<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1995
/ / TRANSITION REPORT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR 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 offices) (Zip Code)
Registrant's telephone number, including area code 815/625-2500
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 no par value
9 1/2% Senior Notes due 2001
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 and 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K of any amendment to this Form 10-K. /X/
State the aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant: $135,785,078
Number of shares of Common Stock, par value $0.01 per share, outstanding as
of October 13, 1995: 24,849,311
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<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Founded in 1879, the Company is a major mini-mill producer of structural
steel products and rod and wire products. In contrast to integrated mills which
produce steel from coke and iron ore through the use of blast furnaces and basic
oxygen furnaces, mini-mills use electric arc furnaces to melt steel scrap and
cast the resulting molten steel into long strands of various shapes in a
continuous casting process. The Company's steel products include wide flange
beams, light structural shapes and merchant bars. The Company's rod and wire
products include nails, concrete reinforcing mesh, residential and agricultural
fencing and a wide range of other wire products.
The Company pioneered the use of electric arc furnaces for steelmaking,
installing its first electric arc furnace in 1936. The Company's three 400-ton
electric arc furnaces are among the world's largest, providing the Company with
considerable economies of scale in its steel scrap melting operations.
The Company's operations are located in Sterling and neighboring Rock
Falls, Illinois (the "Sterling Operations") and Houston, Texas (the "Houston
Facility"). Additionally, a new concrete reinforcing mesh production facility is
under construction in Hickman, Kentucky (the "Kentucky Facility") which is
anticipated to become operational in the latter half of fiscal 1996. The
Sterling Operations consist primarily of a melt shop with three 400-ton electric
arc furnaces with an annual scrap melting capacity in excess of 2.4 million
tons, three continuous casters, three rolling and finishing mills and the
Company's nail and wire operations. The Houston Facility consists of a wide
flange beam rolling and finishing mill. The Company's continuous casters have
sufficient capacity to cast semi-finished steel for all of the Company's rolling
and finishing mills. The Company believes that its large and low-cost steel
scrap melting capacity and its ability to satisfy all of the rod requirements of
its Rod and Wire Products operations from its rod production give it a strategic
cost advantage over its competitors.
OPERATIONS
The Company's operations constitute one line of business with several
classes of products. Operations are divided into the Steel Division and the Rod
and Wire Products Division.
The Steel Division produces raw steel using the electric arc furnace
process. Semi-finished products are then continuously cast into billets, blooms
and beam blanks.
Finished products are rolled from the semi-finished steel through a series
of reduction mill processes. Such products include structural wide flange beams,
channels and angle products and merchant bar and bar shapes, which are sold
nationally to steel fabricators, distributors and original equipment
manufacturers, including industrial and agricultural machinery manufacturers.
The Company sells its output principally through Company personnel and
independent sales agents to customers located throughout the United States. In
addition, semi-finished products are sold to other steel producers.
The Rod and Wire Products Division produces rods for use in drawing to
various wire gauges to produce nails, fence and a wide range of other fabricated
wire products for shipments to hardware jobbers, agricultural cooperatives and
the construction industry.
CUSTOMERS AND MARKETS
Structural steel products are used in a variety of commercial, industrial
and residential construction applications, as well as infrastructure projects,
such as roads and bridges, and public sector construction, such as schools and
hospitals. In construction applications, structural steel products are used as
beams, columns and girders which form the support structure of a building. In
infrastructure construction, structural forms are combined to form bridge
trusses and vertical highway supports. Original equipment manufacturers use
light structural shapes in the fabrication of heavy equipment.
2
<PAGE> 3
Approximately two-thirds of the Company's steel rod production is utilized
in the manufacture of the Company's rod and wire products, while the remaining
one-third of the Company's rod production is sold to other manufacturers of rod
and wire products. The Company sells its rod and wire products largely to
hardware jobbers, agricultural cooperatives, hardware and other retailers
serving the do-it-yourself market and the construction industry in the upper
Midwest region of the United States. Manufacturers' wire is sold directly to
manufacturers of a variety of products, such as fan guards, automotive door
rods, shopping carts and dishwasher baskets. The Company believes that it is the
largest single-site manufacturer of nails in the United States.
CAPITAL IMPROVEMENTS
Over the last decade, the Company has improved many of its steel
manufacturing operations. At the Sterling Operations, capital improvements have
included the modernization of the 12" bar mill into a high-speed rod mill and
the modernization of the 14" rolling mill. Melt shop improvements at the
Sterling Operations have included construction of both an 8-strand billet caster
and a 6-strand bloom caster. Combined with the installation of beam blank
casting technology, these improvements permit the Company to continuously cast
100% of its product at a significantly lower cost by eliminating ingot teeming
and reheating and blooming mill operations. Other melt shop improvements have
included the purchase and installation of a new ladle metallurgical station, low
impedance arms, and ladle transfer cars. In fiscal 1995 the Company approved
additional improvements consisting of a second ladle metallurgical station and a
state-of-the-art high voltage transformer, both of which are expected to be
placed in service in fiscal 1996. The Company believes that these improvements
have enabled it to lower its cost for both its structural steel products and rod
and wire products.
The Company has invested approximately $43 million in capital improvements
in the Houston Facility since acquiring it in 1989. As part of the Houston
Facility's refurbishment, all mechanical and electrical components in its mill
were completely reconditioned and brought to operable condition. In 1991, the
Company also installed a jumbo beam blank continuous caster at the Sterling
Operations to produce near shape beam blanks for the Houston Facility.
In fiscal 1995, the Company began construction of the Kentucky Facility.
The Company believes that this facility will be one of the low cost producers of
concrete reinforcing mesh.
RAW MATERIALS
The Company's major raw material is steel scrap, which is generated
principally from industrial, automotive, demolition and railroad sources and is
purchased by the Company in the open market through a number of scrap brokers
and dealers or by direct purchase. The cost of scrap is subject to market forces
including demand by other steel producers. The cost of scrap to the Company can
vary significantly, and product prices generally cannot be adjusted in the
short-term to recover large increases in steel scrap costs. Over longer periods
of time, however, product prices and scrap prices have tended to move in the
same direction.
The long term demand for ferrous scrap and its importance to the domestic
steel industry can be expected to increase as steelmakers continue to expand
scrap-based electric furnace capacity with additions to or replacements of
existing integrated facilities. For the foreseeable future, however, the Company
believes that supplies of scrap will continue to be available in sufficient
quantities.
ENERGY
Steelmaking is an electricity-intensive industry. Historically, the Company
has been adequately supplied with electricity and does not anticipate any
curtailment in its operations resulting from energy shortages. The Company's
second largest source of energy is natural gas. Historically, the Company has
been adequately supplied with natural gas and an adequate supply is expected to
be available in the future.
3
<PAGE> 4
COMPETITION
The Company competes with a number of domestic and foreign mini-mill and
integrated steel producers. In the structural steel market, the Company believes
its principal competitors are Bethlehem Steel Corporation, an integrated steel
producer, and Chaparral Steel Co. and Nucor Corporation, both of whom use an
electric arc furnace-based steelmaking process. The Company has attempted to
differentiate itself from its mini-mill competitors by taking advantage of its
ability to produce small quantities and concentrating its efforts on the higher
value-added steel fabricator market. Integrated producers generally operate at a
competitive disadvantage to domestic mini-mill producers because of less
efficient production techniques and higher labor costs. The relative weakness of
the U.S. dollar to foreign currencies coupled with high shipping costs has
reduced foreign exports of structural steel products to the United States when
compared to the prior decade.
According to the American Iron and Steel Institute ("AISI"), the size of
the U.S. structural steel market was approximately 5.9 million tons in calendar
1994. Because of their cost disadvantage, domestic integrated producers have
reduced their structural steel production and foreign integrated producers have
reduced their structural steel exports to the United States. This supply has
been replaced by domestic mini-mills. Although integrated producers have been
reducing their production levels, the Company believes that the market for
structural steel products will increase, as the use of structural steel is
expanding in various construction applications, replacing traditional materials
such as concrete, because of the flexibility and strength of steel products and
structural steel's speed of installation and resistance to earthquake damage.
Based on information published by the AISI, the Company believes that its share
of shipments by domestic mills in the U.S. structural steel market was
approximately 16.3% for fiscal 1995. Within the market for wide flange beams,
which represent 77.2% of the Company's structural steel shipments for fiscal
1995, the Company believes its share of domestic mill shipments in the U.S.
market was 23.2% for fiscal 1995 based on information published by the AISI.
The market for rod and wire products in which the Company competes is
confined to the upper Midwest region of the United States in which the Sterling
Operations are located. This confinement results from the relatively high
freight costs as compared to product values. The Company's competitors in the
rod market include G.S.T., CF&I Steel L.P. ("CF&I"), Keystone Steel & Wire Co.
("Keystone") and North Star Steel Co. The Company's competitors in the wire
market include Bekaert Corp., CF&I, Keystone, Insteel Industries, Inc., and
Oklahoma Steel Corp.
BACKLOG
As of September 30, 1995, order backlog, all of which is expected to be
filled in fiscal 1996, totaled approximately $96 million compared with
approximately $67 million as of September 30, 1994. The Company believes that
the increase in order backlog reflects stronger market conditions for structural
products.
SALES BY DIVISION
During the fiscal years ended July 31, 1995, 1994 and 1993 no single
customer accounted for more than 10% of total dollar net sales. Sales to the
Company's ten largest customers accounted for approximately $137.9 million, or
approximately 22% of total net sales in fiscal 1995. Total foreign sales
accounted for approximately $11.3 million, or approximately 2% of total fiscal
1995 net sales.
4
<PAGE> 5
For the fiscal years indicated below, the approximate percentage of net
sales contributed by each class of similar products is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Steel Division
Structural.......................................... 52.5% 52.1% 51.6%
Merchant bar........................................ 11.8 9.9 7.1
Semi-finished....................................... 3.7 6.7 7.9
----- ----- -----
68.0 68.7 66.6
----- ----- -----
Rod and Wire Products Division
Wire Products....................................... 20.0 21.8 23.7
Rod................................................. 12.0 9.5 9.7
----- ----- -----
32.0 31.3 33.4
----- ----- -----
Total............................................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
EMPLOYEES
As of July 31, 1995, there were approximately 2,380 active employees of the
Company. Approximately 2,030 of the Company's employees are represented by five
collective bargaining units, with approximately 1,985 represented by three local
unions affiliated with the United Steelworkers of America ("USWA"), and the
remainder represented by one local union affiliated with the United Plant Guard
Workers of America and one local union affiliated with the International
Brotherhood of Teamsters. The Company is a party to a collective bargaining
agreement with the USWA with respect to Locals 63 and 3720 covering
approximately 1,760 of the Company's employees in Sterling and Rock Falls,
Illinois, which agreement expires on August 1, 1996. The Company is also party
to a collective bargaining agreement with the USWA with respect to approximately
150 employees at the Houston Facility, which agreement will expire on August 1,
1996. On June 30, 1995, a collective bargaining agreement expired with respect
to approximately 75 employees at the Houston Facility. Since that time the
employees continue to work without an agreement. The two remaining bargaining
units are party to collective bargaining agreements with the Company covering a
total of approximately 50 employees, each of which agreements expires in fiscal
1997.
Through the ESOP, various stock ownership plans and direct ownership,
employees of the Company currently own approximately 19% of the outstanding
Common Stock. In addition, pursuant to the Company's profit sharing plan, 5.00%
of the Company's free cash flow (as defined therein) will be paid to eligible
hourly employees in profit sharing. The Company provides similar benefits for
eligible salaried employees covering 0.94% of the Company's free cash flow.
ENVIRONMENTAL COMPLIANCE
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.
Based on continuing review of applicable regulatory requirements by the
Company's internal environmental compliance officer and advice from independent
consultants, 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
1996. Nevertheless, as is the case with steel producers in general, if a release
of hazardous substances located on the Company's property 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.
5
<PAGE> 6
The Resource Conservation and Recovery Act ("RCRA") regulates the disposal
of emission control sludge/dust from electric arc furnaces ("K061"), a waste
stream generated in significant quantities at the Sterling Operations. The
Company is complying with RCRA with respect to K061 by chemically stabilizing
this waste before its disposal. Conversion Systems, Inc. has been chemically
stabilizing the K061 for the Company. Annual expenses in connection with such
services are approximately $3.5 million per year. This chemical stabilization
process allows the Company to use the fully permitted, hazardous waste landfill
at the Sterling Operations for disposal of the stabilized K061.
In March of 1994, the Company received a modification to its Part B RCRA
permit from the Illinois EPA to allow an expansion to its hazardous waste
landfill. Phase I of the expansion took place during the summer of 1994 at a
cost of approximately $1.5 million. Phase II of the expansion will be conducted
during fiscal 1996 and its cost is expected to be less than $500,000. At June
30, 1995, the Company had approximately $2,880,347 in a trust fund designated
for landfill closure costs. The Company also operates an on-site non-hazardous
waste landfill. The Company expects to close this landfill in fiscal 1998.
