall purchase for
the benefit of the Executive a standard disability income policy which will
provide the
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Executive, when fully integrated with social security, with a disability income
benefit of $100,000 per annum commencing one hundred eighty (180) days after the
Executive becomes permanently disabled and continuing until the Executive's 65th
birthday.
(i) SUPPLEMENTAL LIFE INSURANCE. The Company shall pay to the
Executive as additional compensation an amount equal to the annual premium with
respect to National Life Insurance Company Policy #2078081 that is paid by the
Executive on each policy anniversary date which occurs while this Agreement
shall be in effect. Such life insurance policy provides life insurance in the
amount of One Million Dollars ($1,000,000) on the life of the Executive.
(j) COUNTRY CLUB. While this Agreement shall be in effect, the
Company shall pay on behalf of the Executive all membership fees, including bond
and annual dues, necessary for the Executive to remain a member in good standing
in a country club located in Rock Falls, Illinois.
(k) SUPPLEMENTAL MAJOR MEDICAL COVERAGE. The Company shall purchase
for the benefit of the Executive and his spouse a supplemental major medical
policy which wraps around the Company's general hospitalization and major
medical coverage and provides, while this Agreement shall be in effect, for
additional maximum lifetime major medical coverage of at least One Million
Dollars ($1,000,000).
(l) AUTOMOBILE. While this Agreement shall be in effect, the
Executive will receive use of a Company car, in accordance with current Company
practices.
5. TERMINATION OF EMPLOYMENT AND COMPENSATION UPON TERMINATION.
(a) NOTICE OF TERMINATION. Any termination by the Company or by the
Executive shall be communicated by written Notice of Termination to the other
party thereto in accordance with Section 14 hereof. For purposes of this
Section 5, (i) the Executive's annual
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base salary as then in effect or annualized base salary as then in effect shall
at all times be deemed to be at least Three Hundred Five Thousand Dollars
($305,000) and (ii) the Executive's annual target bonus as then in effect shall
at all times be deemed to be at least One Hundred Ninety-Five Thousand Seven
Hundred Dollars ($195,700).
(b) DATE OF TERMINATION, ETC. "DATE OF TERMINATION" shall mean the
date specified in the Notice of Termination (which shall not be less than thirty
(30) nor more than sixty (60) days from the date such Notice of Termination is
given).
(c) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY OR BY
THE EXECUTIVE FOR GOOD REASON. If the Executive's employment hereunder is
terminated by the Company other than for Cause (as hereinafter defined) or
Disability (as hereinafter defined), or if the Executive terminates his
employment hereunder for Good Reason (as hereinafter defined), the Company shall
provide for the termination benefits described below in this Section 4(c).
The Company shall (i) pay to the Executive in a single lump sum on the
Date of Termination an amount equal to the sum of (y) the Executive's annualized
base salary as then in effect plus (z) the Executive's annual target bonus as
then in effect, (ii) continue to provide the Executive with all benefits
described in Sections 4(c), (h), (i) and (k) as (and to the extent) then in
effect for a period of one year (through the first anniversary of the
Executive's Date of Termination) and (iii) make payments of the benefits
described in Sections 4(f), 4(g) and 5(k) in accordance with the terms thereof.
(d) OCCURRENCE OF A CHANGE IN CONTROL. If the Executive's employment
hereunder is terminated by the Company for any reason within the two-year period
beginning on the date as of which a Change in Control (as hereinafter defined)
is determined to have occurred, or if the Executive terminates his employment
hereunder for Good Reason within
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the two-year period beginning on the date as of which a Change in Control is
determined to have occurred, the Company shall provide for the termination
benefits described below in this Section 5(d).
The Company shall (i) pay to the Executive in a single lump sum an
amount equal to the greater of (A) One Million One Thousand Four Hundred Dollars
($1,001,400) and (B) two times the sum of (y) the Executive's annualized base
salary as then in effect plus (z) the Executive's annual target bonus as then in
effect, (ii) continue to provide the Executive with all benefits described in
sections 4(c), (h), (i) and (k) as (and to the extent) then in effect for a
period of two years (through the second anniversary of the Executive's Date of
Termination) and (iii) make payments of the benefits described in Sections 4(f),
4(g) and 5(k) in accordance with the terms thereof. Any legal fees and related
expenses incurred by the Executive to enforce the terms of this Section 5(d)
shall be paid or reimbursed by the Company within sixty (60) days of the
presentation to the Company of appropriate invoices and receipts for such
amounts.
(e) TERMINATION BY COMPANY FOR CAUSE OR TERMINATION BY THE EXECUTIVE
OTHER THAN FOR GOOD REASON. If the Executive's employment hereunder is
terminated by the Company for Cause or by the Executive other than for Good
Reason, the Company shall pay to the Executive his base salary as then in effect
through the Date of Termination at the rate in effect at the time the Notice of
Termination is given. Except as described in the immediately preceding
sentence, the Company shall have no further obligations to the Executive under
this Agreement, subject to making payments of the benefits described in Sections
4(f), 4(g) and 5(k) in accordance with the terms thereof.
