SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended April 30, 1995
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to ___________
Commission file number 1-4288
NORTHWESTERN STEEL AND WIRE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 36-1562920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 Wallace Street, Sterling, Illinois 61081
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 815/625-2500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [ X ] No [ ]
Number of shares of common stock outstanding as of May 31, 1995:
Common Stock 24,374,690 shares
(includes 420,144 treasury shares)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share data)
<TABLE>
<CAPTION>
April 30, July 31,
1995 1994
----------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $11,026 $12,817
Receivables, less allowance of $1,000 61,998 57,276
Deferred income taxes 7,402 7,402
Other assets 7,101 6,822
------- -------
87,527 84,317
------- -------
Inventories, at lower of cost
or market:
Finished products 39,903 39,719
Semi-finished products 35,743 25,633
Raw materials and supplies 22,524 19,330
------- -------
98,170 84,682
------- -------
Total current assets 185,697 168,999
------- -------
PLANT AND EQUIPMENT, at cost 357,801 335,456
Accumulated depreciation 135,433 118,278
------- -------
Net plant and equipment 222,368 217,178
DEFERRED FINANCING COSTS 5,960 6,877
ORGANIZATIONAL AND PRE-OPERATING
COSTS 281 1,122
------- -------
Total assets $414,306 $394,176
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 57,381 $ 67,112
Accrued expenses 25,493 22,880
Current portion of long term debt 4,813 90
-------- --------
Total current liabilities 87,687 90,082
LONG TERM DEBT 178,450 166,942
DEFERRED EMPLOYEE BENEFIT OBLIGATIONS 79,985 79,246
DEFERRED INCOME TAXES 7,402 7,402
-------- --------
Total liabilities 353,524 343,672
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per
share; outstanding 24,774,842 and
24,715,022 shares, respectively 123,472 123,098
Retained earnings (deficit) (42,795) (52,699)
Minimum pension liability (14,572) (14,572)
Treasury shares, at cost;
420,144 and 420,014 shares of
common stock, respectively (5,323) (5,323)
-------- --------
Total shareholders' equity 60,782 50,504
-------- --------
Total liabilities and
shareholders' equity $414,306 $394,176
======== ========
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
------------------ -----------------
1995 1994 1995 1994
(Unaudited)
(in thousands of dollars except per share data and tonnage data)
<S> <C> <C> <C> <C>
Net sales $166,594 $150,356 $465,958 $446,646
-------- -------- -------- --------
Cost and operating
expenses:
Cost of goods sold
(excluding depreciation) 148,162 136,640 411,387 401,244
Depreciation 5,804 5,549 17,155 16,324
Selling and administrative 2,380 2,587 8,048 7,682
-------- -------- -------- --------
Total cost and operating
expenses 156,346 144,776 436,590 425,250
-------- -------- -------- --------
Operating profit 10,248 5,580 29,368 21,396
-------- -------- -------- --------
Other income and
expenses:
Interest expense 5,225 4,645 14,905 14,134
Interest and other
income (18) (3) (107) (123)
-------- -------- -------- --------
Total other income and
expenses 5,207 4,642 14,798 14,011
-------- -------- -------- --------
Income before income
taxes 5,041 938 14,570 7,385
Provision (benefit) for
income taxes 1,613 (722) 4,666 812
-------- -------- -------- --------
Net income $ 3,428 $ 1,660 $ 9,904 $ 6,573
======== ======== ======== ========
Net income per share $ 0.14 $ 0.06 $ 0.40 $ 0.26
======== ======== ======== ========
Net tons shipped 422,734 392,346 1,226,666 1,218,640
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
April 30,
-------------------------
1995 1994
----- -----
(Unaudited)
(In thousands of dollars)
<S> <C> <C>
Cash Flow From Operations:
Net income $ 9,904 $ 6,573
Depreciation 17,155 16,324
Loss on sale of plant and equipment 0 11
Amortization of deferred financing
costs and debt discount 1,606 1,513
Amortization of organizational and
pre-operating costs 841 841
Increase in receivables (4,722) (9,387)
Increase in inventories (13,488) (12,844)
Increase in other current assets (279) (958)
Increase in deferred employee benefits 740 1,466
(Decrease) increase in accounts payable
and accrued expenses (7,118) 2,043