Government regulations regarding steel and foundry non-hazardous landfills were
finalized in September 1994. At this time, the Company is determining the cost
of closing this landfill which the Company currently estimates may be as much as
$2 million.
A closed, pre-RCRA landfill at the Sterling Operations was used from 1974
to 1980. In 1992, the United States Environmental Protection Agency agreed with
a Corrective Measures Study submitted by the Company and allowed continued
groundwater monitoring at the site. The Company currently estimates the cost of
this monitoring to be minimal; however, should the monitoring indicate a more
serious problem, these corrective measures could be material.
The Company has occasionally exceeded the limits of its wastewater
discharge permit at its Sterling Operations. The Company believes that modified
operating procedures and certain equipment upgrades should eliminate the waste
water discharge concerns of the State of Illinois and the EPA. The Company
estimates that costs to implement equipment upgrades will be approximately
$500,000 and will likely be incurred in fiscal 1996 and 1997.
The Houston facility over the past several years has sporadically exceeded
the limits of its waste water permit, sometimes due to high metal concentrations
in city intake water. The Company has recently negotiated an Agreed Order with
the Texas National Resource Conservation Commission which requires a study of
the wastewater treatment processes, the results of which may indicate the need
for additional waste water treatment equipment. If additional control equipment
is necessary, the Company believes its costs will not be material.
The Houston facility is also presently in discussions with the Harris
County Pollution Control Department regarding the remediation of some
oil-contaminated sites. The Company has not provided an accrual for the remedial
cost; however, the Company believes its cost will not be material.
The Company possesses air emission permits for all major operations. Recent
review of operations in connection with other requirements revealed certain
operations which may require permits or permit modifications. The Company is in
the process of applying for such permits or permit modifications.
New rules to be adopted under amendments to the 1990 Clean Air Act ("CAA")
may impose significantly stricter air emissions standards on the Company.
Because regulations applicable to the Company's operations have not yet been
promulgated under the CAA, the Company cannot at this time determine the cost to
comply with the new regulations. Because these standards will also apply to the
Company's domestic competitors, they should not materially affect the Company's
competitive position.
Before it was purchased by the Company in 1989, the Houston Facility was
part of the Armco Houston Works (the "AHW"). The AHW is now closed, but is
listed on CERCLIS, the EPA's list of suspected hazardous substance release
sites. The EPA's concern appears to be related to a part of the AHW not
purchased by the Company and the Company has not received any claims or notices
related to the CERCLIS listing.
6
<PAGE> 7
PATENTS AND TRADEMARKS
The Company holds no patents, trademarks, licenses, franchises or
concessions of material importance to its business.
ENTERPRISE ZONE DESIGNATION
Effective March 30, 1988, the Company's property was designated to be
within an Illinois Enterprise Zone ("Enterprise Zone") by the Illinois
Department of Commerce and Community Affairs. The primary benefit to the Company
of operating within an Enterprise Zone is the receipt of a state utility tax
exemption on gas and electricity as well as an exemption on the Illinois
Commerce Commission's administrative charge on these utilities. The Company has
been able to demonstrate sufficient capital spending and thus is entitled to the
utility tax exemption through July 31, 1998. This utility tax exemption is
expected to save the Company approximately $2 million to $2.5 million per year
through July 31, 1998.
An additional benefit to the Company of operating within the Enterprise
Zone is the receipt of a state sales tax exemption on the purchase of consumable
manufacturing supplies. Eligibility for the sales tax exemption was contingent
upon the Company making a $40 million investment that causes the retention of
2,000 full time jobs in Illinois. The Company has been able to demonstrate
sufficient capital spending and thus is entitled to the sales tax exemption
through June 30, 2000. This sales tax exemption is expected to save the Company
approximately $300,000 to $400,000 per year through June 30, 2000.
ITEM 2. PROPERTIES
The executive offices of the Company and its steel producing facilities,
designated as Plants 1, 2, 3, 5, and 6, are located on approximately 596 acres
of land along the Rock River in Sterling, Illinois, and Plant 4 is on 8 acres of
land located directly across the river in Rock Falls, Illinois. The Houston
Facility is located on approximately 180 acres of land in Houston, Texas. The
Kentucky Facility is located on approximately 60 acres of land in Hickman,
Kentucky.
Plant 1, comprising 641,081 square feet of floor space, consists of a wire
mill with equipment for drawing, galvanizing and annealing wire, and machinery
for manufacturing fence, netting, nails and other wire products.
Located in Plant 2 are liquid metal producing facilities, with 2,400,000
net tons annual capacity, consisting of three 400-ton electric furnaces. Also
located at Plant 2 is a six-strand bloom continuous caster, an eight-strand
billet continuous caster and a three-strand jumbo beam caster having a combined
annual capacity of 2,500,000 net tons, and a 12" rod train having an annual
capacity of 400,000 net tons. At present, this plant comprises 961,318 square
feet of floor space.
Plant 3 consists of a 24" structural mill, with a total annual capacity of
440,000 net tons. The plant comprises approximately 900,000 square feet of floor
space.
Manufacturing facilities for the production of welded wire products are
located at the Rock Falls Plant 4, which consists of 397,880 square feet.
The 14" merchant bar mill, comprising 434,740 square feet and having an
annual capacity of 400,000 net tons, is located at Plant 5.
Plant 6 consists of 48,304 square feet of floor space and is currently
idle.
The Houston Facility consists of a wide flange structural mill and
comprises approximately 860,000 square feet of floor space. The total annual
capacity of the mill is 600,000 net tons. The Houston Facility consists
generally of a 48" wide flange beam finishing mill, a barge dock, and the
corresponding real property on which these structures are located.
The Kentucky Facility, presently under construction, will consist of a
manufacturing facility for the production of concrete reinforcing mesh. The
facility comprises approximately 192,000 square feet of floor space and will
have an annual capacity of 80,000 net tons.
7
<PAGE> 8
All buildings are owned by the Company and are of steel, brick or concrete
construction. The Company believes that its plants and equipment are in good
operating condition.
During fiscal 1995, the Company's primary steelmaking facilities operated
at approximately 81% of capacity. The Company's finishing facilities operated at
approximately 84% of capacity.
Pursuant to the Company's existing credit facility, the Company has granted
mortgages on all of the Company's real estate and security interests in its
other assets, including equipment and fixtures.
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 revised workers'
compensation regulations are unconstitutional. The effect of the revised
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
self-insurance workers' compensation privilege. 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 likely be much more expensive than
the Company's self-insurance plan or may be unavailable and obtaining a letter
of credit under the Senior Credit Facility would reduce the Company's borrowing
capacity.
A wrongful death action against the Company was settled during fiscal 1995
and the Company's insurance carriers covered the losses. A separate wrongful
death action was filed against the Company during 1995. The Company has not
provided an accrual for this potential loss as the outcome of the action filed
in 1995 cannot be predicted at this time. The Company believes that losses
arising from the complaint, if any, also will be covered by the Company's
insurance carriers.
The Company is not a party to any other significant pending legal
proceedings other than routine litigation incidental to its business which the
Company believes will not materially affect its financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
At October 13, 1995, 24,429,167 shares of Common Stock were issued and
outstanding and held by 1,265 registered holders.
The Company does not expect to pay dividends on the Common Stock during the
foreseeable future. The Company's Senior Credit Facility prohibits the payment
of any dividends. The indenture relating to the 9 1/2% Senior Notes due 2001 of
the Company also restricts the payment of dividends.
MARKET PRICE AND CASH DIVIDENDS
The following table presents the high and low market price by quarter for
the last three fiscal years.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
------------- ---- ----
<S> <C> <C>
FISCAL 1995
October 31, ................................................. $ 6 1/4 $ 6
January 31, ................................................. 7 5/8 7 1/4
April 28, ................................................... 6 1/8 5 7/8
July 31, .................................................... 10 9 5/8
FISCAL 1994
October 29, ................................................. 9 1/4 9
January 31, ................................................. 12 1/4 11 7/8
April 29, ................................................... 9 1/2 8 7/8
July 29, .................................................... 9 1/4 9
FISCAL 1993
October 31, ................................................. * *
January 31, ................................................. * *
April 30, ................................................... * *
July 31, .................................................... 9 1/8 7 1/4
</TABLE>
As of October 13, 1995 the closing price of Common Stock on The Nasdaq
Stock Market (under the symbol NWSW) was $8 1/2. Since the initial public
offering of June 12, 1993, there have been no dividends paid on the Common
Stock.
- -------------------------
* Not Applicable
9
<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JULY 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA AND
TONNAGE AND ACTIVE EMPLOYEE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $638,420 $603,609 $539,210 $470,049 $477,429
Cost of goods sold (excluding
depreciation)........................... 563,325 540,701 484,122 435,953 440,227
Selling and administrative expenses....... 11,334 10,882 11,608 6,884 12,348
Operating profit.......................... 40,718 29,821 21,554 5,130 5,598
Interest expense.......................... 19,674 19,221 23,200 27,745 27,498
Income (loss) before extraordinary item
and cumulative effect................... 21,178 10,730 (1,522) (22,372) (19,751)
Net income (loss)......................... 26,978(1) 10,010 (47,695) (22,372) (19,751)
Income (loss) per share before
extraordinary item and cumulative
effect.................................. $ 1.07 $ 0.40 $ (0.08) $ (1.72) $ (1.53)
Net income (loss) per common share........ 1.07(1) 0.40 (2.62) (1.72) (1.53)
OTHER DATA:
Capital expenditures...................... $ 35,573 $ 22,930 $ 12,271 $ 7,119 $ 26,063
EBITDA(2)................................. 64,883 53,148 44,603 28,334 25,976
Total tons shipped........................ 1,662 1,632 1,577 1,363 1,355
Active employees.......................... 2,380 2,517 2,500 2,696 2,800
</TABLE>
<TABLE>
<CAPTION>
AT JULY 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets............................ $186,045 $168,999 $144,247 $101,799 $ 93,450
Plant and equipment -- net................ 299,708 217,178 216,515 226,170 241,133
Other assets.............................. 5,655 7,999 10,896 11,853 8,316
-------- -------- -------- -------- --------
Total assets.............................. $421,408 $394,176 $371,658 $339,822 $342,899
======== ======== ======== ======== ========
Current liabilities....................... $ 96,641 $ 90,082 $ 80,889 $107,371 $ 52,344
Long term debt............................ 162,110 166,942 164,234 199,551 228,383
Deferred employee obligations............. 75,042 79,246 64,043 22,567 32,864
Deferred income taxes..................... 4,744 7,402 7,602 -- --
Stockholders' equity...................... 82,871 50,504 54,890 10,333 29,308
-------- -------- -------- -------- --------
Total liabilities and shareholders'
equity.................................. $421,408 $394,176 $371,658 $339,822 $342,899
======== ======== ======== ======== ========
Working capital........................... $ 89,404 $ 78,917 $ 63,358 $ (5,572) $ 41,106
======== ======== ======== ======== ========
</TABLE>
- -------------------------
Notes for Summary of Selected Financial Data
(1) Fiscal 1995 net income included a $10.6 million or $.42 per share tax
benefit due to recognition of certain deferred tax assets which are now
more likely than not to be realized.
(2) EBITDA is defined as operating profit plus depreciation and amortization.
The Company believes EBITDA provides additional information for determining
its ability to meet debt service requirements. EBITDA does not represent
net income or cash flow from operations as determined by generally accepted
accounting principles, and is not necessarily an indication of whether cash
flow will be sufficient to fund cash requirements.
10
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NET SALES
Net sales for fiscal 1995 increased by $34.8 million or 6% from fiscal
1994. The 6% increase in fiscal 1995 net sales resulted from several price
increases during the fiscal year on many of the Company's products, together
with a 2% increase in steel shipments. Many of the price increases resulted from
improved market conditions. Pricing of the Company's principal product,
structural steel, improved with increased demand and the announced reduction in
capacity by a major competitor.
Net sales for fiscal 1994 increased $64.4 million or 12% from fiscal year
1993, primarily from several price increases during the fiscal year on many of
the Company's products, together with a 3% increase in steel shipments.
COST OF GOODS SOLD
The pricing on the Company's principal raw material, steel scrap, increased
3% during fiscal 1995 from the record levels experienced in fiscal 1994. Despite
this, cost of goods sold (excluding depreciation) as a percentage of net sales
decreased by 2% points, from 90% experienced in fiscal 1994 to 88% for fiscal
1995. This resulted from a combination of improved operating efficiencies and
increased selling prices. Improved Sterling Operations operating efficiencies
resulted from increased capacity utilization and workforce reductions. Record
production levels were achieved in semi-finished products from the Company's
primary facility and rod products from the 12" Mill. These record production
levels were achieved while remaining on plan to reduce the Company's hourly and
salaried workforce by 20% from fiscal 1993 to fiscal 1996. Continued
improvements in production costs at the Houston Facility resulted from increased
yield and operating rates. As a result of these increases, the Houston Facility
achieved record production levels in fiscal 1995. Selling prices improved from
increased market demand in conjunction with emphasis on higher value-added
products and customer service.