(f) TERMINATION BY REASON OF DISABILITY. If, as a result of the
Executive's incapacity due to physical or mental injury or illness, the
Executive shall be unable for a continuous period of one hundred and eighty
(180) days or more to perform a substantial
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portion of his duties hereunder, and the Executive is eligible for the
commencement of disability benefits pursuant to the disability income policy
referred to in Section 4(h) of this Agreement, the Company may terminate the
Executive's employment for "DISABILITY." If the Executive's employment
hereunder is terminated by reason of Disability,
(i) the Company shall pay to the Executive his base salary as then
in effect through the Date of Termination at the rate in effect
at the time that the Notice of Termination is given;
(ii) the Company shall continue to provide the Executive and his
spouse with health insurance benefits, including hospitalization,
major medical, dental and vision, consistent with that provided
by the Company for key employees generally and the supplemental
major medical policy provided for in Section 4(k), for the
remainder of the Executive's life and his spouse's life; and
(iii) the Company shall continue to pay on the Executive's behalf
or reimburse the Executive for the annual premium with respect to
the life insurance policy described in Section 4(i) through
December 31, 1995, or, if longer, for a period of one year after
such Date of Termination of the Executive's employment for
Disability, to the extent such premium is not waived by operation
of the disability waiver provision currently contained in such
life insurance policy.
Except as described in the immediately preceding sentence, the Company shall
have no further obligations to the Executive under this Agreement, subject to
making payments of the benefits described in Sections 4(f), 4(g) and 5(k) in
accordance with the terms thereof.
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(g) TERMINATION BY REASON OF DEATH. If the Executive's
employment hereunder is terminated by reason of his death,
(i) the Company shall pay to the Executive's estate his base salary
as then in effect through the date of his death at the rate in
effect at the time of death; and
(ii) the Company shall continue to provide the Executive's spouse
with health related insurance benefits, including (A)
hospitalization, major medical, dental and vision consistent with
that provided by the Company from time to time for key employees
generally and (B) the supplemental major medical policy provided
for in Section 4(k), for the remainder of the life of the
Executive's surviving spouse.
Except as described in the immediately preceding sentence, the Company shall
have no further obligations to the Executive or his estate under this Agreement,
subject to making payments of the benefits described in Sections 4(f), 4(g) and
5(k) in accordance with the terms thereof.
(h) CAUSE. For purposes of this Agreement, "CAUSE" shall mean
termination upon (i) the repeated and demonstrable failure by the Executive to
substantially perform his duties as Chairman, President and Chief Executive
Officer hereunder (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) continued after (A) a written
demand for substantial performance (a "DEMAND FOR PERFORMANCE") is delivered to
the Executive by the Board, which demand specifically and reasonably identifies
the manner in which the Board believes that the Executive has not substantially
performed his duties and the manner in which the Executive may remedy the
situation and (B) the Executive has had a reasonable opportunity to conform his
performance to such demand; (ii) the engaging by the Executive in an act or acts
of material dishonesty affecting
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the Company; (iii) the engaging by the Executive in conduct which is
intentionally materially injurious to the Company, monetarily or otherwise; or
(iv) the violation by the Executive in any material respect of the noncompete or
confidential information provisions of Sections 7 and 8 of this Agreement.
(i) GOOD REASON. For purposes of this Agreement, "GOOD REASON" shall
mean, without the express written consent of the Executive, the occurrence of
any of the following circumstances unless such circumstances are fully corrected
prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(i) any assignment to the Executive of any duties materially
inconsistent with his status as Chairman, President and Chief
Executive Officer of the Company, or any material diminution in
the Executive's responsibility and authority to supervise and
control the general management and operation of the Company's
business; provided, however, that no such material diminution
shall be deemed to occur by reason of the appointment of a
President and Chief Operating Officer reporting to the Chairman
and Chief Executive Officer of the Company; or
(ii) a reduction by the Company in the annual base salary of the
Executive as provided in Section 4(a) hereof; or
(iii) a reduction by the Company in the annual target bonus of the
Executive from the amount set forth in Section 4(b) hereof; or
(iv) any reduction or failure to provide the benefits described in
Sections 4(c), (f), (g), (h), (i), (j), (k) or (l) or;
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(v) the Executive is not elected to the Board of Directors of the
Company other than by reason of the Executive's refusal to stand
for nomination or election.