Deferred interest due at maturity 15 1,191
------- -------
Net cash provided by operations 4,653 6,773
------- -------
Cash Flows Used in Investing
Activities:
Capital expenditures (22,345) (14,755)
Proceeds from sale of plant and
equipment 0 17
------- -------
Net cash used in investing activities (22,345) (14,738)
------- -------
Cash Flows From Financing Activities:
Payment of long term debt and
repayment on revolver loans (99,023) (51,315)
Borrowings under revolver loans 114,550 58,589
Exercise of stock options 374 307
Costs related to the issuance of
Common Stock 0 (153)
------- -------
Net cash provided by financing
activities 15,901 7,428
------- -------
Decrease in cash and cash equivalents (1,791) (537)
Cash and Cash Equivalents:
Beginning of period 12,817 1,773
------- -------
End of period $ 11,026 $ 1,236
======== ========
Supplemental Disclosures
of Cash Flow Information:
Cash Paid During the Period For:
Interest $ 10,526 $ 14,067
Income taxes 3,976 840
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) COMPANY STRUCTURE
The consolidated financial statements include accounts of the
Company and its wholly-owned subsidiaries. The Company has three
wholly-owned subsidiaries: (i) Northwestern Steel and Wire
Company, a Texas corporation ("NSW - Texas"), which operates the
Company's Houston rolling and finishing mill; (ii) Northwestern
Steel and Wire Company - Kentucky, a Delaware corporation ("NSW -
Kentucky"), which has been established to operate a wire mesh
facility; and (iii) Northwestern Steel and Wire Company, a Delaware
corporation ("NSW - Delaware"), which provides administrative
services to the Company and its subsidiaries for which it receives
payment from the Company. All significant intercompany accounts
and transactions have been eliminated. The Company operates in one
business segment, producing steel and steel products.
(2) INTERIM ACCOUNTING POLICIES
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations; however, the Company believes that the
disclosures are adequate to make the information included herein
not misleading. The consolidated financial statements included
herein should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended July 31, 1994.
In the opinion of management, the unaudited consolidated financial
statements of the Company included herein contain all adjustments,
consisting of normal recurring adjustments, necessary to present
fairly the financial position of the Company as of April 30, 1995,
and the results of operations and cash flows for the three month
and nine month periods ended April 30, 1995 and 1994. The results
of operations for such interim periods are not necessarily
indicative of the results for the full year. The balance sheet as
of July 31, 1994 has been derived from the Company's audited
historical financial statements.
(3) EMPLOYEE BENEFITS
The Company provides pension benefits to substantially all hourly
and salaried employees under noncontributory plans. The pension
costs are funded by the Company in accordance with the requirements
of ERISA. The estimated costs of the pension benefits are
recognized based on annual cost determinations performed by the
Company's independent actuarial firm.
The Company also provides postretirement welfare benefits (life
insurance and medical) to substantially all its retired employees.
These benefits are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 106. The plan is
unfunded and the Company pays for benefits on a current basis. The
estimated costs of the postretirement benefits are recognized based
on annual cost determinations performed by the Company's
independent actuarial firm.
(4) SHAREHOLDERS' EQUITY
As of April 30, 1995, certain salaried and hourly employees
purchased 153,665 shares of Common Stock pursuant to the exercise
of options granted on August 12, 1992 under the Employee Stock
Purchase and Option Plan at an exercise price of $4.00 per share.
Options to purchase 47,030 shares of Common Stock at an exercise
price of $4.00 per share remain outstanding under the Employee
Stock Purchase and Option Plan. Additionally, options granted
under the Management Stock Option Plan aggregate 745,000 shares of
Common Stock at an exercise price of $4.00 per share and 37,500
shares of Common Stock at an exercise price of $9.88 per share.