The pricing on steel scrap escalated 24% during fiscal 1994. Despite this,
cost of goods sold as a percentage of net sales remained unchanged at 90% in
fiscal 1994 compared to fiscal 1993. Excluding the effects of scrap, the Company
improved operating margins in fiscal 1994 through improved operating
efficiencies and increased selling prices. Continued improvements in production
costs at the Houston Facility resulted from increased yield and operating rates.
Also contributing to production cost reductions were improvements in the
Sterling Operations, primarily lower steelmaking costs.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased from $10.9 million in fiscal
1994 to $11.3 million in fiscal 1995. The increase resulted primarily from an
increase in management incentive program expense. These incentives are based on
the Company's achieved versus planned profitability for the fiscal year.
Selling and administrative expenses decreased from $11.6 million in fiscal
1993 to $10.9 million in fiscal 1994, primarily as a result of reduced
management incentive program expense.
OPERATING PROFIT
Operating profit increased 37% in fiscal 1995 to $40.7 million from $29.8
million in fiscal 1994. This improvement is on top of a 38% increase in
operating profit in fiscal 1994 compared to fiscal 1993 when the operating
profit was $21.6 million. These increases were a result of cost reductions due
principally to increased capacity utilization and workforce reductions. Also
contributing to the improvement was revenue growth. Increased revenue resulted
from improved market demand, product penetration and emphasis on higher
value-added products and customer service.
11
<PAGE> 12
INTEREST EXPENSE
Interest expense increased approximately $500,000 from $19.2 million in
fiscal 1994 to $19.7 million for fiscal 1995. The additional interest expense
resulted primarily from the increase in interest rates on the Company's variable
rate debt.
During late fiscal 1993, the Company significantly reduced its borrowing
levels with the cash proceeds from an initial public offering of Common Stock
and from issuance of Senior Notes. As a result of reduced borrowing levels,
interest expense in fiscal 1994 decreased $4.0 million to $19.2 million from
$23.2 million in fiscal 1993.
INCOME TAXES
The fiscal 1995 provision for income taxes includes a $10.6 million tax
benefit associated with the recognition of certain deferred tax assets which are
now more likely than not to be realized. Excluding this benefit, the tax
provision for fiscal 1995 was $4.8 million for fiscal 1995 compared to $720,000
for fiscal 1994. The increase resulted from improved earnings.
NET INCOME
Net income in fiscal 1995 was $27.0 million or $1.07 per share compared to
$10.0 million or $.40 per share in fiscal 1994. Excluding the tax benefit for
deferred tax assets of $10.6 million or $.42 per share, as described above, net
income increased 64% in fiscal 1995 compared to the prior fiscal year.
Fiscal 1994 net income of $10.0 million or $.40 per share compares to a
fiscal 1993 net loss before extraordinary item and cumulative effect of
accounting change of $1.5 million or $.08 per share. In fiscal 1994, the Company
achieved its first profitable year since fiscal 1990 as a result of the various
factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The financial position of the Company continues to improve as discussed
below. The Company achieved cash flow from operations of $36.0 million, which
represents the Company's tenth consecutive year of positive cash flow.
Additionally the Company reported operating profit improvement for the third
consecutive year. As of July 31, 1995, the Company had cash on hand of
approximately $14.3 million and approximately $61.7 million available under its
revolving credit facility. The Company's current ratio remained unchanged at
1.9:1 at July 31, 1995 and 1994. The consolidated debt-to-equity ratio improved
dramatically at July 31, 1995 to 2.0:1 compared to 3.3:1 at July 31, 1994. This
increased financial and operating flexibility has enabled the Company to better
manage inventory levels that, 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 cash flow. The Company expects that its cash flow from
operations, available borrowings and access to the capital markets will be
sufficient to fund future debt service.
CAPITAL EXPENDITURES
Among the most important aspects of the Company's planning system is the
identification of needs for capital expenditures. The system incorporates
selective allocation of funds to projects that will lower operating costs
through technological improvements and/or increase capacity and maintain
equipment and facilities. The Company assesses likely market, technological and
other business changes in coming years and develops plans to ensure that it will
be on the leading edge of such advances.
In view of the increased level of operations and resulting improved
profitability, but more importantly due to the generation of adequate cash flow,
the Company was able to increase capital expenditures to approximately $36
million during fiscal 1995 compared with $23 million in fiscal 1994 and $12
million in fiscal
12
<PAGE> 13
1993. Consistent with the philosophy of maintaining efficient, low cost
production facilities, the Company is continuing its aggressive capital
investment program which began during fiscal 1995. Anticipated capital
expenditures for fiscal 1996 are estimated at $50 million. This plan continues
to be based upon internally generated funds and maintaining debt generally at
existing levels. With the continuing strengthening of our Company, we are now
poised to more effectively compete, grow and provide improvements in the quality
and cost of our products as well as customer service.
ACCOUNTING STANDARDS
Statement of Financial Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS 112), was issued in November 1992. SFAS 112
establishes standards of financial accounting and reporting for the estimated
costs of benefits provided by an employer to former or inactive employees after
employment but before retirement. The Company adopted SFAS 112 during fiscal
1995. The impact of SFAS 112 was not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Financial statements and supplementary data of the Company are included in
this Annual Report of Form 10-K beginning on page F-1 and are listed in Item 14
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein by reference
to the captions (Election of Directors) and (Management) in the Company's
definitive Proxy Statement relating to its 1995 Annual Meeting of Stockholders.
With the exception of the information specifically incorporated by reference,
said definitive Proxy Statement is not deemed to be filed as part of this
report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to the caption "Executive Compensation" in the Company's definitive Proxy
Statement relating to its 1995 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by reference, said
definitive Proxy Statement is not deemed to be filed as part of this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference
to the caption "Security Ownership of Certain Beneficial Owners" in the
Company's definitive Proxy Statement relating to its 1995 Annual Meeting of
Stockholders. With the exception of the information specifically incorporated by
reference, said definitive Proxy Statement is not deemed to be filed as part of
this report.
ITEM 13. CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference
to the caption "Certain Transactions" in the Company's definitive Proxy
Statement relating to its 1995 Annual Meeting of Stockholders. With the
exception of the information specifically incorporated by reference, said
definitive Proxy Statement is not deemed to be filed as part of this report.
13
<PAGE> 14
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, 1995 and
1994 and the related consolidated statements of stockholders' equity, operations
and cash flows for each of the three years in the period ended July 31, 1995.
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, 1995 and 1994 and the
consolidated results of their operations and cash flows for each of the three
years in the period ended July 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Notes 1, 2 and 3 to the consolidated financial statements,
the Company adopted in 1993 the method of accounting for postretirement benefits
other than pensions prescribed by Statement of Financial Accounting Standards
No. 106, and the method of accounting for income taxes prescribed by Statement
of Financial Accounting Standards No. 109.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
September 18, 1995
F-1
<PAGE> 15
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF JULY 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 14,275 $ 12,817
Receivables, less allowance of $1,000................................. 58,878 57,276
Inventories........................................................... 90,577 84,682
Deferred income taxes................................................. 15,344 7,402
Other assets.......................................................... 6,971 6,822
-------- --------
Total current assets 186,045 168,999
-------- --------
PLANT AND EQUIPMENT, at cost, less accumulated depreciation of $141,321
and $118,278, respectively............................................ 229,708 217,178
DEFERRED FINANCING COSTS................................................ 5,655 6,877
ORGANIZATIONAL AND PRE-OPERATING COSTS.................................. -- 1,122
-------- --------
Total assets..................................................... $421,408 $394,176
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................................................... $ 66,441 $ 67,112
Accrued expenses...................................................... 23,810 22,880
Current portion of long term debt..................................... 6,390 90
-------- --------
Total current liabilities........................................ 96,641 90,082
LONG TERM DEBT.......................................................... 162,110 166,942
DEFERRED EMPLOYEE BENEFIT OBLIGATIONS................................... 75,042 79,246
DEFERRED INCOME TAXES................................................... 4,744 7,402
-------- --------
338,537 343,672
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share; outstanding 24,809,842 and
24,715,022 shares, respectively.................................... 123,609 123,098
Retained (deficit) earnings........................................... (25,721) (52,699)
Minimum pension liability............................................. (9,693) (14,572)
Treasury shares, at cost; 420,144 and 420,014 shares, respectively.... (5,324) (5,323)
-------- --------
Total shareholders' equity............................................ 82,871 50,504
-------- --------
Total liabilities and shareholders' equity....................... $421,408 $394,176
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-2
<PAGE> 16
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) OTHER
---------- -------- ---------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1992.............. 4,410,125 $ 25,000 3,345,154 $ 11,259 $(15,014) $ (7,045)
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 compensation earned.............. 3,846
Shares sold -- Recapitalization....... 7,392,680 54,279
ESOP compensation earned --
Recapitalization.................... 3,199
SARs distributed --
Recapitalization.................... 60,735 486
---------- -------- ---------- -------- ---------- -------- -------- --------
Balance at July 31, 1993.............. -- -- 24,631,955 122,942 (62,709) --
Net income............................ 10,010
Treasury shares....................... (21)
Options exercised..................... 83,067 332
Cost from prior year stock issuance... (155)
Establishment of minimum
pension liability................... (14,572)
---------- -------- ---------- -------- ---------- -------- -------- --------
Balance at July 31, 1994.............. -- -- 24,715,022 123,098 (52,699) (14,572)
Net income............................ 26,978
Treasury shares.......................
Options exercised..................... 94,820 361
Contributed capital................... 150
Change in minimum pension liability... 4,879
---------- -------- ---------- -------- ---------- -------- -------- --------
Balance at July 31, 1995.............. $ -- $ -- 24,809,842 $123,609 $(25,721) $ (9,693)
========== ======== ========== ======== ========== ======== ======== ========
<CAPTION>
TREASURY SHARES TOTAL
----------------- STOCKHOLDERS'
SHARES AMOUNT EQUITY
------- ------- -------------
<S> <<C> <C> <C>
Balance at July 31, 1992.............. 169,191 $(3,867) $ 10,333
Net loss.............................. (47,695)
Treasury shares....................... 250,823 (1,476) (1,476)
Shares converted...................... --
Shares sold -- 1992 Investment........ 29,225
SARs distributed 1992 Investment...... 1,702
SARs distributed...................... 59
Shares sold to employees.............. 799
Options exercised..................... 133
ESOP compensation earned.............. 3,846
Shares sold -- Recapitalization....... 54,279
ESOP compensation earned --
Recapitalization.................... 3,199
SARs distributed --
Recapitalization.................... 486
------- ------- --------
Balance at July 31, 1993.............. 420,014 (5,343) 54,890
Net income............................ 10,010
Treasury shares....................... 20 (1)
Options exercised..................... 332
Cost from prior year stock issuance... (155)
Establishment of minimum
pension liability................... (14,572)
------- ------- --------
Balance at July 31, 1994.............. 420,014 (5,323) 50,504
Net income............................ 26,978
Treasury shares....................... 130 (1) (1)
Options exercised..................... 361
Contributed capital................... 150
Change in minimum pension liability... 4,879
------- ------- --------
Balance at July 31, 1995.............. 420,144 $(5,324) $ 82,871
======= ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 17
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA )
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales..................................................... $638,420 $603,609 $539,210
-------- -------- --------
Cost and operating expenses:
Cost of goods sold (excluding depreciation)................. 563,325 540,701 484,122
Depreciation................................................ 23,043 22,205 21,926
Selling and administrative.................................. 11,334 10,882 11,608
-------- -------- --------
Total cost and operating expenses...................... 597,702 573,788 517,656
-------- -------- --------
Operating profit.............................................. 40,718 29,821 21,554
-------- -------- --------
Other income and expenses:
Interest expense............................................ 19,674 19,221 23,200
Interest and other income................................... (134) (130) (124)
-------- -------- --------
Total other income and expenses........................ 19,540 19,091 23,076
-------- -------- --------
Income (loss) before income taxes, extraordinary item and
cumulative effect of accounting change...................... 21,178 10,730 (1,522)
(Benefit) provision for income taxes.......................... (5,800) 720 --
-------- -------- --------
Income (loss) before extraordinary item and cumulative effect
of accounting change........................................ 26,978 10,010 (1,522)
Extraordinary loss related to early retirement of debt........ -- -- (6,395)
Cumulative effect of accounting change........................ -- -- (39,778)
-------- -------- --------
Net income (loss)............................................. $ 26,978 $ 10,010 $(47,695)
======== ======== ========
Income (loss) before extraordinary item and cumulative effect
of accounting change per share.............................. $ 1.07 $ 0.40 $ (0.08)
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................................... $ 1.07 $ 0.40 $ (2.62)
======== ======== ========
Net tons shipped.............................................. 1,662 1,632 1,577
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-4
<PAGE> 18
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
----------------------------------
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
Cash Flow From Operations:
Net income (loss)......................................... $ 26,978 $ 10,010 $ (47,695)
Extraordinary item related to early retirement of debt.... -- -- 6,395
Cumulative effect of accounting change.................... -- -- 39,778
Depreciation.............................................. 23,043 22,205 21,926
Loss on sale of plant and equipment....................... -- 14 --
Amortization of deferred financing costs and debt
discount............................................... 2,176 2,294 1,690
Amortization of organizational and pre-operating costs.... 1,122 1,122 1,123
Deferred income tax benefit............................... (10,600) --
Increase in receivables................................... (1,602) (3,247) (8,355)
Increase in inventories................................... (5,895) (8,960) (26,437)
(Increase) decrease in other current assets............... (149) (1,701) 919
Increase in deferred employee benefits.................... 676 631 3,545
Increase in accounts payable and accrued expenses......... 258 9,190 3,752
Deferred interest due at maturity......................... 15 2,147 2,709
Unearned ESOP compensation................................ -- -- 7,045
--------- -------- ---------
Net cash provided by operations............................. 36,022 33,705 6,395
--------- -------- ---------
Cash Flows From Investing Activities:
Capital expenditures...................................... (35,573) (22,930) (12,271)
Proceeds from sale of plant and equipment................. -- 48 --
--------- -------- ---------
Net cash used in investing activities....................... (35,573) (22,882) (12,271)
--------- -------- ---------
Cash Flows From Financing Activities:
Payment of long term debt and repayment on revolver
loans.................................................. (165,246) (97,645) (343,163)
Purchase of treasury shares............................... (1) -- (1,476)
Payment of ESOP debt...................................... -- -- (9,930)
Issuance of long term debt and borrowings under revolver
loans.................................................. 165,745 97,689 282,239
Proceeds from issuance of Common Stock.................... -- -- 95,073
Costs related to the issuance of Common Stock............. -- (155) (8,637)
Exercise of stock options................................. 511 332 --
Payment of deferred financing costs....................... -- -- (4,173)
Payment of prepayment penalty............................. -- -- (3,084)
--------- -------- ---------
Net cash provided by financing activities................... 1,009 221 6,849
--------- -------- ---------
Increase in cash and cash equivalents..................... 1,458 11,044 973
Cash and Cash Equivalents:
Beginning of period....................................... 12,817 1,773 800
--------- -------- ---------
End of period............................................. $ 14,275 $ 12,817 $ 1,773
========= ======== =========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest.................................................. $ 17,716 $ 14,859 $ 20,670
Income taxes paid......................................... 6,184 1,380 159
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-5
<PAGE> 19
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 three wholly-owned subsidiaries, Northwestern Steel and
Wire Company (a Delaware corporation) which performs the sales, management and
other administrative services, Northwestern Steel and Wire Company (a Texas
corporation) which operates the Houston rolling mill and Northwestern Steel and
Wire Company - Kentucky (a Delaware corporation) which has been established to
operate a wire mesh facility. 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.