(j) CHANGE IN CONTROL. For purposes of this Agreement, a "CHANGE
IN CONTROL" shall occur if:
(i) a majority of the seats (other than vacant seats) on the Board
of Directors of the Company at any time shall be occupied by
persons who were neither (A) nominated by Kohlberg & Co.,
together with its affiliates, nor (B) appointed by directors so
nominated; or
(ii) any person or group other than Kohlberg & Co., together with
its affiliates, shall otherwise directly or indirectly possess
the power to direct or cause the direction of the management or
policies of the Company, whether through the ownership of voting
securities, by contract or otherwise.
The affiliates of Kohlberg & Co. include KNSW Acquisition Company, L.P., a
Delaware limited partnership.
(k) OTHER BENEFITS. In addition to all other amounts payable to the
Executive under this Section 5, the Executive shall be entitled to receive all
benefits payable to him under any of the Company's employee benefit plans (other
than the ESOP referenced in Section 4(e)).
6. SOURCE OF PAYMENTS. All payments provided pursuant to this
Agreement shall be paid from the general funds of the Company, and no special or
separate fund shall be established and no other segregation of assets shall be
made to assure payment; provided, however, that an irrevocable grantor trust
subject to claims of the Company's general creditors
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(the so-called "rabbi trust" described in the document attached as Exhibit B)
shall be established as a means of accumulating assets which may be used to
satisfy the Company's obligation under the SERP established pursuant to Section
4(g).
7. NONCOMPETITION.
(a) COVENANT. During the Executive's employment hereunder and, for a
two-year period following the termination of the Executive's employment
hereunder unless such termination is by reason of (i) a termination by the
Company without Cause, (ii) a termination by the Company within the two-year
period beginning on the date as of which a Change in Control is determined to
have occurred, or (iii) a termination by the Executive for Good Reason, the
Executive shall not, directly or indirectly, own, manage, operate, join,
control, or participate in or be connected with, as an officer, employee,
partner, stockholder, or otherwise, (y) any business, individual, partnership,
firm, or corporation (collectively "ENTITY"), or (z) any division, subsidiary or
other part of an Entity which is engaged principally in a business which in a
material way is at the time in direct competition in the continental United
States with the business of the Company, or any subsidiary or affiliate (as
defined in General Rules and Regulations promulgated under the Securities
Exchange Act of 1934) thereof. Nothing herein, however, shall prohibit the
Executive from acquiring or holding any issue of stock or securities of any
Entity which has any securities listed on a national securities exchange or
quoted in the daily listing of over-the-counter market securities, provided that
at any one time he and members of his immediate family do not own more than one
percent (1%) of any voting securities of any such Entity.
Notwithstanding any other provision of this Agreement, if the
Executive violates the foregoing paragraph after the expiration of twelve (12)
months following the Date of
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Termination, the Company's only remedy will be to cease the continuation of the
benefits in Sections 4(c), (h), (i) and (k) as provided for in Section 5(c).
(b) REPRESENTATIONS OF THE EXECUTIVE. The Executive acknowledges,
represents and warrants that (i) in his position as Chairman, President and
Chief Executive Officer of the Company he has ready access to confidential
information as to the Company's manufacturing processes and techniques,
marketing methods and plans, current and potential product lines and customer
lists, and knowledge of the present or potential future specific requirements of
the Company's major clients, (ii) if he were to directly or indirectly, own,
manage, operate, join, control, or participate in or be connected with, as an
officer, employee, partner, stockholder, or otherwise, (y) any Entity or (z) any
division, subsidiary or other part of an Entity which is engaged principally in
a business which in a material way is at the time in direct competition in the
continental United States with the business of the Company, or any subsidiary or
affiliate (as defined in Section 7(a) above) thereof during a period when the
restrictions contained in Section 7(a) are applicable to him, the Company would
be materially injured thereby and (iii) he would be fully able to earn an
adequate livelihood if this Section 7 were to be enforced against him.
8. CONFIDENTIAL INFORMATION. The Executive shall not during the
term of this Agreement or at any time thereafter except in the performance of
his duties hereunder disclose or reveal to any unauthorized person any
confidential information of the Company relating to the Company, its
subsidiaries or affiliates (as defined in Section 7(a) above), or to any of the
businesses operated by them, and the Executive confirms that such information
constitutes the exclusive property of the Company.
9. ARBITRATION. In the event of any controversy, claim or dispute
arising out of or relating to Section 5 or the breach thereof, such controversy,
claim, dispute or failure shall
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be submitted to arbitration in accordance with the rules of the American
Arbitration Association, in Illinois. The decision of the arbitrator(s) shall
be final. The costs and expenses of the arbitrator hereunder and the
apportionment of the same between the parties hereto shall be determined by the
arbitrator(s) in his award or decision. If any party shall fail, neglect or
refuse to appear at any hearing appointed by the arbitrator, the arbitrator may
act in the absence of such party.