During fiscal 1994, the Company approved the establishment of the
1994 Long-Term Incentive Plan (the "1994 Plan") and reserved
1,250,000 shares of Common Stock for issuance under the 1994 Plan.
The 1994 Plan provides for the granting to key employees and other
key individuals who perform services for the Company stock options,
stock appreciation rights and restricted stock that the Board of
Directors or a duly appointed committee thereof deems to be
consistent with the purposes of the 1994 Plan. Options under this
plan 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 April 30,
1995.
During fiscal 1994, the Company also approved the establishment of
the 1994 Director Stock Option Plan (the "1994 Director Plan") and
reserved 50,000 shares of Common Stock for issuance under the 1994
Director Plan. The 1994 Director Plan provides solely for the
award of non-qualified stock options to Directors who are not
employees of the Company or affiliates of Kohlberg & Co., L.P.
Each eligible director will be awarded 2,500 stock options upon
such director's election or reelection to the Board of Directors.
Each such award will be at fair market value on the date of the
grant. Options become exercisable six months after the date of the
grant. Options to purchase an aggregate of 7,500 shares of Common
Stock at an exercise price of $11.25 per share, and which generally
expire five years from the grant date, are outstanding. The 1994
Director Plan was amended at the 1994 Annual Shareholders' Meeting
whereby future awards would generally expire ten years from date of
grant. Options to purchase an aggregate of 10,000 shares of common
Stock at an exercise price of $7.13 per share, and which generally
expire ten years from the grant date, are also outstanding.
(5) NET INCOME PER SHARE
Per share amounts, as presented on the Consolidated Statements of
Income, are based on the average shares outstanding of 25,012,377
and 25,258,998 for the three and nine months ended April 30, 1995
and 1994, respectively. The average shares outstanding for each
period include the dilutive impact of shares issued pursuant to the
Company's Management Stock Option Plan and the Employee Stock
Purchase and Option Plan, such shares being issued or issuable and
such options granted within one year prior to the initial public
offering.
(6) DEBT AND CREDIT ARRANGEMENTS
Long-term debt at April 30, 1995, consisted of the following:
Principal Interest
Amount Rate
------------- --------
(In Thousands)
Amended and Restated
Credit Agreement
Rollover Term Loan $ 41,912 13.1%
Revolver Loan 18,200 10.5%
Deferred Financing Fee 7,433 8.9%
9.5% Senior Notes due 2001,
Net of Discount 114,394 9.5%
Other notes payable 1,324 3.0%
--------
183,263
Less current portion ( 4,813)
--------
$178,450
========
Chemical Bank and certain other lenders provided financing (as so
amended, the "Senior Credit Facility") to the Company in the form
of two remaining facilities: (i) a rollover term loan in the
amount of $50 million and (ii) a revolving credit loan providing
available borrowings up to $65 million. The revolving credit loan
has a final maturity on May 9, 1997, but may be renewed on an
annual basis thereafter with the unanimous approval of Chemical
Bank and any other participating lenders. The interest rates
indicated above are as of April 30, 1995.
The Senior Credit Facility contains various covenants, including
covenants prohibiting or limiting the incurrence of additional
indebtedness, the granting of liens or guarantees, sales of assets,
and capital expenditures, as well as financial covenants requiring
maintenance of a specified current ratio, a consolidated interest
expense coverage ratio, a fixed charge coverage ratio and a
leverage ratio.