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 other equipment).
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.
F-6
<PAGE> 20
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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." 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.
NET INCOME PER SHARE
Per share amounts are based on the average shares outstanding of
25,152,215, 25,185,389 and 18,170,143 for the periods ended July 31, 1995, 1994
and 1993, respectively. Average shares outstanding for the years ended July 31,
1995 and 1994 include the dilutive impact of shares issuable pursuant to the
Company's stock option plans. The average shares outstanding for the year ended
July 31, 1993 include the dilutive impact of shares issued pursuant to the 1992
Investment and the dilutive impact of shares granted to senior management (the
"Management Stock Option Plan") and shares granted to employees (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.
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. 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 represented 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.
CASH EQUIVALENTS
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.
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
8.45% to 7.91% for fiscal 1995. In addition, the Company has also reduced its
ultimate trend rate for postretirement benefits from 4.6% to 4.1%.
F-7
<PAGE> 21
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A non-cash increase to shareholders' equity of $4,879,000 during fiscal
1995 resulted principally from the change in discount rate, pension asset
changes and pension payouts. Unlike SFAS No. 87, changes of discount rates and
ultimate trend rates under SFAS No. 106 do not result in an immediate 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>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Benefits earned during the period (service
cost).......................................... $ 3,569 $ 4,004 $ 3,331
Interest cost on projected benefit obligation.... 17,944 17,075 17,822
Return on plan assets -- actual.................. (12,633) (4,401) (12,896)
Net amortization and deferral.................... (2,683) (11,045) (4,166)
-------- -------- --------
Net pension cost................................. $ 6,197 $ 5,633 $ 4,091
======== ======== ========
</TABLE>
Deferred gains and losses are amortized over the average remaining future
service periods (approximately 15 years).
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, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
HOURLY SALARIED HOURLY SALARIED
PLAN PLAN PLAN PLAN
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations (including vested
benefits of $155,939 for 1995 and $143,359 for
1994 for the Hourly Plan and $51,810 for 1995 and
$47,506 for 1994 for the Salaried Plan).......... $166,458 $ 54,465 $152,854 $ 49,906
Effect of increase in compensation.................. 9,847 3,837 13,065 4,206
-------- ------- -------- -------
Projected benefit obligation........................ 176,305 58,302 165,919 54,112
Plan assets at fair value............................. 155,922 56,635 136,829 51,380
-------- ------- -------- -------
Plan assets (less than) in excess of projected benefit
obligation.......................................... (20,383) (1,667) (29,090) (2,732)
Unrecognized net loss................................. 19,540 7,654 27,637 8,709
Adjustment required to recognize minimum liability.... (9,693) -- (14,572) --
-------- ------- -------- -------
Pension (liability) asset............................. $(10,536) $ 5,987 $(16,025) $ 5,977
======== ======= ======== =======
</TABLE>
Significant assumptions used in determining plan benefit obligations at the
end of July 31, 1995 and 1994 include a discount rate of 7.91% and 8.45%,
respectively, and a rate of projected compensation increase of 3.5% for 1995 and
1994. The assumed long-term rate of return on plan assets for determining net
pension costs was 9% for 1995 and 1994.
F-8
<PAGE> 22
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Summary information on the Company's postretirement plan other than
pensions is as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Financial Status of Plan:
Accumulated postretirement benefit obligation (APBO) as of July 31:
Retirees........................................................... $(39,266) $(36,095)
Fully eligible active plan participants............................ (8,986) (7,555)
Other active plan participants..................................... (21,205) (21,606)
-------- --------
(69,457) (65,256)
Less plan assets at fair value..................................... 0 0
-------- --------
Funded status...................................................... (69,457) (65,256)
Unrecognized prior service cost.................................... (3,523) --
Unrecognized net loss/(gain)....................................... 6,711 (213)
-------- --------
Unfunded accrued cost.............................................. $(66,269) $(65,469)
======== ========
</TABLE>
The components of net periodic postretirement benefit cost for the two
years ended July 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Service cost, benefits attributed to employee service during the year....... $1,074 $1,177
Interest cost on accumulated postretirement benefit obligation.............. 5,329 4,754
Net amortization and deferral............................................... (348) --
------- ------
Net periodic postretirement benefit cost.................................... $6,055 $5,931
======= ======
</TABLE>
The discount rate used in determining the APBO was 7.91% and 8.45% at July
31, 1995 and 1994, respectively. The assumed health care cost trend rate used in
measuring the accumulated postretirement benefit obligation was 7.7% in 1995 for
pre-65 retirees and 7.0% for post-65 retirees declining to an ultimate rate of
4.1% over a 10-year period for both populations. 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.
If the health care cost trend rate assumptions were increased by 1% each
year, the APBO as of July 31, 1995, would be increased by $9,035,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended would be increased by
$885,000.
The amounts paid for such benefits were $5.4 million, $5.1 million and $5.4
million for fiscal years ended July 31, 1995, 1994 and 1993, respectively.
3. INCOME TAXES
As of July 31, 1995, the Company has approximately $29,400,000 of net
operating loss carryforwards, which expire in 2006 and 2007. The
Recapitalization created an "ownership change" as defined by Section 382 of the
Internal Revenue Code of 1986, as amended. As a result of this, the loss
carryforwards of the Company are subject to an annual limitation of
approximately $1,965,000.
The Company also has investment tax credit and alternative minimum tax
credit carryforwards of approximately $3,033,000 and $2,113,000, respectively.
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.
F-9
<PAGE> 23
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities for which
income tax effects will be realized in future years. A deferred tax benefit of
approximately $10,600,000 was recorded in fiscal 1995, as the result of a
reduction in the recorded valuation allowance. The basis for this reduction is
the determination that the future profitability of the Company will more likely
than not allow realization of certain deferred tax assets. The Company continues
to record a valuation allowance with respect to the future tax benefits of
certain bases differences, investment tax credits, alternative minimum tax
credits and net operating loss carryforwards. This valuation allowance results
from the uncertainty of the future tax benefits ultimate realization due to
restrictions placed on their usage and the anticipated years in which they are
expected to reverse.
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>
1995 1994
TEMPORARY TAX TEMPORARY TAX
DIFFERENCE EFFECT DIFFERENCE EFFECT
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Trade accounts receivable.................... $ 1,000 $ 390 $ 1,000 $ 390
Inventories.................................. 3,440 1,341 4,080 1,591
Intangible assets............................ 3,654 1,425 3,655 1,425
Employee compensation........................ 19,669 7,671 20,052 7,820
Other accrued liabilities.................... 217 85 566 221
Retirement costs............................. 58,921 22,979 57,670 22,491
ITC and AMT carryforwards.................... 5,146 5,146 5,489 5,489
Net operating loss........................... 29,432 11,479 39,032 15,222
-------- -------- -------- --------
Subtotal................................ 121,479 50,516 131,544 54,649
Less: valuation allowance.................... (31,678) (15,509) (67,276) (29,584)
-------- -------- -------- --------
Total deferred tax asset..................... $ 89,801 $ 35,007 $ 64,268 $ 25,065
======== ======== ======== ========
Property, plant and equipment................ $ 62,582 $ 24,407 $ 64,268 $ 25,065
-------- -------- -------- --------
Total deferred tax liability................. $ 62,582 $ 24,407 $ 64,268 $ 25,065
======== ======== ======== ========
Net deferred tax asset....................... $ 27,219 $ 10,600 $ -- $ --
======== ======== ======== ========
</TABLE>
The (benefit) provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ---- ----
<S> <C> <C> <C>
Current........................................... $ 4,800 $720 $ --
Deferred.......................................... (10,600) -- --
-------- ---- ----
Total income tax (benefit) expense................ $ (5,800) $720 $ --
======== ==== ====
</TABLE>
The provision for income taxes on income differs from expected tax expense
(benefit) computed by applying the federal corporate rate as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -----
<S> <C> <C> <C>
Taxes computed at statutory rate.............. $ 7,200 $ 3,648 $(517)
Utilization of net operating loss
carryforward................................ (3,274) (3,809) --
Current benefit of deferred tax asset......... (10,600) -- --
Other......................................... 874 881 517
-------- ------- -----
Total tax (benefit) provision................. $ (5,800) $ 720 $ --
======== ======= =====
</TABLE>
F-10
<PAGE> 24
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The 1995 deferred tax benefit results from temporary differences in the
recognition of certain items of revenue and expense for tax and financial
reporting purposes. The source of these differences and tax effect of each were
as follows:
<TABLE>
<S> <C>
Differences in tax and book inventory............................... $ (250)
Utilization of NOL carryforward..................................... (3,743)
Change in employee compensation..................................... (149)
Change in other accrued liabilities................................. (136)
Change in retirement costs.......................................... 488
ITC and AMT credit carryforwards.................................... (343)
Difference in tax and book asset bases.............................. 658
Change in valuation allowance for deferred tax asset................ 14,075
-------
Deferred tax benefit................................................ $10,600
=======
</TABLE>
4. DEBT AND CREDIT ARRANGEMENTS
<TABLE>
<CAPTION>
INTEREST
1995 1994 RATE(S)
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Credit Agreement:
Rollover Term Loan................................ $ 41,912 $ 44,503 13.1%
Revolver Loan..................................... -- -- 10.25% Variable
Deferred Financing Fee.............................. 7,673 6,818 9.75% Variable
9.5% Senior Notes due 2001, net of discount......... 114,419 114,320 9.5%
Other notes payable................................. 4,496 1,391 3% & 7.75%
-------- --------
168,500 167,032
Less Current Portion................................ 6,390 90
-------- --------
$162,110 $166,942
======== ========
Market value of total debt.......................... $170,093 $164,281
======== ========
</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 (of
which two have been extinguished as of July 31, 1993): (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 expires 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, 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
of approximately $1,574,000 beginning October 31, 1995. Future installments vary
by year 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 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
F-11
<PAGE> 25
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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), which resulted in a prepayment of approximately $2,606,000 during
fiscal 1995.
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, 1995 there were no borrowings under the revolver loan
and approximately $61.7 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 defined) 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 are 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, 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.
At July 31, 1995, $114,419,000 (net of unamortized discount of $581,000) 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 1995
are; 1996, $6,390,000; 1997, $8,181,000; 1998, $8,146,000; 1999, $29,174,000;
2000, $669,000 and thereafter of $115,940,000.
The Company estimated the market value of its total debt by utilizing a
discounted cash flow methodology.