10. COMPANY'S REMEDIES UPON BREACH. The Executive acknowledges that
the Company's remedy at law for a breach by him of the provisions of Sections 7
and 8 hereof will be inadequate. Accordingly, in the event of the breach or
threatened breach by the Executive of Sections 7 or 8 hereof, the Company shall
be entitled to injunctive relief in addition to any other remedy it may have.
If any of the provisions of or covenants contained in Section 7 or 8 or this
Section 10 are hereafter construed to be invalid or unenforceable in any
jurisdiction, the same shall not affect the remainder of the provisions or the
enforceability thereof in any other jurisdiction, which shall be given full
effect, without regard to the invalidity or unenforceability in such other
jurisdiction. If any of the provisions of or covenants contained in Sections 7
or 8 or in this Section 10 are held to be unenforceable in any jurisdiction
because of the duration or geographical scope thereof, the parties agree that
the court making such determination shall have the power to reduce the duration
or geographical scope of such provision or covenant and, in its reduced form,
said provision or covenant shall be enforceable; provided, however, that the
determination of such court shall not affect the enforceability of Section 7 or
8 or this Section 10 in any other jurisdiction.
11. INCOME TAX WITHHOLDING. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
This includes without limitation the right of
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the Company to withhold from the Executive's current cash compensation described
in Sections 4(a) and (b) hereof sufficient cash to satisfy any obligation on the
part of the Company to withhold taxes as a result of (i) the payment to the
Executive of the supplemental funds for the retirement annuity provided in
Section 4(f) and (ii) the establishment and maintenance of the SERP described in
Section 4(g).
12. GENERAL PROVISIONS.
(a) NO ATTACHMENT OR ASSIGNMENT. Except as required by law, no right
to receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process or
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
(b) BINDING AGREEMENT. This Agreement shall be binding upon, and
inure to the benefit of, the Executive and the Company and their respective
permitted successors and assigns.
13. MODIFICATION AND WAIVER.
(a) AMENDMENT OF AGREEMENT. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.
(b) WAIVER. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
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14. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
address set forth on the signature page of the Agreement in the case of the
Executive and, in the case of the Company, to the attention of the Board with a
copy to the Secretary of the Company at the principal executive offices of the
Company, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
15. SEVERABILITY. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity shall
in no way affect the rest of such provision not held so invalid, and the rest of
such provision, together with all other provisions of this Agreement, shall to
the full extent consistent with law continue in full force and effect.
16. HEADINGS. The headings of Sections and paragraphs herein are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
17. COMPLETE AGREEMENT. This Agreement and the documents referred to
herein set forth all the covenants, promises, agreements, conditions and
understandings among the parties hereto, and there are no other covenants,
promises, agreements, conditions or understandings, whether oral or written,
among the parties hereto.
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18. GOVERNING LAW. This Agreement has been executed and delivered in
the State of Illinois and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Executive has signed this Agreement, this 31st day of
Oct., 1994, effective as of the day and year first written above.
ATTEST: NORTHWESTERN STEEL AND WIRE
COMPANY
/s/ Janet Ohmstead /s/ William F. Andrews
_________________________ By: ____________________________________
Chairman Comp Committee 10-31-94
Title: __________________________________
WITNESS: EXECUTIVE
/s/ Ellen L. Conner /s/ Robert N. Gist
_________________________ _________________________________________
_________________________________________
Executive's Address
5011 Parliament Place
Rockford, IL 61107
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Exhibit 11
NORTHWESTERN STEEL AND WIRE COMPANY
Computation of Income Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 2,215,000 $ 1,671,000 $ 6,476,000 $ 4,913,000
============ ============ ============ ============
Weighted average shares outstanding 24,685,599 24,656,023 24,685,599 24,656,023
Net additional shares outstanding assuming
dilutive stock options exercised and proceeds used
to purchase treasury stock at average market price 344,338 626,581 344,338 626,581
------------ ------------ ------------ ------------
Shares outstanding for net income
per share calculation 25,029,937 25,282,604 25,029,937 25,282,604
============ ============ ============ ============
Net income per share $ 0.09 $ 0.07 $ 0.26 $ 0.20
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> JAN-31-1995
<CASH> 9,108
<SECURITIES> 0
<RECEIVABLES> 52,086
<ALLOWANCES> 1,000
<INVENTORY> 101,827
<CURRENT-ASSETS> 176,658
<PP&E> 350,812
<DEPRECIATION> 129,629
<TOTAL-ASSETS> 404,668
<CURRENT-LIABILITIES> 78,478
<BONDS> 0
<COMMON> 123,481
0
0
<OTHER-SE> (66,118)
<TOTAL-LIABILITY-AND-EQUITY> 404,668
<SALES> 153,546
<TOTAL-REVENUES> 145,818
<CGS> 128,875
<TOTAL-COSTS> 137,473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,923
<INCOME-PRETAX> 3,443
<INCOME-TAX> 1,228
<INCOME-CONTINUING> 2,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,215
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