The rollover term loan is required to be repaid in quarterly
installments beginning October 31, 1995, with final maturity on
April 30, 1999. The Senior Credit Facility provides that the
rollover term loan bears interest at a fixed annual rate of 13.07%,
provided that, through July 31, 1994, interest on the term loan was
required to be paid at a floating annual rate equal to the
Alternate Base Rate (as defined in the Senior Credit Facility) plus
1.5% and, provided further, that the difference between interest
accrued at the fixed annual rate of 13.07% and interest paid as
described above was deferred monthly in arrears and added to the
principal of the rollover term loan. Such deferred interest bears
interest which is required to be paid monthly in arrears at a
floating rate equal to the Alternate Base Rate plus 1.5%, and the
deferred interest added to principal is required to be paid in full
on the date of the final installment of principal of the rollover
term loan. The Company is also required to prepay the rollover
term loan, to the extent of excess cash flow on an annual basis (as
defined in the Senior Credit Facility), which resulted in a
prepayment of approximately $2,606,000 during the quarter ended
October 31, 1994.
The loans under the Senior Credit Facility are collateralized by
a lien on substantially all of the Company's and its subsidiaries
assets and all loans are cross-collateralized. The revolving
credit loan under the Senior Credit Facility will be available to
the extent that the Company satisfies certain borrowing base
criteria. At April 30, 1995 additional borrowings of approximately
$45,250,000 under the revolving credit facility were available to
the Company.
In connection with the Senior Credit Facility, the Company had
previously agreed to pay Chemical Bank a fee of $5 million, which
was to be deferred until the Company's Houston, Texas facility
began to earn revenue (as described) and which would be payable
thereafter in accordance with a formula. As a result of an
amendment to the Senior Credit Facility in September 1991, the
terms of the $5 million fee were modified to provide that the
entire fee became due and payable immediately, but that Chemical
Bank would defer payment until the principal amount of all loans
under the Senior Credit Facility has been paid in full. The
deferred fee bears interest at the adjusted LIBOR for the interest
period then in effect plus 4% compounded monthly, with the payment
of interest also being deferred until such principal amount has
been paid in full.
Pursuant to the Senior Credit Facility, Chemical Bank receives a
$200,000 annual administration fee and the lenders receive a
quarterly commitment fee of 1/2% per annum based on the average
unused amount of the commitment of the lenders under the Senior
Credit Facility.
In consideration for the September 1991 amendment to the Senior
Credit Facility, the Company agreed to pay Chemical Bank
approximately $238,000 which is deferred until the principal amount
of all loans under the Senior Credit Facility has been paid in
full.
At April 30, 1995, $114,394,000 (net of unamortized discount of
$606,000) of Senior Notes were outstanding. The Senior Notes earn
interest at the rate of 9.5% per annum, payable semi-annually on
June 15 and December 15. The Company will be required to redeem on
June 15, 2001, the aggregate principal amount of the Senior Notes
plus accrued and unpaid interest. The Senior Notes may not be
redeemed prior to June 15, 1997. On or after June 15, 1997, the
Company may, at its option, redeem the Senior Notes in whole or in
part at a premium plus accrued and unpaid interest. On or after
June 15, 1999, the Company may redeem in whole or in part the
Senior Notes at the aggregate principal amount plus accrued and
unpaid interest.
The Senior Notes are unsecured obligations of the Company. They
will be senior to all subordinated indebtedness of the Company and
rank pari passu with all other existing and future senior
indebtedness of the Company. Upon the occurrence of a change in
control (as defined), the holders will have the option to cause the
Company to repurchase all or a portion of the outstanding Senior
Notes at 101% of the principal amount.
The Senior Notes contain certain restrictive covenants that, among
other things, will limit the ability of the Company to incur
additional indebtedness, create liens, issue preferred stock of
subsidiaries, pay dividends, repurchase capital stock, make certain
other restricted payments, engage in transactions with affiliates,
sell assets, engage in sale and leaseback transactions and engage
in mergers and consolidation.
(7) INCOME TAX
The Company estimates that annual income taxes will be incurred,
thus the allocation of income tax to interim periods is required.
The Company recorded an income tax provision by estimating the
annual effective income tax rate and applied that rate to pretax
income.
The effective income tax rate for the Company varies from the
Federal statutory tax rate due to permanent differences and the
utilization of net operating loss carryforwards.