F-12
<PAGE> 26
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. SUPPLEMENTAL BALANCE SHEET DATA
The following balance sheet information is provided as of July 31,:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
INVENTORIES:
Raw materials and supplies........................................... $ 21,907 $ 19,330
Semi-finished products............................................... 33,839 25,633
Finished products.................................................... 34,831 39,719
-------- --------
$ 90,577 $ 84,682
======== ========
PLANT AND EQUIPMENT:
Land................................................................. $ 5,651 $ 5,559
Buildings............................................................ 31,833 29,511
Machinery and equipment.............................................. 318,627 296,734
Construction in progress............................................. 14,918 3,652
-------- --------
Total........................................................... 371,029 335,456
Less accumulated depreciation........................................ 141,321 118,278
-------- --------
Net plant and equipment......................................... $229,708 $217,178
======== ========
ACCRUED EXPENSES:
Salaries and wages................................................... $ 12,609 $ 11,291
Pensions............................................................. (6,229) (6,385)
Postretirement welfare benefits...................................... 5,000 5,000
Other employment costs............................................... 7,738 7,667
Accrued interest..................................................... 1,510 1,530
Taxes other than income.............................................. 2,214 2,393
Insurance and other.................................................. 968 1,384
-------- --------
$ 23,810 $ 22,880
======== ========
DEFERRED EMPLOYEE BENEFIT OBLIGATIONS:
Postretirement welfare benefits...................................... $ 61,269 $ 60,469
Supplemental unemployment benefits................................... 1,060 1,058
Deferred minimum pension liability................................... 9,693 14,572
Workers' compensation................................................ 3,000 3,000
Other benefit plan................................................... 20 147
-------- --------
$ 75,042 $ 79,246
======== ========
</TABLE>
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.
F-13
<PAGE> 27
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum rental payments required for the noncancelable lease
term of the operating leases as of July 31, 1995, were as follows:
Fiscal year ending July 31:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996............................................................ $1,861
1997............................................................ 1,454
1998............................................................ 827
1999............................................................ 80
2000............................................................ 10
Remaining years................................................. 20
------
Total minimum future lease payments........................ $4,252
======
</TABLE>
Rental expense under operating leases for the years ended July 31, 1995,
1994 and 1993 was approximately $2,364,000; $4,300,000; and $4,603,000,
respectively.
7. STOCKHOLDERS' EQUITY
The Company's authorized shares are as follows:
<TABLE>
<S> <C>
Common Stock...................................................... 75,000,000
Preferred Stock................................................... 1,000,000
</TABLE>
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.
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 704,000 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 remain
outstanding under the Management Stock Option Plan. At July 31, 1995, 576,000
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, 1995, certain salaried and hourly employees purchased
153,665 shares of Common Stock pursuant to the Employee Stock Purchase and
Option Plan at an exercise price of $4.00 per share. Options to
F-14
<PAGE> 28
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
purchase 45,226 shares of Common Stock at an exercise price of $4.00 per share
remain outstanding under the Employee Stock Purchase and Option Plan which
generally expire on the earlier of August 12, 2002 or one year from the date of
the employee's termination.
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 and 125,000 shares of Common Stock at an
exercise price of $6.00 per share are outstanding at July 31, 1995.
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.
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 also 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 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 a management fee of $75,000 to certain former Class B
Stockholders for the fiscal year ended July 31, 1993. No such fees were incurred
in fiscal 1995 and 1994.
8. COMMITMENTS AND CONTINGENCIES
At July 31, 1995, the Company has commitments for capital expenditures of
approximately $27,200,000. The major expenditures committed to include
approximately $10,000,000 for new concrete reinforcing mesh production equipment
and approximately $15,000,000 for improvements to the Company's Sterling,
Illinois facility. The improvements to the Sterling facility include a second
ladle metallurgical station, a state-of-the-art high voltage transformer and raw
material handling equipment.
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.
F-15
<PAGE> 29
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A wrongful death action against the Company was settled during fiscal 1995
and the Company's insurance carriers covered the losses. A separate wrongful
death action was filed against the Company during 1995. The Company has not
provided an accrual for this potential loss as the outcome of the action filed
in 1995 cannot be predicted at this time. The Company believes that losses
arising from the complaint, if any, also will be covered by the Company's
insurance carriers.
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.
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 1996.
However, 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, 1995 and 1994:
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------- TOTAL FOR
OCTOBER 31 JANUARY 31 APRIL 30 JULY 31 THE YEAR
---------- ---------- -------- -------- ---------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1995
Net sales............................ $153,546 $145,818 $166,594 $172,462 $ 638,420
Gross profit(1)...................... 19,196 16,943 18,432 20,524 75,095
Net income(2)........................ 4,261 2,215 3,428 17,074 26,978
Net income per share(2).............. .17 .09 .14 .67 1.07
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
</TABLE>
- -------------------------
Notes:
(1) Gross profit is defined here as net sales less cost of goods sold excluding
depreciation.
(2) For the quarter ended July 31, 1995, net income includes a $10.6 million tax
benefit associated with the recognition of certain deferred tax assets
which are now more likely than not to be realized.
F-16
<PAGE> 30
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 schedule listed in the index included in Item 14
of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
September 18, 1995
F-17
<PAGE> 31
SCHEDULE VIII
NORTHWESTERN STEEL AND WIRE COMPANY
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
FOR THE YEAR ENDED JULY 31, 1995.............. $1,000 $ 57 $ (57) $1,000
====== ==== ===== ======
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
====== ==== ===== ======
Inventory valuation allowance:
FOR THE YEAR ENDED JULY 31, 1995.............. $ 690 $ -- $ (356) $ 334
====== ==== ===== ======
FOR THE YEAR ENDED JULY 31, 1994.............. $ 809 $ -- $ (119) $ 690
====== ==== ===== ======
FOR THE YEAR ENDED JULY 31, 1993.............. $ 665 $144 $ -- $ 809
====== ==== ===== ======
</TABLE>
F-18
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Report of Independent Accountants................................................. F-1
Consolidated Balance Sheets as of July 31, 1995 and 1994.......................... F-2
Consolidated Statements of Stockholders' Equity for the years July 31, 1995, 1994
and 1993.......................................................................... F-3
Consolidated Statements of Operations for the years ended July 31, 1995, 1994 and
1993.............................................................................. F-4
Consolidated Statements of Cash Flows for the years ended July 31, 1995, 1994 and
1993.............................................................................. F-5
Notes to Financial Statements..................................................... F-6
2. Financial Statements Schedules:
Quarterly Sales and Earnings Data (Unaudited)..................................... F-16
Report of Independent Accountants................................................. F-17
Schedule VIII -- Valuation and Qualifying Accounts for the years ended July 31,
1995, 1994 and 1993............................................................... F-18
3. (a) See Index to Exhibits on pages 14 through 19.
(b) Exhibit 11.1 Computation of Income (Loss) Per Share
(c) Exhibit 24. Consent of Independent Accountants
(d) No reports on Form 8-K were filed during the last fiscal quarter of the period
covered by this report.
</TABLE>
F-19
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ ROBERT N. GURNITZ
----------------------------------------
Robert N. Gurnitz
Chairman of the Board,
President and Chief Executive Officer
Date: October 26, 1995
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------ ------------------------------------ -----------------
<C> <S> <C>
/s/ ROBERT N. GURNITZ Chairman of the Board, President, October 26, 1995
- ------------------------------------ Chief Executive Officer, Principal
Robert N. Gurnitz Executive Officer and Director
/s/ EDWARD G. MARIS Senior Vice President, Chief October 26, 1995
- ------------------------------------ Financial Officer, Secretary and
Edward G. Maris Treasurer, Principal Financial and
Accounting Officer
/s/ WILLIAM F. ANDREWS Director October 26, 1995
- ------------------------------------
William F. Andrews
/s/ WARNER C. FRAZIER Director October 26, 1995
- ------------------------------------
Warner C. Frazier
/s/ DARIUS W. GASKINS, JR. Director October 26, 1995
- ------------------------------------
Darius W. Gaskins, Jr.
/s/ JAMES A. KOHLBERG Director October 26, 1995
- ------------------------------------
James A. Kohlberg
/s/ CHRISTOPHER LACOVARA Director October 26, 1995
- ------------------------------------
Christopher Lacovara
/s/ ALBERT G. PASTINO Director October 26, 1995
- ------------------------------------
Albert G. Pastino
/s/ GEORGE W. PECK, IV Director October 26, 1995
- ------------------------------------
George W. Peck, IV
/s/ RICHARD F. WILLIAMS Director October 26, 1995
- ------------------------------------
Richard F. Williams
</TABLE>
F-20
<PAGE> 34
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED BY REFERENCE
NUMBER DESCRIPTION TO OTHER DOCUMENT
- ------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
2.1 Stock Purchase Agreement dated as of July
27, 1992 between the Company and KNSW.... Current Report on Form 8-K dated July 27,
1992, File No. 1-4288, Exhibit 2.1
2.2 Management Subscription Agreement dated
as of July 27, 1992 between the Company
and the management investors named
therein (the "Management Investors")..... Current Report on Form 8-K dated August
12, 1992, File No. 1-4288, Exhibit 2.3
3.1 Second Amended and Restated Articles of
Incorporation of the Company dated as of
August 12, 1992.......................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 3.1
3.2 Amended and Restated By-Laws of the
Company.................................. Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 3.2
4.1 Articles Four through Eight and Eleven of
the Second Amended and Restated Articles
of Incorporation of the Company dated as
of August 12, 1992....................... See Exhibit 3.1 above
4.2 Articles II, VII, IX and XIII of the
Amended and Restated By-Laws of the
Company.................................. See Exhibit 3.2 above
4.3 Management Subscription Agreement dated
as of July 27, 1992 between the Company
and Management Investors................. See Exhibit 2.2 above
4.4 Fourth Amendment dated as of March 2,
1994 to the Amended and Restated Credit
Agreement................................ Quarterly Report on Form 10-Q for the
quarterly period ended April 30, 1994.
File No. 1-4288, Exhibit 4.1
4.5 Seventh Amendment dated as of March 31,
1995 to the Amended and Restated Credit
Agreement................................ Annual Report of Form 10-K for the fiscal
year ended July 31, 1995, File No. 1-4288
4.6 Eighth Amendment dated as of June 2, 1995
to the Amended and Restated Credit
Agreement................................ Annual Report of Form 10-K for the fiscal
year ended July 31, 1995, File No. 1-4288
4.7 Ninth Amendment dated as of June 21, 1995
to the Amended and Restated Credit
Agreement................................ Annual Report of Form 10-K for the fiscal
year ended July 31, 1995, File No. 1-4288
</TABLE>
14
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED BY REFERENCE
NUMBER DESCRIPTION TO OTHER DOCUMENT
- ------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
4.8 Amended and Restated Credit Agreement
dated as of August 16, 1988, as 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").............................. Current Report on Form 8-K dated August
12, 1992, File No. 1-4288, Exhibit 2.4
4.9 Revolving Credit Note dated June 22, 1989
from the Company and H/N Steel Company,
Inc. to Chemical Bank as agent under the
Amended and Restated Credit Agreement.... Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.1
4.10 Rollover Term Note dated June 22, 1989
from the Company and H/N Steel Company,
Inc. to Chemical Bank as agent under the
Amended and Restated Credit Agreement.... Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.2
4.11 Form of Revolving Credit Notes dated June
22, 1989 as amended as of July 27, 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......................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 4.11
4.12 Form of Rollover Term Notes dated June
22, 1989 as amended as of July 27, 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.... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 4.12
4.13 Mortgage, Security Agreement and
Assignment of Rents dated as of August
16, 1988 from the Company to Chemical
Bank as collateral agent................. Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.5
</TABLE>
15
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED BY REFERENCE
NUMBER DESCRIPTION TO OTHER DOCUMENT
- ------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
4.14 Agreement of Modification of Mortgage,
Security Agreement and Assignment of
Rents dated as of June 21, 1989 between
the Company and Chemical Bank as
collateral agent......................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.6
4.15 Deed of Trust, Security Agreement and
Assignment of Leases and Rents dated 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......................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.7
4.16 Amended and Restated Security Agreement
dated as of August 16, 1989 among the
Company, H/N Steel Company, Inc. and
Chemical Bank as collateral agent........ Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.8
4.17 Second Amendment dated as of August 12,
1992 to Mortgage, Security 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......................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 4.19
4.18 Amendment dated as of August 12, 1992 to
Deed of Trust, Security Agreement 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.................................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 4.20
4.19 Collateral Assignment of and Ratification
of Security Interest in 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................. Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 4.21
</TABLE>
16
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED BY REFERENCE
NUMBER DESCRIPTION TO OTHER DOCUMENT
- ------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
4.20 Pledge Agreement dated as of June 21,
1989 between the Company and Chemical
Bank as collateral agent................. Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.9
4.21 Amended and Restated Lockbox Agreement
dated as of June 21, 1989 between 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.................................. Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.10
4.22 Collateral Assignment dated as of June
21, 1989 between H/N Steel Company and
Chemical Bank as collateral agent........ Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 19.11
4.23 Guarantee Agreement dated as of September
25, 1990 between Northwestern Steel and
Wire Company, a Delaware corporation, and
the lenders named in the Amended and
Restated Credit Agreement................ Annual Report on Form 10-K for the fiscal
year ended July 31, 1990, File No.
1-4288, Exhibit 4.24
4.24 Second Amendment to Amended and Restated
Credit Agreement dated as of April 15,
1993..................................... Registration Statement No. 33-60716,
Exhibit 4.37
4.25 Form of Indenture dated as of 1993,
between the Company and Continental Bank,
National Association, as Trustee
(including form of Senior Note).......... Registration Statement No. 33-60766,
Exhibit 4.38
4.26 Northwestern Steel and Wire Company
Employee Stock Ownership Plan............ Rule 13e-3 Transaction Statement, File
No. 5-10871, Exhibit 17(c)(vii)
4.27 Amendment No. 1 to ESOP dated
March 29, 1990........................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 19.1
4.28 Amendment No. 2 to ESOP effective as of
August 1, 1990........................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 19.2
</TABLE>
17
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED BY REFERENCE
NUMBER DESCRIPTION TO OTHER DOCUMENT
- ------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
4.29 Amendment No. 3 to ESOP effective as of
January 1, 1992.......................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 19.3
4.30 Amendment No. 4 to the ESOP effective as
of August 12, 1992....................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 4.27
4.31 Amendment No. 5 to the ESOP effective
April 29, 1995........................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1995, File No. 1-4288
4.32 Amendment No. 6 to the ESOP effective
July 26, 1995............................ Annual Report on Form 10-K for the fiscal
year ended July 31, 1995, File No. 1-4288
10.1 Employment Agreement between Robert N.
Gurnitz and the Company dated as of
November 29, 1990........................ Annual Report on Form 10-K for the fiscal
year ended July 31, 1991, File No.
1-4288, Exhibit 10.1
10.2 Employment Agreement between John C.
Meyer and the Company effective
February 10, 1992........................ Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 10.2
10.3 Form of Indemnification Agreements dated
April, 1992 between the Company and its
directors................................ Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 10.16
10.4 Form of Indemnification Agreements dated
May 29, 1992 between the Company and
members of the Administrative Committee
of the ESOP.............................. Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 10.17
10.5 Form of Amendments of Indemnification
Agreements dated as of July 23, 1992
between the Company and members of the
Administrative Committee of the ESOP..... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 10.18
10.6 Form of Deferred Compensation
Agreement................................ Annual Report on Form 10-K for the fiscal
year ended July 31, 1989, File No.
1-4288, Exhibit 10.5
</TABLE>
18
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED BY REFERENCE
NUMBER DESCRIPTION TO OTHER DOCUMENT
- ------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
10.7 Northwestern Steel and Wire Company
Management Stock Option Plan effective
August 12, 1992.......................... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 10.20
10.8 Form of Management Stock Option Agreement
dated as of August 12, 1992.............. Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 10.21
10.9 Fee Agreement dated as of August 12, 1992
between the Company and Kohlberg......... Annual Report on Form 10-K for the fiscal
year ended July 31, 1992, File No.
1-4288, Exhibit 10.22
10.11 1994 Long Term Incentive Plan............ Registration Statement on Form S-8 and
Form S-3, No. 33-53471, Exhibit 4(d)
10.12 1994 Director Stock Option Plan.......... Registration Statement on Form S-8 and
Form S-3, No. 33-53471, Exhibit 4(e)
11.1 Computation of Income (Loss) per share
22.1 The Company has three subsidiaries:
Northwestern Steel and Wire Company
(formerly H/N Steel Company, Inc.), a
Texas corporation, Northwestern Steel and
Wire Company, a Delaware corporation, and
Northwestern Steel and Wire Company --
Kentucky, a Delaware corporation.........
24 Consent of Coopers & Lybrand.............
</TABLE>
19
<PAGE> 1
EXHIBIT 4.5
SEVENTH AMENDMENT dated as of March 31,
1995, to the Credit Agreement dated as of August 16,
1988, as amended and restated as of July 27, 1992,
and as further amended prior to the date hereof (the
"Credit Agreement"), among Northwestern Steel and
Wire Company, an Illinois corporation ("NWS"),
Northwestern Steel and Wire Company (formerly known
as H/N Steel Company, Inc.), a wholly-owned
subsidiary of NWS ("NWS/Texas" and, together with
NWS, the "Borrowers"), the lenders party thereto (the
"Lenders") and Chemical Bank, as Agent for the
Lenders (the "Agent").
The Borrowers have requested, subject to the terms and
conditions set forth herein, that the Lenders approve the amendments to the
Credit Agreement set forth in Section 1 of this Agreement in order to permit
NWS to establish a subsidiary that will construct, own and operate a wire mesh
plant in the State of Kentucky. Accordingly, the Borrowers, the undersigned
Lenders and the Agent agree as follows:
SECTION 1. Amendments. (a) Article I of the Credit
Agreement is hereby amended by inserting the following definitions in their
appropriate alphabetical positions:
"Kentucky Plant" shall mean the wire mesh plant
located in the State of Kentucky to be constructed, owned and
operated by the Kentucky Subsidiary.
"Kentucky Subsidiary" shall mean a wholly-owned
subsidiary of NWS to be established for the purpose of
constructing, owning and operating the Kentucky Plant.
(b) The definition of "Excess Cash Flow" in Article I of
the Credit Agreement is hereby amended by inserting at the end of clause (iii)
thereof the phrase "or any Indebtedness of the Kentucky Subsidiary to either
Borrower".
(c) Clause (e) of Section 5.05 of the Credit Agreement is
hereby amended by (i) deleting the words "within three Business Days after the
end of each week and" at the beginning of such clause, and (ii) deleting the
proviso to such clause that was added thereto pursuant to the Fifth Amendment
dated as of June 7, 1994, to the Credit Agreement.
(d) Section 6.01 of the Credit Agreement is hereby
amended by inserting in clause (g) thereof, after the reference to
"NWS/Delaware", the words "or the Kentucky Subsidiary".
(e) Section 6.06 of the Credit Agreement is hereby
amended by inserting in clause (v) thereof, after the reference to "NWS/Texas",
the words "or the Kentucky Subsidiary".
(f) Section 6.16 of the Credit Agreement is hereby
amended by (i) inserting at the end of the first parenthetical clause therein
the phrase "and (c) the Kentucky Subsidiary" and (ii) inserting the following
proviso at the end of the existing proviso to such Section:
<PAGE> 2
; and provided further that (1) the sole business activity of the
Kentucky Subsidiary shall be the acquisition, construction, ownership
and operation of the assets comprising the Kentucky Plant and (2) the
Kentucky Subsidiary shall not incur any Indebtedness other than
Indebtedness owed to NWS or NWS/Texas and Indebtedness consisting of a
Guarantee of the Obligations.
SECTION 2. Certain Agreements Regarding Kentucky Subsidiary.
The Borrowers agree that (a) promptly following creation of the Kentucky
Subsidiary (i) NWS will pledge, pursuant to the Pledge Agreement, all the
outstanding shares of capital stock of the Kentucky Subsidiary, (ii) the
Kentucky Subsidiary will Guarantee the Obligations pursuant to a guarantee
agreement satisfactory in form and substance to the Agent and (iii) the
Kentucky Subsidiary will become a party to the Security Agreement pursuant to
an amendment or supplement thereto satisfactory in form and substance to the
Collateral Agent, and shall take such action as shall be necessary, or as the
Collateral Agent shall reasonably request, to perfect the liens and security
interests granted thereunder, (b) any loans made by NWS or NWS/Texas to the
Kentucky Subsidiary will be evidenced by promissory notes pledged pursuant to
the Pledge Agreement and (c) the Borrowers will not permit the Kentucky
Subsidiary to enter into any agreement or become subject to any other
restriction that would impair the ability of the Kentucky Subsidiary to
mortgage the Kentucky Plant to secure the obligations, if requested to do so by
the Required Lenders following completion of the Kentucky Plant.
SECTION 3. Representations and Warranties. The Borrowers
jointly and severally represent and warrant to each of the Lenders that, after
giving effect to this Agreement:
(a) as of the date hereof, there exists no Event of
Default or event which, with notice, lapse of time or both, would constitute an
Event of Default;
(b) all representations and warranties contained in the
Credit Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof except to the extent such
representations and warranties specifically relate to an earlier date, in which
case they were true and correct in all material respects on and as of such
earlier date; and
(c) as of the date hereof, the Borrowers have performed
all obligations to be performed on their part as set forth in the Credit
Agreement and the other Loan Documents.
SECTION 4. Conditions of Effectiveness. This Agreement shall
become effective upon receipt by the Agent (or its counsel) of counterparts of
this Agreement which, when taken together, bear the signatures of each Borrower
and the Required Lenders.
SECTION 5. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
-2-
<PAGE> 3
SECTION 6. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all
of which when taken together shall constitute but one instrument.
SECTION 7. Agreement. Except as expressly amended hereby,
the Credit Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof.
SECTION 8. Expenses. The Borrowers shall pay all reasonable
out-of-pocket expenses incurred by the Agent or any Lender in connection with
this Agreement.
SECTION 9. Headings. The headings of this Agreement are for
the purposes of reference only and shall not limit or otherwise affect the
meaning hereof.
SECTION 10. Capitalized Terms. Unless otherwise specified,
capitalized terms used herein shall have the respective meanings assigned
thereto in the Credit Agreement.
IN WITNESS WHEREOF, the Borrowers, the Agent and the
undersigned Lenders have caused this Agreement to be duly executed by their
duly authorized officers, all as of the date first above written.
NORTHWESTERN STEEL AND WIRE COMPANY,
an Illinois corporation,
by _____________________________________
Name:
Title:
NORTHWESTERN STEEL AND WIRE COMPANY,
a Texas corporation,
by ______________________________________
Name:
Title:
CHEMICAL BANK, in its capacity as a
Lender and as Agent,
by ____________________________________
Name:
Title:
-3-
<PAGE> 4
MARINE MIDLAND BUSINESS LOANS, INC.,
by ___________________________________
Name:
Title:
WELLS FARGO BANK, N.A.,
by ___________________________________
Name:
Title:
THE TRAVELERS INSURANCE COMPANY,
by __________________________________
Name:
Title:
THE TRAVELERS INDEMNITY COMPANY,
by __________________________________
Name:
Title:
THE PHOENIX INSURANCE COMPANY,
by __________________________________
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
(AS TO SEPARATE ACCOUNT D),
by __________________________________
Name:
Title:
-4-
<PAGE> 5
HELLER FINANCIAL, INC.,
by ___________________________________
Name:
Title:
-5-
<PAGE> 1
EXHIBIT 4.6
EIGHTH AMENDMENT dated as of June 2,
1995, to the Credit Agreement dated as of
August 16, 1988, as amended and restated
as of July 27, 1992, and as further
amended prior to the date hereof (the
"Credit Agreement"), among Northwestern
Steel and Wire Company, an Illinois
corporation ("NWS"), Northwestern Steel
and Wire Company (formerly known as H/N
Steel Company, Inc.), a wholly-owned
subsidiary of NWS ("NWS/Texas" and,
together with NWS, the "Borrowers"), the
lenders party thereto (the "Lenders") and
Chemical Bank, as Agent for the Lenders
(the "Agent").
The Borrowers have requested, subject to the terms
and conditions set forth herein, that the Lenders approve the amendments to the
Credit Agreement set forth in Section 1 of this Agreement in order to permit
NWS to issue the Impianti Notes and the Tamini Notes (as defined below) and to
obtain a Letter or Letters of Credit to support its obligations thereunder.
Accordingly, the Borrowers, the undersigned Lenders and the Agent agree as
follows:
SECTION 1. Amendments. (a) Article I of the Credit
Agreement is hereby amended by inserting the following definitions in the
appropriate alphabetical positions:
"Impianti Notes" shall mean unsecured
promissory notes of NWS in an aggregate principal
amount not exceeding 2,719,294,500.00 Italian Lire
and issued by NWS to Impianti Industriali S.P.A. in
consideration of the acquisition of equipment and
machinery to be used by NWS in its business
operations.
"Tamini Notes" shall mean unsecured
promissory notes of NWS in an aggregate principal
amount not to exceed $1,462,951 and issued by NWS to
Tamini Costruzioni Elettromeccaniche S.r.l. in
consideration of the acquisition of equipment and
machinery to be used by NWS in its business
operations.
(b) Clause (a)(ii)(A) of Section 2.17 of the Credit
Agreement is hereby amended to read as follows:
(A) the Letter of Credit Exposure shall not exceed
$15,000,000, and
(c) Section 6.01 of the Credit Agreement is
hereby amended by (i) deleting the word "and" at the end of clause (j) thereof,
(ii) replacing the period at the end of clause (k) thereof with "; and", (iii)
inserting the following new clause (1) at the
<PAGE> 2
end thereof: "(1) Indebtedness of NWS represented by the Impianti Notes and the
Tamini Notes;".