(8) COMMITMENTS AND CONTINGENCIES
At April 30, 1995, the Company had commitments for capital
expenditures of approximately $29,500,000. The major expenditures
committed include approximately $9,600,000 for new concrete
reinforcing mesh production equipment and $10,200,000 for
improvements to the Company's Sterling, Illinois facility. The
improvements to the Sterling facility consist of a second ladle
metallurgical station, a state-of-the-art high voltage transformer,
raw material handling equipment and a neural control network.
There are various claims and legal proceedings arising in the
normal course of business pending against or involving the Company
wherein monetary damages are sought. These claims and proceedings
are generally covered by insurance and it is management's opinion
that the Company's liability, if any, under such claims or
proceedings would not materially affect its financial position or
results of operations.
A wrongful death action against the Company was settled on April
28, 1995. The action stemmed from the death of an employee at the
Company's Houston facility. The losses arising from the complaint
were 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 Company's Sterling
facility produces dust that contains lead and cadmium, the Company
is classified, in the same manner as other similar steel mills in
its industry, as a generator of hazardous waste.
The Company believes that it is currently in substantial compliance
with applicable environmental requirements and does not anticipate
the need to make substantial expenditures for environmental control
measures during the remainder of fiscal 1995. Nevertheless, as is
the case with steel producers in general, if a release of hazardous
substances located on the Company's property or used in general in
the conduct of the Company's business occurs, the Company may be
held liable and may be required to pay the cost of remedying the
condition. The amount of any such liability and remedial cost
could be material.
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and
Results of Operations included as Item 7 of Part II of the
Company's Annual Report on Form 10-K for the year ended July 31,
1994.
Results of Operations
Net sales for the Company were $166.6 million on shipments of
422,734 net tons for the three months ended April 30, 1995,
compared to $150.4 million on shipments of 392,346 net tons for the
three months ended April 30, 1994. The Company experienced
increased sales and volume shipped for its structural, rod and wire
products. Due to stronger demand in these more profitable product
lines, production for the Company's lower margin semi-finished
steel was reduced.
Based on volume shipped, structural steel shipments increased over
11% during the three months ended April 30, 1995 compared to the
same period in the prior year, while rod and wire products
increased over 21%.
Due to these volume increases, together with price increases and
a relative increase in shipments of higher margin products, the
Company's net sales increased 11% or $16.2 million for the three
months ended April 30, 1995 compared to the same period in the
prior year.
For the nine-month period ended April 30, 1995, net sales were
$466.0 million. This represents an increase of $19.3 million or a
4% improvement compared to the same period in the prior year.
Steel shipments (volume) improved slightly from 1,218,640 net tons
for the nine months ended April 30, 1994 to 1,226,666 net tons for
the comparable nine months in the current fiscal year.
Cost of goods sold, excluding depreciation, as a percentage of net
sales for three-month period ended April 30, 1995, improved to 89%
from 91% for the same period in the prior year. The continuing
improvements in operating margins are primarily the result of
improved steelmaking efficiencies, record production in the rod
mill, and increased selling prices. Cost of goods sold, excluding
depreciation, as a percentage of net sales for nine months ended
April 30, 1995, improved to 88% from 90% for the same period in the
prior year.
For the quarter ended April 30, 1995, selling and administrative
expense at $2.4 million decreased slightly compared to $2.6 million
for the same period ended April 30, 1994. Selling and
administrative expense was $8.0 million for the nine months ended
April 30, 1995 compared to $7.7 million for the nine months ended
April 30, 1995. The nine month year-over-year increase in selling
and administrative expense is primarily due to increased sales
commissions and accrued executive compensation resulting from
earnings improvements.
Interest expense was $5.2 million for the quarter ended April 30,
1995, compared to $4.6 million for the same quarter in the prior
fiscal year. For the nine months ended April 30, 1995, interest
expense increased to $14.9 million from $14.1 million for the same
period in the prior year. The increase in interest expense is
primarily due to the increase in revolving credit borrowing levels
and increases in interest rates on the Company's variable rate
debt.