SECTION 2. Representations and Warranties. The
Borrowers jointly and severally represent and warrant to each of the
Lenders that, after giving effect to this Agreement:
(a) as of the date hereof, there exists no Event of
Default or event which, with notice, lapse of time or both, would constitute an
Event of Default;
(b) all representations and warranties contained in
the Credit Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof except to the extent such
representations and warranties specifically relate to an earlier date, in which
case they were true and correct in all material respects on and as of such
earlier date; and
(c) as of the date hereof, the Borrowers have
performed all obligations to be performed on their part as set forth in the
Credit Agreement and the other Loan Documents.
SECTION 3. Conditions of Effectiveness. This
Agreement shall become effective upon receipt by the Agent (or its counsel)
of counterparts of this Agreement which, when taken together, bear the
signatures of each Borrower and the Required Lenders.
SECTION 4. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 5. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute but one
instrument.
SECTION 6. Agreement. Except as expressly amended
hereby, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof on the date hereof.
SECTION 7. Expenses. The Borrowers shall pay all
reasonable out-of-pocket expenses incurred by the Agent or any Lender in
connection with this Agreement.
SECTION 8. Headings. The headings of this Agreement
are for the purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
SECTION 9. Capitalized Terms. Unless otherwise
specified, capitalized terms used herein shall have the respective
meanings assigned thereto in the credit Agreement.
<PAGE> 3
IN WITNESS WHEREOF, the Borrowers, the Agent and the undersigned
Lenders have caused this Agreement to be duly executed by their duly authorized
officers, all as of the date first above written.
NORTHWESTERN STEEL AND WIRE
COMPANY, an Illinois
corporation,
by __________________________________
Name:
Title:
NORTHWESTERN STEEL AND WIRE
COMPANY, a Texas corporation,
by __________________________________
Name:
Title:
CHEMICAL BANK, in its capacity
as a Lender and as Agent,
by __________________________________
Name:
Title:
MARINE MIDLAND BUSINESS LOANS,
INC.,
by __________________________________
Name:
Title:
WELLS FARGO BANK, N.A.,
by __________________________________
Name:
Title:
<PAGE> 4
MITSUI NEVITT CAPITAL CORP.,
by __________________________________
Name:
Title:
THE TRAVELERS INSURANCE
COMPANY,
by __________________________________
Name:
Title:
CHEMICAL BANK, in its capacity
as a Lender and as Agent,
by __________________________________
Name:
Title:
MARINE MIDLAND BUSINESS LOANS,
INC.,
by __________________________________
Name:
Title:
WELLS FARGO BANK, N.A.,
by __________________________________
Name:
Title:
MITSUI NEVITT CAPITAL CORP.,
by __________________________________
Name:
Title:
<PAGE> 5
THE TRAVELERS INSURANCE
COMPANY,
by __________________________________
Name:
Title:
CHEMICAL BANK, in its capacity
as a Lender and as Agent,
by __________________________________
Name:
Title:
MARINE MIDLAND BUSINESS LOANS,
INC.,
by __________________________________
Name:
Title:
WELLS FARGO BANK, N.A.,
by __________________________________
Name:
Title:
MITSUI NEVITT CAPITAL CORP.,
by __________________________________
Name:
Title:
THE TRAVELERS INSURANCE
COMPANY,
by __________________________________
Name:
Title:
<PAGE> 6
CHEMICAL BANK, in its capacity
as a Lender and as Agent,
by __________________________________
Name:
Title:
MARINE MIDLAND BUSINESS LOANS,
INC.,
by __________________________________
Name:
Title:
WELLS FARGO BANK, N.A.,
by __________________________________
Name:
Title:
MITSUI NEVITT CAPITAL CORP.,
by __________________________________
Name:
Title:
THE TRAVELERS INSURANCE
COMPANY,
by __________________________________
Name:
Title:
CHEMICAL BANK, in its capacity
as a Lender and as Agent,
by __________________________________
Name:
Title:
<PAGE> 7
MARINE MIDLAND BUSINESS LOANS,
INC.,
by __________________________________
Name:
Title:
WELLS FARGO BANK, N.A.,
by __________________________________
Name:
Title:
MITSUI NEVITT CAPITAL CORP.,
by __________________________________
Name:
Title:
THE TRAVELERS INSURANCE
COMPANY,
by __________________________________
Name:
Title:
THE TRAVELERS INDEMNITY
COMPANY,
by __________________________________
Name:
Title:
THE PHOENIX INSURANCE COMPANY,
by __________________________________
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
(AS TO SEPARATE ACCOUNT D),
<PAGE> 8
by __________________________________
Name:
Title:
HELLER FINANCIAL, INC.,
by __________________________________
Name:
Title:
THE TRAVELERS INDEMNITY
COMPANY,
by __________________________________
Name:
Title:
THE PHOENIX INSURANCE COMPANY,
by __________________________________
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
(AS TO SEPARATE ACCOUNT D),
by __________________________________
Name:
Title:
HELLER FINANCIAL, INC.
by __________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.7
NINTH AMENDMENT dated as of June 21, 1995,
to the Credit Agreement dated as of August 16, 1988,
as amended and restated as of July 27, 1992, and as
further amended prior to the date hereof (the "Credit
Agreement"), among Northwestern Steel and Wire
Company, an Illinois corporation ("NWS"),
Northwestern Steel and Wire Company (formerly known
as H/N Steel Company, Inc.), a wholly-owned
subsidiary of NWS ("NWS/Texas" and, together with
NWS, the "Borrowers"), the lenders party thereto (the
"Lenders") and Chemical Bank, as Agent for the
Lenders (the "Agent").
The Borrowers have requested, subject to the terms and
conditions set forth herein, that the Lenders approve the amendments to the
Credit Agreement set forth in Section 1 of this Agreement in order to permit
NWS to obtain a Letter or Letters of Credit denominated in currencies other
than U.S. dollars. Accordingly, the Borrowers, the undersigned Lenders and the
Agent agree as follows:
SECTION 1. Amendments. (a) Article I of the Credit Agreement
is hereby amended by inserting the following definitions in the appropriate
alphabetical positions:
"Alternate Currency" shall mean Italian Lire or any other
currency (other than U.S. dollars) approved in writing by the Issuing
Bank and the Required Lenders as an "Alternate Currency" hereunder.
"Alternate Currency Letter of Credit" shall mean a Letter of
Credit that provides for payments of drawings thereunder in an
Alternate Currency.
"Dollar Equivalent" shall mean, on or as of any particular
date with respect to an amount in an Alternate Currency, the amount in
U.S. dollars, as conclusively determined by the Agent, which is
required for the Agent to purchase such Alternate Currency amount on
or as of such date on the basis of the spot exchange rate therefor in
the interbank currency market where the foreign currency and exchange
operations of the Agent are customarily conducted with respect to such
Alternate Currency.
(b) The last sentence of Section 2.17(b) of the Credit
Agreement is hereby amended by inserting at the end of such sentence the words
"or an Alternate Currency".
(c) Section 2.17 of the Credit Agreement is hereby
amended by adding at the end of such Section the following:
(k) In the event that an Alternate Currency Letter of
Credit is issued, the following provisions shall apply:
<PAGE> 2
(i) Such Alternate Currency Letter of Credit shall
constitute a Letter of Credit for all purposes of
this Agreement and the other Loan Documents.
(ii) For purposes of determining the Letter of
Credit Exposure for any purpose other than expressly
provided below, the amount of such Letter of Credit
and of any unreimbursed Letter of Credit
Disbursements in respect thereof shall be, as of any
date of determination, the Dollar Equivalent of the
Alternate Currency amount thereof at such date.
(iii) For purposes of calculating fees payable under
Section 2.09(a) or 2.17(f), the amount of such Letter
of Credit and of any unreimbursed Letter of Credit
Disbursements in respect thereof shall be the Dollar
Equivalent of the Alternate Currency amount thereof
as of the first Business Day of each month (or the
date on which such Letter of Credit was issued or
such Letter of Credit Disbursement was made, if such
date is more recent than such first Business Day)
during the period for which such fees are being
calculated.
(iv) The obligation of the Borrowers to reimburse
Letter of Credit Disbursements under such Alternate
Currency Letter of Credit, and to pay fees in respect
thereof and interest or other amounts thereon, shall
be payable only in U.S. dollars and shall not be
discharged by paying an amount in an Alternate
Currency. The obligation of the Borrowers to
reimburse any such Letter of Credit Disbursement
shall be in an amount of U.S. dollars equal to the
Dollar Equivalent of the Alternate Currency amount
thereof determined as of the date on which such
Letter of Credit Disbursement is made, and any
interest on the unreimbursed amount thereof shall
accrue on the unreimbursed portion of such Dollar
Equivalent amount.
(v) The obligation of each Lender with a Revolving
Credit Commitment to pay its Applicable Percentage of
any unreimbursed Letter of Credit Disbursement under
such Alternate Currency Letter of Credit shall be
payable only in U.S. dollars and shall be in an
amount equal to such Applicable Percentage of the
Dollar Equivalent amount of such unreimbursed Letter
of Credit Disbursement determined as provided in
clause (iv) above. Under no circumstances shall the
provisions hereof permitting the issuance of
Alternate Currency Letters of Credit be construed, by
implication or otherwise, as imposing any obligation
upon any Lender to make any Loan or other payment
under any Loan Document, or to accept any payment
from the Borrowers in respect of any Obligations, in
any currency other than U.S. dollars, it being
understood that the parties intend all Obligations to
be denominated and payable only in U.S. dollars.
-2-
<PAGE> 3
SECTION 2. Representations and Warranties. The Borrowers
jointly and severally represent and warrant to each of the Lenders that, after
giving effect to this Agreement:
(a) as of the date hereof, there exists no Event of Default or
event which, with notice, lapse of time or both, would constitute an Event of
Default;
(b) all representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date hereof except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true and correct in all material respects on and as of such earlier date; and
(c) as of the date hereof, the Borrowers have performed all
obligations to be performed on their part as set forth in the Credit Agreement
and the other Loan Documents.
SECTION 3. Conditions of Effectiveness. This Agreement shall become
effective upon receipt by the Agent (or its counsel) of counterparts of this
Agreement which, when taken together, bear the signatures of each Borrower
and the Required Lenders.
SECTION 4. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 5. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one instrument.
SECTION 6. Agreement. Except as expressly amended hereby, the Credit
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof.
SECTION 7. Expenses. The Borrowers shall pay all reasonable
out-of-pocket expenses incurred by the Agent or any Lender in connection
with this Agreement.
SECTION 8. Headings. The headings of this Agreement are for the
purposes of reference only and shall not limit or otherwise affect the
meaning hereof.
SECTION 9. Capitalized Terms. Unless otherwise specified,
capitalized terms used herein shall have the respective meanings assigned
thereto in the Credit Agreement.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Borrowers, the Agent and the undersigned
Lenders have caused this Agreement to be duly executed by their duly authorized
officers, all as of the date first above written.
NORTHWESTERN STEEL AND WIRE
COMPANY, an Illinois
corporation,
by __________________________________
Name:
Title:
NORTHWESTERN STEEL AND WIRE
COMPANY, a Texas corporation,
by __________________________________
Name:
Title:
CHEMICAL BANK, in its capacity
as a Lender and as Agent,
by __________________________________
Name:
Title:
MARINE MIDLAND BUSINESS LOANS,
INC.,
by __________________________________
Name:
Title:
-4-
<PAGE> 5
WELLS FARGO BANK, N.A.,
by __________________________________
Name: Kathleen J. Harrison
Title: Vice President
MITSUI NEVITT CAPITAL CORP.,
by __________________________________
Name:
Title:
THE TRAVELERS INSURANCE
COMPANY,
by __________________________________
Name:
Title:
THE TRAVELERS INDEMNITY
COMPANY,
by __________________________________
Name:
Title:
THE PHOENIX INSURANCE COMPANY,
by __________________________________
Name:
Title:
-5-
<PAGE> 6
THE TRAVELERS INSURANCE
COMPANY (AS TO SEPARATE
ACCOUNT D),
by __________________________________
Name:
Title:
HELLER FINANCIAL, INC.
by __________________________________
Name:
Title:
-6-
<PAGE> 1
EXHIBIT 4.31
AMENDMENT NO. 5 TO THE
NORTHWESTERN STEEL AND WIRE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
The Northwestern Steel and Wire Company Employee Stock Ownership Plan
(the "Plan") was adopted by Northwestern Steel and Wire Company (the "Company")
effective August 1, 1988, and was thereafter amended by Amendment No. 1,
Amendment No. 2, Amendment No. 3, and Amendment No. 4 thereto: The Plan is
hereby amended further, effective April 29, 1994, by amending and restating
Section 13(b) thereof to read in its entirety as follows:
(b) Upon application for a distribution by a Participant or
Beneficiary eligible for a distribution under Section 13(a),
(i) as soon as practicable thereafter, at the
Participant's election, either (A) fifty percent of the whole shares
of Company Stock allocated to the Stock Account of the Participant
plus 50% of the cash held in the Participant's Cash Account or (B)
100% of the whole shares of Company Stock allocated to the Stock
Account of the Participant's plus 100% of the cash held in the
Participant's Cash Account and cash representing the fair market value
of any fractional shares of Company Stock (determined as of the
preceding Anniversary Date in accordance with Section 9) allocated to
the Stock Account of the Participant shall be distributed in the form
of one lump sum payment;
(ii) on the first anniversary of the payment of a
distribution under Section 13(b)(i)(A), the remaining balance of the
Participant's Capital Accumulation (including any amounts allocated to
the Accounts of the Participant with respect to the Plan year in which
the Termination of Service occurred), if any, shall be distributed in
one lump sum payment consisting of whole shares of Company Stock
allocated to the Participant's Stock Account (and which were not
previously distributed) plus any remaining cash held in the
Participant's Cash Account and cash representing the fair market value
of any fractional shares of Company Stock (determined as of the
preceding Anniversary Date in accordance with Section 19) allocated to
the Stock Account of the Participant;
<PAGE> 2
ADOPTION OF AMENDMENT NO. 5
To record the adoption of Amendment No. 5 to the Plan, the undersigned
duly authorized officers of the Company have caused this document to be
executed as of the 29th day of April 1994.