The provision for income taxes increased from $0.8 million for the
nine months ended April 30, 1994 to $4.7 million for the nine
months ended April 30, 1995. The increase in the provision for
income taxes is the result of a 97% increase in income before
taxes, from $7.4 million for the nine-month period ended April 30,
1994 to $14.6 million for the same period in the current year. The
provision for income taxes for the quarter ended April 30, 1995 was
an expense of $1.6 million compared to a benefit of $0.7 million
for the same quarter in the prior fiscal year.
For the foregoing reasons, the net income for the nine months ended
April 30, 1995 was $9.9 million or $0.40 per share, compared to
$6.6 million or $0.26 per share for the nine months ended April 30,
1994, for an improvement of approximately 51%. For the quarter
ended April 30, 1995, net income was $3.4 million or $0.14 per
share, compared to $1.7 million or $0.06 per share for the quarter
ended April 30, 1994, an increase of approximately 107%.
Liquidity and Capital Resources
General. Funds for the Company's operational needs have been
provided from internally generated cash and through utilization of
the Senior Credit Facility. As of April 30, 1995, the Company's
consolidated total debt aggregated approximately $183.3 million
(net of unamortized discount on the Senior Notes), of which
approximately $178.5 million was classified as long-term debt. The
consolidated debt-to-equity ratio improved to 3.0:1 at April 30,
1995 compared to 3.3:1 at July 31, 1994. As of April 30, 1995, the
Company had cash on hand of approximately $11.0 million and
approximately $46.7 million available for borrowing under its
existing revolving credit facility. The Company's current ratio
improved to 2.1:1 at April 30, 1995 compared to 1.9:1 at July 31,
1994. The Company's increased financial and operating flexibility
has enabled it to better manage inventory levels which, when
combined with the Company's enhanced product line, have enabled it
to better serve its customers' needs.
On a longer term basis, the Company has significant future debt
service obligations. The Company's ability to satisfy these
obligations and to secure adequate capital resources in the future
will be dependent on its ability to generate adequate operating
cash flow. The Company expects that its cash flow from operations
and available borrowings will be sufficient to fund the repayment
of the Senior Notes, other investing activities and other required
debt amortization through the maturity date of the Senior Notes.
This will be dependent on its overall operating performance and be
subject to general business, financial and other factors affecting
the Company and the domestic steel industry certain of which are
beyond the control of the Company.
At April 30, 1995, the Company had commitments for capital
expenditures of approximately $29,500,000. The major expenditures
committed include approximately $9,600,000 for new concrete
reinforcing mesh production equipment and $10,200,000 for
improvements to the Company's Sterling facility. The improvements
to the Sterling facility consist of a second ladle metallurgical
station, a state-of-the-art high voltage transformer, raw material
handling equipment and a neural control network.
As reported in the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1994 in "Item 3, Legal Proceedings," the
Company is seeking a declaratory judgment in the Circuit Court of
Cook County, Illinois that certain provisions of the state's
recently amended workers' compensation regulations are
unconstitutional. The effect of the amended regulations is to
require the Company to increase the amount of security posted by
the Company from $200,000 to $8.8 million to maintain the Company's
right to self-insure its workers' compensation obligations. Upon
the posting of a $400,000 bond, the Company obtained a temporary
restraining order which effectively restrains the imposition of
this increased security requirement and the ability of the Illinois
Industrial Commission (the "Industrial Commission") to terminate
the Company's self-insurer status, pending further order of the
Circuit Court of Cook County. If the Company is unsuccessful in
its challenge to the Industrial Commission's actions or regulations
and is unable to post the required bond, the Company would be
required under the Illinois law to obtain insurance for its
workers' compensation claims. Insurance would be much more
expensive than the Company's self-insurance plan or may be
unavailable and obtaining a letter of credit under the Senior
Credit Facility would reduce the Company's borrowing capacity.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11 - Computation of Income Per Share
(b) Exhibit 27 - Financial Data Schedule
(c) 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 among the Company, a Texas
corporation, the lenders party thereto and Chemical Bank, as Agent
for the lenders.