ATTEST: NORTHWESTERN STEEL AND WIRE COMPANY
_________________________ By:________________________________
Chairman of the Board
President and Chief
Executive Officer
-2-
<PAGE> 1
EXHIBIT 4.32
SIXTH AMENDMENT
OF
NORTHWESTERN STEEL AND WIRE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Northwestern Steel and Wire Company, an Illinois corporation
(the "company"), maintains the Northwestern Steel and Wire Company Employee
Stock Ownership Plan (the "plan"); and
WHEREAS, the plan has been amended, and further amendment of the plan
now is considered desirable;
NOW, THEREFORE, by virtue of the power reserved to the company under
Section 23 of the plan, and in exercise of the authority delegated to the
undersigned officers of the company by resolution of its Board of Directors,
the plan hereby is amended in the following particulars:
1. Effective as of August 1, 1988, by substituting the following
for the first sentence of the definition of "Break in Service" set forth in
Section 2 of the plan:
"A consecutive twelve-month period beginning on the date a
Participant's employment with an Employer and the members of the
Controlled Group terminates, and each annual anniversary of such date,
during which a Participant has not earned 435 Hours of Service."
2. Effective as of August 1, 1994, by substituting the following
two sentences for the last sentence of the definition of "Compensation" set
forth in Section 2 of the plan:
"Effective for Plan Years ending prior to August 1, 1994, amounts in
excess of $200,000 (as adjusted as set forth in Section 401(a)(17) of
the Code) shall be disregarded. Effective for Plan Years beginning
on and
<PAGE> 2
after August 1, 1994, amounts in excess of $150,000 (as adjusted as
set forth in Section 401(a)(17) of the Code) shall be disregarded."
3. Effective August 1, 1995, by substituting the following for
the definition of "Employee" set forth in Section 2 of the plan:
"Employee . . . . . . . Any person who is employed by an Employer
on August 16, 1988, or thereafter,
excluding (i) any individual who, either
directly or through inheritance,
receives rights to shares of
common stock of the Company under the
Northwestern Steel and Wire Company Stock
Appreciation Rights Plan (adopted in 1988)
or the Northwestern Steel and Wire Company
Management Stock Option Plan (adopted in
1992); or (ii) any individual hired on a
temporary basis for a period not to exceed
four months; provided, however, that,
effective August 1, 1995, if a person
hired on a temporary basis completes 1,000
Hours of Service, such person shall be
considered an Employee."
4. Effective as of August 1, 1988, by substituting the following
for the definition of "Year of Service" set forth in Section 2 of the plan:
"Year of Service . . . A consecutive 12-month period of
employment with an Employer or any member
of the Controlled Group, beginning on an
Employee's date of hire and on each
subsequent anniversary of the Employee's
date of hire, in which the Employee earns
at least 870 Hours of Service."
5. Effective August 1, 1995, by adding the following sentence at
the end of Section 5(d)(3) of the plan:
"Notwithstanding any provision of the Plan to the contrary, the
Trustee shall vote the shares of Company Stock in the manner it
determines is necessary to fulfill its fiduciary duties under ERISA."
6. Effective as of August 1, 1989, by substituting the following
for Section 6(c)(i) of the plan:
"(i) Effective August 1, 1989, the total amount of Plan
Contributions allocated to the Accounts of a Participant in any
calendar year may not exceed the lesser of:
-2-
<PAGE> 3
(A) Twenty-five percent (25%) of his Compensation for
such calendar year; or
(B) $30,000 (or, if greater, one-fourth of the dollar
limitation in effect under Code Section 415(b)(1)(A)).
In the event these limitations would be exceeded with respect
to any Participant, allocations of Plan Contributions under
this Plan shall be reduced with respect to such Participant to
the extent necessary to ensure such limitations are not
exceeded."
7. Effective August 1, 1995, by adding the following new sentence
at the end of Section 9(a) of the plan:
"Notwithstanding any provision of the Plan to the contrary, the
Trustee shall vote the shares of Company Stock in the manner it
determines is necessary to fulfill its fiduciary duties under ERISA."
8. Effective as of January 1, 1993, by substituting the following
for Section 10(e) of the plan:
"(e) Tax -- The Administrative Committee shall provide the
recipient of a distribution with an explanation of the tax
consequences of such distribution to the extent required by Section
402(f) of the Code and shall comply with the applicable withholding
requirements of the Code (and the applicable withholding requirements
of any state's tax law) with respect to distributions from the Trust
(other than dividend distributions under Section 12(a)). If Sections
401(a)(11) and 417 of the Code do not apply to a distribution, such
distribution may commence less than 30 days after the notice required
under applicable law and regulations is given, provided that: (1) the
Administrative Committee clearly informs the recipient that the
recipient has a right, for a period of at least 30 days after
receiving the notice, to consider the decision of whether or not to
elect a distribution, and (2) the recipient, after receiving the
notice, affirmatively elects a distribution."
9. Effective as of January 1, 1993, by adding the following new
Section 13(c) to the plan immediately after Section 13(b) thereof:
"(c) Subject to rules established by the Administrative
Committee, if a payment under this Section 13 constitutes an 'eligible
rollover distribution' (as defined in Section 402(c)(4) of the Code),
then the Participant or other 'eligible distributee' (as defined in
applicable Treasury Regulations) may elect to have such distribution
paid directly to an 'eligible retirement plan' (as defined in Section
402(c)(8)(B) of the Code). Each election under this Section 13(c)
shall be made at
-3-
<PAGE> 4
such time and in such manner as the Administrative Committee shall
determine and shall be effective only in accordance with such rules as
shall be established from time to time by the Administrative
Committee."
10. Effective as of January 1, 1993, by adding the following new
Section 14(d) to the plan immediately after Section 14(c) thereof:
"(d) Subject to rules established by the Administrative
Committee, if a payment under this Section 14 constitutes an 'eligible
rollover distribution' (as defined in Section 402(c)(4) of the Code),
then the Participant or other 'eligible distributee' (as defined in
applicable Treasury Regulations) may elect to have such distribution
paid directly to an 'eligible retirement plan' (as defined in Section
402(c)(8)(B) of the Code). Each election under this Section 14(d)
shall be made at such time and in such manner as the Administrative
Committee shall determine and shall be effective only in accordance
with such rules as shall be established from time to time by the
Administrative Committee."
11. Effective as of August 1, 1989, by substituting the following
for Section 15(a) of the plan:
"(a) A Participant who terminates Service may elect to defer
the distribution of his Capital Accumulation under Section 13 or 14
after the date on which a Participant would otherwise be eligible for
distribution of his Capital Accumulation under Section 13 or 14."
12. Effective as of August 1, 1988, by adding the following
sentence at the end of Section 16(a) of the plan:
"As provided in Sections 13 and 14, a Participant has the
right to demand the distribution of his benefits in shares of Company
Stock."
13. Effective as of January 1, 1993, by deleting Section 16(c) of
the plan.
14. Effective as of August 1, 1994, by substituting the following
for Section 22(f)(1) of the plan:
"(1) "Top-Heavy Compensation" will mean the average
compensation of the Participant, determined using his five (5) highest
consecutive years of Compensation. For the purpose of the preceding
sentence, years beginning after the close of the last Plan Year in
which the Plan was a Top-Heavy Plan will be disregarded."
-4-
<PAGE> 5
15. Effective as of August 1, 1988, by substituting the following
for Section 22(f)(3) of the plan:
"(3) "Key Employee" means an individual (and the
Beneficiaries of such individual) who at any time during the
Determination Period had Compensation greater than 50% of the amount
in effect under Section 415(b)(1)(A) of the Code while an officer or
member of the Controlled Group, one of the ten Employees having
Compensation of more than the limitation in effect under Section
415(c)(1)(A) of the Code and owning (or considered as owning within
the meaning of Section 318 of the Code) the largest interest in the
Employer, a five percent (5%) owner of a member of the Controlled
Group, or a one percent (1%) owner of a member of the Controlled Group
having annual Compensation from the Employer of more than $150,000."
16. Effective as of January 1, 1995, by substituting the following
two sentences for the first and second sentences of Section 23 of the plan:
"Technical amendments of the Plan or amendments to comply with
the requirements of the Code or ERISA or to ensure the initial or
continued qualification of the Plan under the Code may be adopted by a
majority vote of the Company's Board of Directors or may be made by
instrument signed by any person or persons authorized by the Company's
Board of Directors to make technical amendments of the Plan. With the
concurrence of the majority of shares of Company Stock held in the
Trust (voting in accordance with Section 9 on such matter), amendments
that would result in substantive changes to the Plan may be adopted by
a majority vote of the Company's Board of Directors or may be made by
instrument signed by any person or persons authorized by the Company's
Board of Directors to make substantive amendments of the Plan, subject
to the terms of the Board's authorization."
17. Effective August 1, 1995, by substituting the following for
the last paragraph of Section 23 of the plan:
"In the event of any merger or consolidation of the Plan with,
or transfer of assets or liabilities of the Plan to any other plan,
each Participant's or Beneficiary's benefits under such other
planimmediately after such merger, consolidation or transfer (if such
other plan then
-5-
<PAGE> 6
terminated) shall at least equal the benefits to which such
Participant or Beneficiary would have been entitled under this Plan
immediately before such merger, consolidation or transfer (if this
Plan had then terminated)."
IN WITNESS WHEREOF, the undersigned duly authorized officers of the
company have caused the foregoing amendment to be executed this 26th day of
July, 1995.
NORTHWESTERN STEEL AND WIRE COMPANY,
an Illinois corporation
By ______________________________________
Its Chairman, President & CEO
_____________________________________
ATTEST:
___________________________________________
Its _______________________________________
-6-
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF INCOME (LOSS)
PER SHARE
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------------------
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Income (loss) before extraordinary credit and
cumulative effect of accounting change............. $ 26,978 $ 10,010 $ (1,522,000)
Extraordinary loss related to early retirement of
debt............................................... -- -- (6,395,000)
Cumulative effect of accounting change............... -- -- (39,778,000)
----------- ----------- ------------
Net income (loss).................................... $ 26,978 $ 10,010 $(47,695,000)
=========== =========== ============
Weighted average shares outstanding.................. 24,763,402 24,679,249 17,564,000
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
Net additional shares outstanding assuming dilutive
stock options exercised and proceeds used to
purchase treasury stock at average market price.... 388,813 506,140 71,143
----------- ----------- ------------
Shares outstanding for net income (loss) per share
calculation........................................ 25,152,215 25,185,389 18,170,143
=========== =========== ============
Income (loss) before extraordinary item and
cumulative effect of accounting change per share... $ 1.07 $ 0.40 $ (0.08)
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.......................... $ 1.07 $ 0.40 $ (2.62)
=========== =========== ============
</TABLE>
<PAGE> 1
EXHIBIT 24
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 18, 1995 on our audits of the
consolidated financial statements and financial statement schedule of
Northwestern Steel and Wire Company as of July 31, 1995 and 1994 and for the
years ended July 31, 1995, 1994 and 1993, which reports are included in this
annual report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
October 12, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<CASH> 14,275
<SECURITIES> 0
<RECEIVABLES> 59,878
<ALLOWANCES> 1,000
<INVENTORY> 90,577
<CURRENT-ASSETS> 186,045
<PP&E> 371,029
<DEPRECIATION> 141,321
<TOTAL-ASSETS> 421,408
<CURRENT-LIABILITIES> 96,641
<BONDS> 0
<COMMON> 123,609
0
0
<OTHER-SE> (40,738)
<TOTAL-LIABILITY-AND-EQUITY> 421,408
<SALES> 638,420
<TOTAL-REVENUES> 638,420
<CGS> 563,325
<TOTAL-COSTS> 597,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,540
<INCOME-PRETAX> 21,178
<INCOME-TAX> (5,800)
<INCOME-CONTINUING> 26,978
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,978
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