(d) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter ended April 30, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NORTHWESTERN STEEL AND WIRE COMPANY
By: /s/ E.G. MARIS
_____________________________
E. G. Maris, Senior Vice President,
Chief Financial Officer
(Principal Financial Officer)
June 14, 1995
EXHIBIT INDEX
Prior Filing
or Sequential
Exhibit No. Description Page Number
4.1 Seventh Amendment to the
Credit Agreement
11.0 Computation of Income Per Share
27.0 Financial Data Schedule
EXHIBIT 4.1
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:
; 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.
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 /s/ EDWARD G. MARIS
______________________
Name:
Title: Senior Vice President and Chief Financial Officer
NORTHWESTERN STEEL AND WIRE COMPANY, a Texas corporation,
By /s/ EDWARD G. MARIS
______________________
Name:
Title: Senior Vice President and Chief Financial Officer
CHEMICAL BANK, in its capacity as a Lender and as Agent,
By /s/ RONALD POTTER
______________________
Name:
Title: Managing Director
MARINE MIDLAND BUSINESS LOANS, INC.,
By /s/ MICHAEL J. O'CONNELL
______________________
Name:
Title: Assistant Vice President
WELLS FARGO BANK, N.A.,
By /s/ K.J. HARRISON
_______________________
Name:
Title: Vice President
MITSUI NEVITT CAPITAL CORP.,
By /s/ DAN JOSEFOV
_______________________
Name:
Title: Vice President
THE TRAVELERS INSURANCE COMPANY,
By /s/ JOHN W. PETCHLER
_______________________
Name:
Title: Second Vice President
THE TRAVELERS INDEMNITY COMPANY,
By /s/ JOHN W. PETCHLER
_______________________
Name:
Title: Second Vice President
THE PHOENIX INSURANCE COMPANY,
By /s/ JOHN W. PETCHLER
_______________________
Name:
Title: Second Vice President
THE TRAVELERS INSURANCE COMPANY (AS TO SEPARATE ACCOUNT D),
By /s/ JOHN W. PETCHLER
_______________________
Name:
Title: Second Vice President
HELLER FINANCIAL, INC.,
By /s/ MARK TOMPKINS
_______________________
Name:
Title: Assistant Vice President
Exhibit 11
NORTHWESTERN STEEL AND WIRE COMPANY
Computation of Income Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30 April 30,
__________________ _________________
1995 1994 1995 1994
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net income........ $ 3,428,000 $1,660,000 $9,904,000 $6,573,000
========== ========== ========== ==========
Weighted average
shares outstanding. 24,682,238 24,668,674 24,682,238 24,668,674
Net additional
shares outstanding
assuming dilutive
stock options
exercised and
proceeds used
to purchase
treasury stock
at average
market price....... 330,139 590,324 330,139 590,324
_______ _______ _______ _______
Shares outstanding
for net income
per share
calculation........ 25,012,377 25,258,998 25,012,377 25,258,998
========== ========== ========== ==========
Net income per
share.............. $0.14 $0.06 $0.40 $0.26
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> APR-30-1995
<CASH> 11,026
<SECURITIES> 0
<RECEIVABLES> 62,998
<ALLOWANCES> 1,000
<INVENTORY> 98,170
<CURRENT-ASSETS> 185,697
<PP&E> 357,801
<DEPRECIATION> 135,433
<TOTAL-ASSETS> 414,306
<CURRENT-LIABILITIES> 87,687
<BONDS> 0
<COMMON> 123,472
0
0
<OTHER-SE> (62,690)
<TOTAL-LIABILITY-AND-EQUITY> 414,306
<SALES> 166,594
<TOTAL-REVENUES> 166,612
<CGS> 148,162
<TOTAL-COSTS> 156,346
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,225
<INCOME-PRETAX> 5,041
<INCOME-TAX> 1,613
<INCOME-CONTINUING> 3,428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,428
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
